Legislators defend recommendaton of $300 million more for pension funds; Retirees bash changes to future benefits
11/20/2012 07:01 PM
Legislative on the public pension task force said the message from their recommendations is clear: everyone will have make sacrifices to make sure the Kentucky Employee Retirement System stays solvent and stops being a financial drag on the state.
The pension task force hopes the recommendations they made Tuesday will lead to passing pension reform legislation in the 2013 legislative session. But the big question will be how to come with the more than $300 million extra to pay for the centerpiece of the reforms — fully fund the state’s required contribution.
The group’s top recommendation is put in the actuarially required contribution for the state, as the employer, each year. That’s something the General Assembly and recent governors have failed to do over the last decade.
Sen. Damon Thayer, R-Georgetown, and Rep. Mike Cherry, D-Princeton, co-chaired the task force. And they said this is the first step toward financial security for the public employee pension funds that have more than $30 billion less than what the funds would need to cover all the obligations to current and future retirees.
Watch the interview:
Cherry and Thayer plan to pre-file legislation for the 2013 session. But only Thayer will be in the legislature next year to push for it because Cherry is retiring. They urged lawmakers to submit changes to the recommendations in committee meetings, warned that too many amendments could dilute the compromise reached by members of both political parties.
Thayer and Cherry will go before interim budget committee and KACo in the coming weeks to present the recommendations.
State retiree groups, however, launched immediate objections to the recommendation calling for changes to how future state employees’ retirement benefits are collected. Current employes and retirees would continue to get pension checks based on the formula of years of service and highest five years of salary. Future employees would pay 8 percent of their paychecks into a fund matched by 7.5 percent of the salary from the state. The fund would accrue interest at a rate of 4 percent, and that would form the basis for their retirement nest egg.
The Kentucky Public Pensions Coalition held a telephone call 30-minutes after the groups meeting where they called the plan a “costly mistake.” An independent actuary paid for by the group said participants in the proposal would be the losers but said the state returning to full funding was a positive step.
Jim Carroll, a retired state employee who serves as spokesman for the Kentucky Government Retirees group, also issued a statement saying:
“We are appalled that the Kentucky Public Pensions Task Force proposes to break the pension promise by specifying that future hires in the proposed new pension plan would not be protected by Kentucky’s long-established inviolable contract. The General Assembly created the current crisis by consistently failing to provide the annual required contribution. This legislative neglect should not be a basis for creating two classes of employees – those whose retirement benefits are guaranteed and those whose benefits can be changed at the whim of the legislature. We call on the General Assembly to reject this recommendation.”
Thayer said the recommendations were not everything he would have hoped for, but that this was a consensus plan.
Thayer said he hopes members of the task force and the General Assembly can continue to work together in a bi-partisan way.
“We can not delay any further,” Thayer told the audience. He said the General Assembly needs to show state employees and retirees legislators are serious about instituting reforms.
Below the Fold
Subscribe and get the latest political intelligence delivered to your inbox.