Bonding plan for teachers' pension still under consideration as sine die looms
03/24/2015 01:04 AM
FRANKFORT — Conferees cobbling together a plan to shore up the Kentucky Teachers’ Retirement System made little public progress toward an agreement Monday.
Lawmakers emerged from a private meeting without a resolution on House Bill 4, but House Speaker Greg Stumbo said Senate conferees left with some proposals, including his pitch to split $3.3 billion in bonds for KTRS while lawmakers study the pension agency, to consider as sine die nears.
Stumbo said the state has two options to address the nearly $14 billion unfunded liability at KTRS, and both will require sizable infusions of cash.
“That’s going to mean basically a tax increase, and I don’t sense any appetite for a large tax increase at this time, or by using this favorable market to help us shore up this system with the selling of bonds,” he said.
“There’s only two ways you can do it. I don’t care how many times you look at it, I don’t care how many experts or actuaries look at it, it’s a cash problem.”
But as the HB 4 conference committee met Monday morning, Senate Republicans had a number of questions about specifics of the proposal. The Senate has proposed studying the system in the interim before enacting any reforms or plans, and Sen. Joe Bowen, an Owensboro Republican and co-chairman of the committee, requested additional financial information for further review.
“The clock’s ticking,” he said after the morning meeting adjourned. “We understand that.”
KTRS officials have said Stumbo’s $3.3 billion bonding plan will open an eight-year window for the state to develop a long-term funding strategy.
Up to $1.5 billion in bonds would be sold at first in Stumbo’s compromise, prompting Senate President Robert Stivers to ask whether piecemealing bond sales would affect the proposed eight-year phase-in for the state’s financing plan.
“As long as you get that $3.3 billion sometime in the next year and a half and the General Assembly then meets its obligation to fully fund the (actuarially required contribution) beginning in the next budget cycle, this plan is predicated on those types of moving parts happening in conjunction with each other,” Stumbo said during the meeting.
KTRS based its proposal on a 4.17 percent interest rate, but lawmakers said a more reasonable estimate may be 4.75 percent or 5 percent.
“The conversations we’ve had here about a 5 percent rate and a staggered offering, how would that impact you calculations?” Senate President Pro Tem David Givens, R-Greensburg, asked.
Beau Barnes, KTRS deputy executive secretary and general counsel, said the differing interest rates would have little impact on the agency’s expectations. A 5 percent rate “is still an extremely low interest rate,” he said.
“The numbers are never going to be exactly right,” he said.
Later Monday, Stivers said conferees plan to meet again Tuesday morning, but the funeral of former Senate Minority Floor Leader R.J. Palmer’s mother at that time may create a conflict as “several people want to attend out of respect to R.J. in the morning so we’re trying to work around that scheduling.”
The discussion on HB 4 wasn’t limited to KTRS as the House and Senate reappointed members to a free conference committee Monday. Stivers and Stumbo said conferees, largely comprised of legislative leaders, also discussed a number of high-profile issues still looming, such as heroin and the gas tax.
“Since we had most of our leadership on both sides we did a little bit more of a discussion than just pensions,” Stivers said, declining to share details of the closed-door talks.
One thing leaders didn’t discuss, according to Stivers: adjusting the legislative calendar. The General Assembly is scheduled to adjourn sine die Tuesday with two days available in the 30-day session.
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