Senate Leaders Vow Action On Pension Bill
FRANKFORT, Ky. -- Senate Republican leaders on Friday promised fast-track work on pension legislation, drawing support from business groups demanding action to shore up a system plagued by a massive unfunded liability they say threatens to drain money from education and economic development.
The pension bill is expected to be introduced in the Senate on Tuesday and reviewed in committee the following day. Kentucky lawmakers return to the Capitol next week to resume a 2013 regular session that will last a few more weeks.
"We're ready to act, move quickly on the bill," said Senate Majority Floor Leader Damon Thayer, R-Georgetown. "We want to get it down to the House early in the session so they've got plenty of time to consider it and hopefully pass it."
A bipartisan legislative task force set up to study the issue recommended several ideas including the repeal of built-in cost-of-living increases for government retirees. Other proposals included creating 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.
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 task force made no recommendations for how to come up with the money to do that.
Senate President Robert Stivers said the measure would solidify a public pension system dogged by an unfunded liability exceeding $30 billion. The legislation will reflect the recommendations by the task force that delved into the thorny issue last year, he said.
"That stops the digging, that stops the bleeding," said Stivers, R-Manchester. "It gets us to a floor and then we can start filling up the hole."
Stivers said rank-and-file Senate members have been consulted about the legislation to make sure there are no "gotcha politic moments."
Business groups led by the Kentucky Chamber of Commerce said the pension problem ranks as the overriding issue for lawmakers to tackle. The groups expressed support for the task force recommendations that will be featured in the Senate bill.
"Every day that passes without significant changes increases the chances that people and employers in Kentucky will be targeted for significant tax increases," said Kentucky Chamber President and CEO Dave Adkisson. "Failing to act will continue the short-sighted downward spiral of providing less money for education and economic development and more for unsustainable benefits not available to the average taxpayer."
Adkisson said lawmakers can resolve how to pay for the pension overhaul when they craft the next state budget in 2014.
Government workers and retirees, meanwhile, are calling for full funding for the pension system. Scores of people gathered at the Capitol last month for a boisterous rally to make their position clear to lawmakers.
Adkisson said he was skeptical about linking overhauls of the pension system and the state's tax code, another key issue hanging over lawmakers. He also downplayed the need to deal with pensions in a special legislative session, saying there's time to start fixing it in the 26 days left in the regular session.
He spoke at a Capitol press conference that also featured the state director of the National Federation of Independent Businesses and the board chairman of the Associated General Contractors of Kentucky. The Senate Republican leaders attended and spoke to reporters.
The three groups were among more than 50 business organizations that signed a letter demanding immediate action on pension legislation.
The business leaders said the downgrading of Kentucky's bond rating reinforces the need to tackle pension problems.
Those downgrades, tied to concerns over pension funding levels, result in higher taxpayer costs to finance new schools, sewer and water lines and other public improvements, said David Dean, board president of the Associated General Contractors of Kentucky.
"Those higher costs will mean fewer projects and fewer jobs for Kentuckians," he said.
Adkisson said that fixing the pension problems would put bond markets "on notice that we are serious about getting our state's finances in order."