Stivers said state's pension funding might have to be adjusted as a plan B

06/04/2014 07:16 PM

Kentucky leaders need to come up with a plan B for the financially teetering Kentucky Employee Retirement System if a bankruptcy court decision stands that allows a mental health center to leave the fund, said the Senate president Wednesday.

Senate President Robert Stivers said it’s too early to say whether the General Assembly will have to kick in more money to shore up the fund, which covers pension benefits for more than 200,000 workers, including state employees. For one thing, Stivers said, he’s been in contact with the governor’s office and House Speaker Greg Stumbo’s office about whether the bankruptcy judge’s decision should be appealed.

U.S. Bankruptcy Judge Joan Lloyd ruled Friday that Seven Counties Services, a mental health agency in Louisville, could proceed with bankruptcy protection, which would mean leaving the Kentucky Employee Retirement System.

Stivers said it’s no doubt the pension fund would be hurt if Seven Counties — and potentially other quasi-governmental agencies that are part of the retirement system — bolted. And already the system can cover just 23.2 percent of cost of obligations to the non-hazerdous current and future retirees that it is supposed to cover.

But Stivers said the legislature has tried to address that, most recently with reforms passed in 2013.

“We have made the initial commitment to fund at the level we were funding at plus $125 million to give them that ability to do long-term strategic investments. We will see what it does,” Stivers said (at 4:00). “As in any major piece of legislation, we may have to go back and adjust upward or downwards, we don’t know.”

“We funded at the level we were requested to each and every year,” Stivers said. “In the recommendations that came from the executive branch, they get their recommendations from the retirement systems, we funded at those levels that they requested each and every year.”

However, as pointed out in the interview, news articles from the Louisville Courier-Journal and Lexington Herald-Leader dating back to 2002 show that Kentucky Retirement System officials and state retirees repeatedly criticized and protested budget proposals from Govs. Paul Patton, Ernie Fletcher and Steve Beshear that did not fund the state’s full contribution recommended by actuaries.

For 15 of the last 20 years, governors and General Assemblies signed off on state budgets that put less into the Kentucky Employees Retirement System than what the state, as the biggest employer whose workers are in that fund, was supposed to, according to actuaries.

Stivers said the General Assembly funded more than what governors proposed in some years because they questioned the accuracy of the governors’ budget request numbers. But he sought to downplay the role the General Assembly played in the fund hemorrhaging money and pointed to market changes and an investment strategies.

“It’s easy to lay it at the feet of the legislature, but we did what we were asked from the executive branch but you also have to look at what the investments were used and made in to see if they had an appropriate rate of return in comparison to our sister states,” Stivers said (at 5:15).

About Ryan Alessi

Ryan Alessi joined cn|2 in May 2010 as senior managing editor and host of Pure Politics. He is now pursuing an advanced degree in non-fiction writing from Murray State University and is a regular contributor to Pure Politics. Ryan has covered politics for more than 14 years, including seven years as a reporter for the Lexington Herald-Leader. Ryan can be reached at purepolitics@twcable.com or @mycn2 on Twitter.

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