FRANKFORT – Although it wasn’t his intention, Governor Bevin’s plan to radically change Kentucky’s public retirement systems has sparked a textbook example of democracy in action.
Since he and other legislative leaders presented a framework of ideas last fall, there have been dozens of public forums, hundreds of people crowding the Capitol’s hallways and thousands of letters, phone messages and emails – almost all of which have been in opposition to what the governor would like to do.
It made a difference. Even legislators from the governor’s own party backed away from the framework as a result, and his promise to call the General Assembly to the Capitol by the end of the year never materialized.
That delay extended through the first half of the current legislative session, only ending when House and Senate leaders – but not the governor – presented their revised plan early last week in Senate Bill 1.
While this legislation is not as far-reaching as what the governor initially proposed, I believe it still moves us in the wrong direction by putting an unfair and unnecessary burden on most public workers and retirees and making it much tougher to replace them in the years ahead.
This legislation also undermines the bipartisan reforms the General Assembly enacted in 2008 and 2013 and the additional funding we provided in the 2014 and 2016 budgets and are set to include during the next two fiscal years. As long as we stay on this path, we will see the retirement systems continue to strengthen.
Proof of that strategy can be found in their most recent investment reports, which showed annual gains of 13 to 15 percent, or about double what they need to adequately cover their expenses. Those numbers would have been much lower if they had to continue selling assets, which are still considerable. They have more than $30 billion in hand, while they pay out about $4 billion annually.
With Senate Bill 1 nearly 300 pages long, it would be impossible to adequately cover all of its provisions. In general, though, it would do away with the traditional pension for teachers hired in 2019 and beyond; reduce retired teacher benefits; and ratchet down future retirement benefits earned by state and local government and classified school workers hired since the start of 2014.
The impact on retired teachers would be especially costly. Currently, they receive a 1.5 percent cost-of-living-allowance (COLA) each year, which mimics the increase received by those on Social Security, something teachers don’t pay into.
The teacher’s COLA is one they pre-pay while working, highlighting just how unfair it would be to take any of it away. Even so, Senate Bill 1 would cut it in half for a dozen years, which would cost a retiree in her late 50s more than $70,000 if she lived until her mid-80s.
That loss would be on top of the governor’s budget proposal to completely remove the state’s portion of premiums for health insurance that retired teachers receive until they reach Medicare eligibility. That would cost them hundreds of dollars more each month.
On a related retirement matter, there does appear to be some bipartisan movement toward reducing the financial hit that cities, counties and schools are set to face because of more conservative projections by the Kentucky Retirement Systems.
If nothing is changed, these employers will have to come up with more than $300 million extra in the upcoming fiscal year – or about 50 percent more than they’re now paying. That’s too much too soon, especially with their retirement system not facing a dire situation.
I am proud to support a bill House Democratic Leader Rocky Adkins has filed that would give these local governments and schools five years to reach that much-higher payment. Legislative leaders on the other side of the aisle have backed that idea as well.
While the filing of Senate Bill 1 was the most prominent legislative matter last week, it wasn’t the only one.
On Wednesday, the House voted for a bill that would, with some exceptions, curb workers comp medical benefits after 15 years for those with a partial but permanent disability. With the overall program strong financially – premiums have declined for 12 straight years – I do not think this bill is necessary, and those suffering for the rest of their lives from a workplace injury should not be saddled with medical costs associated with it.
The attack on employee benefits continued last week in a House committee, with one approving a bill that would significantly reduce how long those unemployed would be eligible for weekly payments. This insurance plan has more than $400 million in reserves and unemployment is low statewide, leaving no justification for changing a system that has performed well for decades.
By the first of March, the House is expected to take up its version of the state budget. I will cover that and other legislation more as we move toward the final weeks of our work passing new laws.
For now, I hope you will continue letting me know your thoughts on these and other issues. You can write to me at Room 432F, Capitol Annex, 702 Capitol Avenue, Frankfort, KY 40601, or you can send me an email at Rick.Rand@lrc.ky.gov.
Our toll-free message line is 800-372-7181, and if you have a hearing impairment, it is 800-896-0305.