Pension Oversight co-chair Sen. Joe Bowen: "a lot of wood to cut" before special session

04/24/2017 08:50 PM

FRANKFORT – The amount of work and agreements to reach before a special session on tax reform could push lawmakers much further into the year than first anticipated.

Sen. Joe Bowen, R-Owensboro, told reporters Monday that he does not envision a special session until sometime in the fall.

“I think conventional wisdom was saying it would be in September. I think it’s going to be a little bit later in the year than that, because we’ve got a lot of heavy lifting to do yet, so, I’m going to say mid to late fall would be my speculation,” Bowen said. “We’re talking about two really complex issues, tax reform and pension reform.”

In the area of pensions, Bowen sees two paths for the struggling pension systems.

The vision Bowen is promoting would allow pension funds performing well to stand alone. He said others will see benefit in keeping the systems together.

The separation of the County Employee Retirement System from Kentucky Retirement Systems was discussed for nearly an hour. CERS is at a higher funded ratio than it was prior to the passage of SB 2 in 2013 – despite more conservative actuarial assumptions.

Actuaries say CERS will be fully funded by 2043, the end of the current amortization period.

Bryanna Carroll of the Kentucky League of Cities, would like to see the separation to “ensure the future stability of Kentucky pensions, and to ensure local control of local pensions.”

“Separating CERS from KRS will ensure the long term solvency for CERS,” Carroll said. “Separation will allow the focus to be on fixing the real problem and the funding shortfalls of the remaining KRS plans.”

Bowen said the move was not about abandoning or crippling the Kentucky Retirement Systems but to focus on the most troubled assets in the system.

“Rather than see this as abandonment to that particular group of folks, I would embrace this as an opportunity to get all of the attention which is obviously what we need to do,” Bowen said during Monday’s Public Pension Oversight committee meeting.

Some committee members expressed concerns about state liability if the CERS system were to fail, and some would like to see more studies before any move is made.

Bowen indicated that the county employee pension separation issue may be part of pension reform during a potential special session this fall.

Another possible solution that’s been suggested is to move incoming new state employees to a 401(K) type of retirement plan, but some suggest that the current KRS system would take a major hit with the new employees not contributing to the system.

Bowen suggests an overall view of the system is a must in finding a workable solution to the pension crisis.

“It’s all about the tiers and there’s several tiers now, and I think something that we have to take a look at some point in time is how well actually each tier, within each system in funded,” Bowen said. “I think we need to break it down further.”

As for dealing with tax reform, Bowen wants to see the state get away from taxing productivity and tax consumption.

“Let’s put a fair code in place,” Bowen said. “Whatever money that raises, that’s what we run state government off of — that’s our allowance.”


Subscribe to email updates.

Subscribe and get the latest political intelligence delivered to your inbox.