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Tue November 20, 2012
Public Retirees Could Lose Cost-Of-Living Hikes
FRANKFORT, Ky. -- A legislative group asked to find ways to shore up Kentucky's public pension system recommended Tuesday the repeal of built-in cost-of-living increases for government retirees.
That was among a list of proposals made by the Kentucky Public Pensions Task Force to rein in a growing unfunded liability that now exceeds $30 billion.
Other proposals include creation of a "hybrid cash balance" retirement plan similar in some ways to a 401(k) plan for employees hired after July 1, 2013. The state would guarantee a 4 percent annual return on employee contributions under that proposal that has elements of standard defined-benefit and defined-contribution plans.
Not among the task force's recommendations was an earlier suggestion that the state take on more debt through a bond sale to close the funding gap in the pension plans for state and local government retirees. That idea proved divisive at a time when growing government debt has become an overriding political issue.
State Rep. Mike Cherry, D-Princeton, said the proposals included in the task force's overall recommendation are those that had consensus among the members.
"It's got a lot of compromise in it," said Cherry, co-chairman of the task force. "Everyone should understand that there are some things that some of us would like to have in this recommendation that aren't there."
One of the major proposals is for the state to fully fund its contributions to the government retirement plans to ensure their solvency, which has been a long-term aim of the legislature but it has continually fallen short. The group made no recommendation for how to come up with the money to do that.
The proposals are expected to be drafted into legislation to be considered by lawmakers early next year.
"The final verdict is going to be whether or not the General Assembly can pass something," Cherry said. "We can make recommendations as long as we like. If we can't get them through the Legislature, our efforts have been in vain."
Sen. Dorsey Ridley, D-Henderson, said lawmakers have no choice but to pass reforms to shore up the state's pension system.
"This issue is Kentucky's fiscal cliff," said Ridley, one of 12 members who served on the task force. "I think we've made a bold statement to address this issue, and I really think it's time we move forward so that we can assure current retirees we won't have some future date out there where we have to tell them we have to cut your pensions to make ends meet."