Special session will deal with pensions
Governor, lawmakers hoping five-day meeting will yield long-term results
By JUSTIN STORY, The Daily News, jstory@bgdailynews.com
Saturday, June 21, 2008 9:13 PM CDT
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The General Assembly will meet in special session Monday to discuss reform of the state pension plan for public employees, and state lawmakers and local
agencies alike will be looking for results.
Gov. Steve Beshear called the session last week, with the hopes that after five days, legislators will pass a reform bill crafted recently by leadership in
the state House and Senate.
Kentucky Retirement Systems administers the pension funds for all current, retired and inactive public employees except for teachers, whose retirement is
administered by the Kentucky Teachers' Retirement System.
About 445,000 people receive benefits from the state retirement systems, and the changes proposed would affect only new hires, rather than current employees.
Those changes, according to reports, include requiring newly hired state employees to wait until their age and years of employment with the state total 87,
with a minimum age of 57, before being eligible to retire with full benefits.
The annual cost-of-living adjustment for retirees would be reduced to 1.5 percent and new employees would have to contribute 1 percent of their salaries to
health insurance.
The governor has projected savings of nearly $500 million a year for local governments, which are obligated to fund the pension system.
House Speaker Jody Richards, D-Bowling Green, said his sense of the Assembly is that there is consensus among legislators in the House and Senate on the
reform bill, and that it will reach the governor's desk for his signature within five days.
The projected $500 million in savings, though, is a figure that is "hard to substantiate or challenge," according to Richards, who added that the
legislature in future sessions will have to commit to dedicating a portion of the budget to what is known as actuarially required contributions to help pay
down more than $26 billion in unfunded liabilities.
"If general assemblies down the road have the will to make those ARC payments, the liability will be paid down," Richards said, noting that the
temptation to divert those contributions to other aspects of the state budget in times of financial distress may be strong.
Richards said the proposed reform bill brings the state's pension system more in line with the requirements that the private sector must meet for its
retirees, noting that state employees will have to work longer to receive benefits and that the practice of "double dipping," in which state
retirees return to state jobs to earn a second pension, is outlawed.
The House is scheduled to review the pension reform bill Monday, with the Senate on deck to consider the measure as early as Wednesday.
Sen. Brett Guthrie, R-Bowling Green, said the bill deserved to be commended for lessening the obligation of local governments and school districts toward
funding the pension system.
He and other Senate Republicans, however, are critical of the proposal for its failure to include the option of a plan in which state employees make defined
contributions, similar to a 401(k) plan.
"This is a beginning," said Sen. Brett Guthrie, R-Bowling Green. "We've got to have a sustainable retirement system that attracts
employees to state government and is fair to taxpayers."
Lawmakers identified shoring up the financially strapped pension program as a high priority going into the 2008 session, but could reach no agreement during
the regular session.
Several statewide organizations and local government entities supported the special session to address the issue.
"Retirement, whether it's public or in the private sector, it's a large dollar amount that you're dealing with," said Warren County
Treasurer Jerry Pearson.
For the last fiscal year, Pearson estimated that the county contributed more than $1 million to the state pension fund, and the county's obligation has
increased steadily each year.
The obligation is taken from the salaries of county employees.
The legislature has eyed 2025 as the deadline by which it can pay down its unfunded liability.
"City and county school districts are spending so much on fuel that anything we can do to reduce their obligation would be very important for us to
do," Guthrie said.
Richards said officials in city and county governments and school districts have informed him of their support for the special session if it leads to reforms
in the system.
"My office kept the stakeholders informed as we went along and the reaction that I have gotten has been universally positive because everyone knows that
the system has to undergo some changes to be sustainable over the long run," Richards said.
Pearson said bringing costs down would be important, but added that it would be a long process on the part of the state legislature to accomplish that goal.
"Somebody is going to have to sit down and come up with a solution to these things and it's not going to be painless," Pearson said. "This
has been taking a big impact on our budget."






