Senate GOP again calls for interim study of KTRS, but prospects remain unclear
04/10/2015 03:09 PM
Senate Republicans are formally reiterating their request for an interim study of Kentucky’s underfunded pension system for public school teachers, the caucus announced in a news release Friday.
The Senate GOP called for Gov. Steve Beshear to “use the bully pulpit of his office” in his last months as governor and form a task force to review the Kentucky Teachers’ Retirement System, a panel they suggested during talks on House Speaker Greg Stumbo’s House Bill 4 this session that would have allowed the sale of $3.3 billion in bonds for KTRS. House Minority Floor Leader Jeff Hoover, R-Jamestown, issued a similar call in a letter to Beshear on Monday.
“It is important to remember that the Senate Republican caucus was the first to issue a clarion call for pension reform, so, we recognize the danger the unfunded liability that the KTRS poses both to individual teachers and to the fiscal health of the Commonwealth,” the GOP caucus wrote in its news release, noting past efforts to study the Kentucky Retirement Systems before enacting pension reforms in 2013.
“That is why the Senate did not agree to issue $3.3 billion in bonds during the last legislative session. As you will see, that plan was unworkable and was interpreted by many as nothing more than a cynical move by Democrats in the House of Representatives to gain a political advantage by harming Republicans.”
A request for clarification on the “political advantage” HB 4 offered Democrats, who have typically counted on teachers’ groups for electoral support in previous campaigns, and the harm posed to Republicans was not immediately returned.
According to the release, House and Senate negotiators on HB 4 agreed to consult with one of Beshear’s bonding experts, who said selling $3.3 billion in bonds in one year under HB 4 “would be impossible” and even putting $1 billion in bonds on the market “would be very difficult” in a year.
“He went on to outline how selling even $1 billion of bonds would lower the Commonwealth’s credit rating and increase the cost of operating state government,” the caucus wrote in the news release. “At that moment it became perfectly clear the plan in HB 4 simply could not work.”
Senate Republicans instead offered $50 million immediately in cash for KTRS plus an interim study on funding issues at the agency, a proposal House Democrats rejected as a paltry sum for the system that faces nearly $14 billion in unfunded pension liabilities.
Democrats also said the GOP proposal would’ve pulled $50 million from the Public Employee Health Trust Fund, an account from which lawmakers plucked $63.5 million from an estimated $110 million in projected savings in this year’s session.
Beshear called honoring pension obligations for retired teachers “an absolute priority” in a statement Friday, but whether a task force on KTRS will be formed remains unclear.
“While there was no consensus reached by the General Assembly during the recent legislative session on what action to take to stabilize the KTRS, most legislators are committed to finding a solution to this issue,” the governor said in a statement. “I will continue to bring leaders in the General Assembly together over the summer to find a workable solution which can be enacted in the upcoming 2016 session.”
Stumbo, D-Prestonsburg, previously told Pure Politics that he would support a special session in order to resolve funding issues at KTRS, but studying the pension agency in the legislative interim “will show what we already know: that KTRS needs money, and that the longer we wait, the less likely interest rates will stay low and the harder it will be to close the unfunded liability in the years ahead.”
Brian Wilkerson, Stumbo’s spokesman, noted that when the General Assembly passed shared-responsibility legislation in 2010, which shored up the KTRS insurance fund partly through the sale of $737.4 million in bonds, the sales were split in two installments and completed within a year.
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