Bonding proposal for teachers’ retirement system forthcoming, Stumbo says

01/08/2015 02:22 PM

UPDATED FRANKFORT — House Speaker Greg Stumbo intends to introduce this week his proposal to shore up the Kentucky Teachers’ Retirement System with at least $1 billion in bonds, he told reporters Thursday.

KTRS officials had previously floated a pair of 30-year bonding plans worth $1.9 billion and $3.3 billion, saying the bonds are necessary to maintain the pension program’s long-term stability. KTRS is about 52 percent funded with $13.9 billion in unfunded liabilities.

The details of Stumbo’s proposal are unknown. The Prestonsburg Democrat said his plan has been sent to the teachers’ retirement agency for “some final tweaks” to ensure the bill matches what KTRS officials had publicly laid out in November — selling bonds and diverting cash already budgeted for the system alongside bonds as the state comes up with a long-term funding solution for KTRS.

“The point, really, is to use the market’s rates in a favorable way,” Stumbo said before the House convened. “… The market’s historically low for bonds now, so if they can borrow money at a rate lower than what they can reinvest it for or use it for and make that margin up and then shore up those funds while the market’s still low, they take advantage of those rates.”

He continued later: “I don’t generally favor bonding these pension obligations, but because the markets is so favorable, I think it would be irresponsible for us not to at least consider what they’ve (KTRS) proposed.”

Stumbo said a final bonding amount is still in the air, but the proposal will “probably be upwards of $1 billion.”

The Republican-led Senate has typically balked at approving new bonding projects, and prospects could be even more dim after Stumbo said he expects the measure will require a supermajority — 60 “yes” votes in the House and 23 in the Senate — for the General Assembly to authorize the bonds. Democrats hold a 54-46 majority in the House while Republicans have a 26-11 supermajority in the Senate.

Stumbo said he had spoken with Senate leaders about the KTRS bonding proposal “conceptually.”

“(Senate) President (Robert) Stivers has said that he doesn’t favor borrowing necessarily, but he’s not closed his mind to it I don’t think,” Stumbo said.

Stivers, R-Manchester, said others are skeptical of the plan as well, and he wants to see the viability of Stumbo’s proposal.

Gov. Steve Beshear and his administration could play a key role in that process, he said.

“This is where I think he could be a big help as a facilitator and with the expertise of the Finance (and Administration) Cabinet and their bond counsels to tell us is this something that is feasible or not feasible,” Stivers said after the Senate adjourned. “… I’ve had discussions with him and they’re not convinced about it, and I know other members that have been in the House Democrat caucus have asked me about what I thought about it and that they’re unsure about it.

“So there’s a lot of uncertainty. I’m not saying it is or is not a good idea or a bad idea, but I know this: We’re going to make sure our commitment’s fulfilled to all the retirement systems.”


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