Thayer to lawmakers: Don't throw out pension bill with bipartisan support because of one report

02/12/2013 07:41 PM

The Senate Republican leader took the floor Tuesday to defend pension reforms the Senate passed last week, saying although the legislature’s actuary revealed one provision might cost slightly more, the changes overall would save Kentucky $10 billion over 20 years.

Sen. Damon Thayer, R-Georgetown, told his colleagues — and by extension the state House that now has possession of the pension reform bill — that General Assembly must make changes to the Kentucky Retirement System before it goes broke.

SB 2 passed the Senate last week with a bipartisan vote of 33-5. The bill mirrors the interim public pension task force recommendations from last year, which includes fully funding the required payments into the retirement system and ending cost of living adjustments.

Those changes would stop the financial hemorrhaging of the Kentucky Retirement System, which handles pension for state, county and city employees and the state police. The changes would save billions of dollars compared to the path the system is currently on, Thayer said.

However, the Courier-Journal was first to report Saturday that an actuarial study conducted for the Legislative Research Commission showed a proposed new benefit structure for future hires that the bill contains might cost the state slightly more over 20 years than the current system.

A coalition of retirees and Jason Bailey, director of the progressive think-tank the Kentucky Center for Economic Policy, told reporters Monday that it could cost $55 million more over 20 years.

Thayer said the legislature shouldn’t throw out the bill because of one report showing .02 percent cost difference over two decades.

Thayer pointed to charts with projections contained from the same Feb. 7 actuarial report prepared by the firm Cavanaugh MacDonald for the legislature.

With the changes contained in SB 2, the state’s contribution into the Kentucky Retirement System fund would essentially flat-line at about 40 percent of its total payroll over the next 20 years. If nothing is done, the state’s share would go up to nearly 65 percent by 2032 — if it doesn’t go broke first.

“When Cavanaugh MacDonald compared implementing all the changes in SB 2 with keeping the current plan with no other changes, the savings were dramatic.’ Dramatic, as evidenced by this chart,” Thayer said.

House leaders said Tuesday they plan to make some changes to SB 2, including designating a source of funding to cover the increased payments into the Kentucky Retirement System and changes to the proposed hybrid cash-balance benefit structure for future hires.

Jacqueline Pitts

Jacqueline Pitts joined the cn|2 political team in June 2012. A graduate of WKU, Jacqueline grew up in Nashville, TN and is looking forward to having a front row seat to Kentucky politics. Follow Jacqueline on Twitter @Jacqueline_cn2. She can be reached at 502-792-1114 or jacqueline.pitts@twcnews.com.

Comments

  • Chris Tobe wrote on February 12, 2013 08:00 PM :

    This is all smoke and mirrors and does nothing about the current crisis. Only 100% funding of the ARC fixes the crisis. There is bi-partisan agreement to pass a bill to divert people from the fact that Governors and the legislature raided billions from the pensions of retirees and current employees, and now can not figure how to pay it back.

    SB-2 (since it cannot secure funding) is only an argument over the benefits of theoretical faceless future employees. If the benefits are lower you may to have to pay a higher salary to get employees, negating any savings. Again it does not even address the main problem.

  • sadkywkr wrote on February 13, 2013 10:06 AM :

    There are multiple reports that show that the change to a defined contribution would cost the state more money and cost employees too. It will be more cost effective to just fix the pension we have than start a new system. The legislature is trying to throw out the bathtub with the baby and water in it!

  • viewer wrote on February 13, 2013 10:15 AM :

    Who pays the 401k fees in this plan ? State or the workers ? Hidden fees are everywhere in 401k’s.

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