Over the past several weeks, I have had the opportunity to meet with several constituent groups in the 28th district to answer questions and elicit feedback, thoughts, and ideas regarding Kentucky’s looming pension crisis. As most of you know, for the past two decades, many previous administrators chose to ignore a call to action to address what was once a much smaller problem. This lack of engagement has now ballooned into a massive unfunded liability that threatens Kentucky’s financial stability and has become the most pressing issue facing our Commonwealth. As your State Senator, I have vowed to keep the pension promise to our teachers and public servants, and I am hopeful that the pension reform plan proposed by Governor Bevin and the Kentucky General Assembly will do just that.
The framework of the proposed reform focuses on restructuring the pension funding mechanism to ensure the systems are on the pathway to solvency. In this plan, there will be no Cost of Living Adjustment (COLA) “clawbacks;” and checks, for those already retired, will not be reduced. Those who are still working will not be forced into an older retirement age and their current defined benefits will remain the same until the employee reaches their promised level of service for their pension type. Additionally, future non-hazardous employees and teachers will be enrolled in a defined contribution retirement plan that provides comparable benefits to the previous plans.
For those enrolled in hazardous plans and future hazardous employees, their benefits will remain the same. This proposed reform will also close a loophole in death benefits for families of hazardous employees, ensuring those who lose their family members in the line of duty will receive their full benefits.
Many people have also asked how legislative pensions will be addressed in pension reform. The proposed plan ends the Legislative Retirement Plan and transfers its assists and administration to the KRS Board. New legislators and legislators elected after 2013 will be placed into the same direct contribution plan as public employees. Other legislators will see their pension benefits reduced as any future benefits will be in the KRS plan. The legislation also ends the ability of current legislators to “supersize” their pensions and it will reduce the monthly benefit of retired legislators who did increase their pension by closing a loophole and recalculating benefits. As officials elected and held accountable by you, the citizens of our great Commonwealth, we want to ensure these reforms are put in place across the board.
Lastly, I want to emphasize that there will be no emergency clause attached to this proposed legislation. That means the reforms will not go into effect until July of 2018, offering sufficient time for current state employees to consider how the changes may affect them. Ultimately, we hope these reforms help us better utilize taxpayer dollars, improve the Commonwealth’s rating with credit agencies to strengthen our economy, and most importantly, provide a sustainable retirement for our public servants.
As always, I realize that no matter what the final bill looks like, it will not please everyone. There will be those of us who breathe a sigh of relief and applaud the proposed legislation, and others who will be furious at the thought of any change to a retirement system. However, in the end, we must not forsake the good for the sake of the perfect. It is also important to note, that this proposal does not fill the full pension deficit that the legislature will deal with during this next legislative session. Tax reform and other cuts to government spending will still need to be considered in order to place our financial house in order.