(FRANKFORT, Ky.) –– Senate Bill 1 was returned to the State and Local Government Committee on Friday after Senate leaders decided against bringing the pension-reform legislation to the floor for a vote by the full body.
An analysis by the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank, contends SB 1 offers a reasonable compromise between ideological proponents of ideological proponents of 401k-style plans and others who advocate for the status quo, which would result in continuing the current – and unsustainable – defined-benefit plan.
“It’s a reasonable approach that offers meaningful reforms to address the commonwealth’s pension crisis that protects taxpayers while ensuring teachers and other public employees receive an adequate and secure retirement,” Bluegrass Institute president and CEO Jim Waters said. “SB 1 along with a state budget proposed by the Bevin administration dedicating nearly 15 percent of all General Fund revenues over the next biennium to public pension plans represents a good-faith effort by policymakers to address the greatest threat to Kentucky’s economic security and future.” The bill:
- Places new state workers and teachers into a portable cash-balance plan that provides a portable, defined benefit while limiting the amount taxpayers would be required to contribute to funding new employees’ future retirements.
- Addresses some of the more arbitrary and costlier aspects of the system for current employees, including capping the use of additional unused sick days to retire early and/or increase the amount of lifetime pension benefits; requiring new teachers to work longer before retiring with full benefits; and returning automatic cost-of-living increases (COLAs) for TRS retirees from 1.5 percent to the 1-percent COLA which was in place for decades beginning in 1967 before being arbitrarily increased in 1991.
- Strips benefits from retired politicians who padded their legislative pensions by taking high-paying jobs in other government positions.
State and Local Government Committee testimony indicates that the cash-balance plan created by SB 1 would result in a teacher starting in Franklin County who works for 30 years, beginning at age 27, and receives the Teachers’ Retirement System assumed rate of return an account balance of nearly $720,000 and a yearly annuitized benefit of more than $62,000.
“Reasonable Kentuckians will recognize such a plan as an adequate retirement income for our teachers while also agreeing that benefits awarded in an arbitrary manner for political gain the past, and that are digging the pension-liability hole deeper must be addressed,” Waters said.
The Bluegrass Institute Pension Reform Team encourages the state Senate to work toward passing genuine reform so that the issue can eventually be debated in the House of Representatives
“Kentucky’s public pension quandary is threatening to crowd out funding even further for public safety, education, healthcare and infrastructure,” Waters said. “Those opposing these reforms must make a better case for how to reform these systems without increasing the tax burden for already-overburdened taxpayers.”