State Rep. Brad Montell pre-files bill to direct excess public employee insurance funds to retirement systems

08/28/2015 11:47 AM

SHELBYVILLE — After $63.5 million was pulled from the Public Employees’ Health Insurance Trust Fund in the current fiscal year and $93 million the year prior, state Rep. Brad Montell hopes a bill he’s pre-filing on Friday will put an end to the practice.

The insurance account is one of several restricted funds that have been tapped for budgetary purposes in recent years.

Montell, R-Shelbyville, said his pre-filed legislation is not a slight at Gov. Steve Beshear, but rather a rethinking of how Frankfort finances its spending priorities. He noted that other governors have skimmed excess money from restricted funds.

Montell’s bill would direct 75 percent of excess funds in the employees’ health trust to state pension systems, with dollar amounts based on plans’ funded statuses. The remaining 25 percent would be held until all claims are filed, then transferred to either the Kentucky Retirement Systems or Kentucky Teachers’ Retirement System.

“The trust fund is designed to be a self-funded plan so that we self-fund our insurance for our employees, and at the end of the year any money that is not paid out in claims is excess money,” he said in an interview with Pure Politics.

“So the question is what do we do with the excess money? The last two years there’s been a significant amount of excess in that fund, and we have swept a total of, I think, about $163 million dollars over the last two fiscal years into the general fund to pay for other things.”

The fund has provided resources for a variety of causes. This year, lawmakers tapped the insurance trust for $10 million to increase treatment options in the heroin bill and $7.8 million to make up lost gas tax revenue, among other items, as reported by The Courier-Journal.

“It’s not that that money went to bad places,” Montell said. “It’s just that that money should’ve been earmarked for our public employees, and I think by putting it in statute that that’s what we will do I think will help protect those funds in the future.”

Much of the extra money under Montell’s proposal would go to the cash-strapped Kentucky Employees Retirement System pension fund for state workers in non-hazardous positions, which is about 21 percent funded. KERS non-hazardous cover the majority of state employees.

Montell said he had considered a proposal to transfer money based on individual employee contributions, but that process would be too cumbersome.

“We settled on what was going to be, I think, the most common-sense answer, which would the fund that is in the worst shape financially probably needs the biggest share of the money,” he said.

The 2008 recession, which “hit Kentucky hard” and “hit state government hard,” Montell said, prompted a greater reliance on restricted-fund transfers to make up for shrinking tax revenues, but Montell hopes his bill will cut some of the “bad habits” picked up in the budgeting process as a new gubernatorial administration takes office. He also plans to file legislation addressing other restricted-fund transfers.

“With a new administration coming in, I think it’s a good time to set the precedent that, you know, we need to do this thing right and stop looking for one-time monies,” he said.

Kevin Wheatley

Kevin Wheatley is a reporter for Pure Politics. He joined cn|2 in September 2014 after five years at The State Journal in Frankfort, where he covered Kentucky government and politics. You can reach him at kevin.wheatley@charter.com or 502-792-1135 and follow him on Twitter at @KWheatley_cn2.

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