Philosophical divides on bonding will likely resurface next year as KTRS funding group finishes report
12/01/2015 09:13 PM
FRANKFORT — Next year’s General Assembly will have a number of options to consider in shoring up the underfunded Kentucky Teachers’ Retirement System, but underlying philosophical differences in how to fix financial issues at the pension agency will likely reemerge.
The 25-member Kentucky Teachers’ Retirement System Funding Work Group met for the final time Tuesday, putting the finishing touches on their report to Gov. Steve Beshear, who leaves office next week.
The task will be up to lawmakers and Gov.-elect Matt Bevin, who has advocated moving future teachers and public workers into 401(k)-style defined-contribution pensions.
He’s also opposed the sale of pension obligation bonds, a position shared by the Republican-controlled Senate and opposed by the Democrat-led House. The two sides could not agree on a financing plan for KTRS during this year’s session.
House Speaker Greg Stumbo, who sponsored a bill that would have authorized $3.3 billion in bonding as a means to both shore up KTRS and provide an eight-year window for the state to phase-in actuarially required contributions into the system. KTRS faces $14 billion in unfunded liabilities, and officials there have said they will seek more than $1 billion in additional funding in next year’s budget session as recommended by actuaries.
He took umbrage at a piece in a draft of the group’s report that he said could be perceived as anti-bonding.
The group’s report indicates that pension obligation bonds can be part of a funding plan, but should not be relied on as a sole solution.
“I don’t think you want to block the General Assembly from considering those, and I don’t think you want to impede that discussion from happening again, and I don’t think that it would conducive to finding a solution if you allowed someone to hold this up and say, ‘Well didn’t you see, the work group said we shouldn’t rely upon these things, we shouldn’t rely upon these things,’ and scare people because that’s what’s going to happen,” said Stumbo, D-Prestonsburg.
“And, you know, I for one am not going to vote for a report that somebody’s going to throw up and just try to scare people into not voting for something that actually is a way forward to solve the problem when they don’t have a way forward themselves.”
The report also offers information on potential reforms such as phasing in full pension contributions, shifting hires to defined-contribution plans, increasing the retirement age for new hires and moving unused sick leave to service credits rather than salary credits for current and future teachers. The group did not consider moving teachers to Social Security and shifting some assets to KTRS for liquidation as “viable parts of a financial stability plan for KTRS at this time,” according to the document.
Stumbo told The Courier-Journal after leaving the meeting that he would again offer a plan to sell $3.3 billion in bonds for KTRS in next year’s session, a proposal that will likely again meet a cold reception in the Senate.
Sen. Joe Bowen, an Owensboro Republican who chairs the Senate State and Local Government Committee, said his opposition to bonding for KTRS “has not changed.”
“I’ve not wavered one iota on the value or the validity of bonding,” he told reporters after the meeting. “I absolutely do not think that that should be any part of resolving this issue.”
Regardless of any philosophical — and public — differences between the two legislative chambers, Bowen said lawmakers are “committed to finding a solution.”
“That solution may not look like this document,” he said during the meeting. “It may look like portions of this document, and we’ll not be the only players in the final outcome of this, but I want to make it very plain, very clear that there is a commitment by the General Assembly of Kentucky to resolve this issue.”
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