The House State Government Committee heard testimony Thursday on a wide-ranging pension reform bill that’s expected to be amended next week.
Senate Majority Leader Damon Thayer, R-Georgetown, spoke on Senate Bill 2, pushing the legislation as a bipartisan compromise to help curb more than $18 billion in unfunded liabilities in the Kentucky Retirement Systems.
A number of key provisions in the bill include fully paying actuarially required contributions to KRS, moving new state employees, judges and legislators into a hybrid cash balance pension plan, and repealing cost-of-living adjustments for retirees from state law.
House Democrats are expected to maintain full actuarially required contribution payments while maintaining the current defined benefit retirement plan and mandating pay raises be pre-funded in their version of SB 2.
House Democrats are also looking to identify a funding stream to pay for pension contributions, expected to be some $120 million July 1, 2014 under SB 2.
Rep. Brent Yonts, a Greenville Democrat who chairs the committee, declined to identify possible funding sources after a caucus meeting Wednesday, but some options recently discussed include raising the tax on a pack of cigarettes 40 cents and implementing Instant Racing statewide.
Thayer called the legislation as currently written a plan to share investment risk while keeping state pension contributions in check at around 40 percent of payroll in future years.
With 14 days remaining in the 30-day session, Thayer said he hopes lawmakers act on pension reform without taking the matter to a special session.
“I believe we need to take pension reform off the table, get it done and then we can deal with tax reform sometime after April and before the end of the year,” Thayer said. “But I think leaving pension reform on the table will complicate the tax reform debate.
“… We are nowhere near a compromise on tax reform whereas I can see the finish line on pension reform.”