Senate Passes Government Reform Pension Bill

Feb 7, 2013

FRANKFORT, Ky.-- Legislation that would reform the pension system for state and local government retirees in Kentucky has cleared the Senate without an identified funding source to resolve worsening financial problems.

The proposal would create a 401(k)-like hybrid retirement plan for new employees and would eliminate cost-of-living increases for retirees already drawing benefits in an effort to deal with a $33 billion deficit.

"This is a starting point," said Sen. Jimmy Higdon, the Lebanon Republican who served on a legislative task that spent most of last year studying the pension issue. "We have to start because we have a terrible problem."

The Senate voted 33-5 on Thursday to pass the measure containing recommendations made by the legislative task.

The legislation calls for the state to begin paying its full contribution to the pension system beginning next fiscal year. That would require more than $200 million a year in additional funds.

Jim Carroll, a leader of the group Kentucky Government Retirees, said the Senate bulldozed ahead with legislation that does nothing to resolve the financial problems.

"We are bitterly disappointed," he said in a statement. "We hope the General Assembly will ultimately recognize that the only path forward is identifying a dedicated revenue source to accelerate required state contributions. Failure to act this year could lead the Kentucky employees' non-hazardous fund into chaotic insolvency in just a couple of years."

Gov. Steve Beshear said Wednesday he wants lawmakers to fully fund the state's contribution to the pension system. In a speech to a joint session of the House and Senate, he tied pension reform to a revamping of the state's tax structure.

A group of experts serving on a commission appointed by Beshear last year proposed a list of tax reforms that would generate nearly $700 million a year in additional revenue. By adopting those recommendations, the Democratic governor said lawmakers could generate needed revenue to help restore solvency to the pension system.

The legislation now moves to the Democratic-controlled House where leaders also have said they want a designated funding source for making the state's contribution to the pension system.

Democratic state Rep. Brent Yonts of Greenville, chairman of the House State Government Committee, said the issue is far from resolved, even though lawmakers have only 22 more working days remaining in the legislative session.

Beshear has said he's willing to call a special legislative session if lawmakers don't get the issues ironed out.