Pension Bill Faces 'Difficult Path Forward'

Faced with an energized opposition and a dwindling number of days to work, the Kentucky Senate's top leader sounded increasingly pessimistic Wednesday about the prospects of overhauling the state's public pension plans during the regular legislative session.

"I think it has a very limited and difficult path forward at this point in time," Senate President Robert Stivers told reporters. Asked what could be done to save the bill, he replied: "Not sure."

The measure would cut benefits for some retired teachers while making structural changes some lawmakers say are necessary to save the retirement system from collapse. Supporters tout it as a way to reap an estimated $3.2 billion in taxpayer savings over the next 20 years.

But the measure has stalled as teachers across Kentucky mobilized to defeat it.

Last Friday, hundreds of teachers jammed the halls of the state Capitol to protest the proposed overhaul. They cheered when the Republican-led Senate decided not to vote on the bill.

Asked Wednesday if there were enough Senate votes to pass it, Stivers replied: "That's debatable."

Most of the bill's savings would come from temporary cuts to the annual cost-of-living raises for retired teachers, who are not eligible to receive Social Security benefits. The raises would be restored once the system is 90 percent funded. Currently, the system is 56 percent funded.

Also, all newly hired teachers hired would be placed in a new retirement plan that shifts most of the risk from the state to the employees. Current teachers with less than 20 years of experience would have a new retirement formula that would reward them with more generous benefits if they work longer. And no teacher would be able to accumulate unused sick days to boost their retirement checks.

Kentucky has one of the nation's worst-funded public pension plans. The state is at least $41 billion short of what it needs to pay retirement benefits over the next 30 years. Lawmakers have committed to putting $3.3 billion into the pension system over the next two years to keep it solvent, prompting plans for budget cuts across most state agencies.

Stivers, a Manchester Republican, said Wednesday that the Senate will "do the best we can" to provide the pension funding that Republican Gov. Matt Bevin requested.

"If we don't, the unfunded liability will even become greater and a tougher problem," he said.

The Senate is working on its version of the next two-year state budget. The GOP-led House has passed its plan. A conference committee will meet in the closing days of the session to try to iron out differences. Wednesday was day 49 of the 60-day session.

Meanwhile, Stivers warned of financial consequences for cities, counties and school districts faced with burgeoning pension obligations if the overhaul measure fails.

"There will be counties that will be hit for multi-million-dollar assessments because we haven't stopped the bucket from leaking," he said.

Stivers said the overhaul bill is linked to another measure that would give local governments more time to adjust to rising pension costs. That measure would limit annual pension contribution increases for cities, counties, school districts and others to 12 percent a year.

But its impact, he said, would be nullified if the overhaul measure fails.

"It does, in my opinion, no good because you're not limiting or capping your exposure," Stivers told reporters. "It just continues to go on and get greater."

Stivers also raised the prospect that the pension issue might have to be taken up in a special legislative session later in the year. If that happens, he's looking at offering a proposal to limit lawmakers' pay during a special session. Under the proposal, they would not be paid during the days they wait to find out if the governor issues any vetoes, Stivers said.