Kentucky Democrats Unveil Proposals To Address Surging Pension Costs

Jul 12, 2019
Originally published on July 12, 2019 10:26 am


Democrats in Kentucky’s House of Representatives have unveiled two bills to try and address surging pension costs currently being experienced by the state’s regional universities and small agencies like health departments.

The proposals come as Gov. Matt Bevin has been trying to rally support for his own bill and has promised to call a special session for state lawmakers to vote on it.

 


A Republican House leader said Wednesday that the session might start on July 19 during a narrow window when enough lawmakers will be back from summer vacations or conferences.

Minority Leader Rocky Adkins, the top Democrat in the House, said that his party’s proposals would provide more “stability and certainty” to the agencies than the governor’s version.

“We have several days left here to meet in a good faith effort, to bring together what could potentially be a proposal that will bring about bipartisan support,” Adkins said.

Optimistic Or Pessimistic Assumptions?

Regional universities and the “quasi” agencies had to pay 68 percent more into Kentucky’s pension system starting July 1, leading to worries about cuts in services or closures.

The spike is happening because in 2017, the board that manages the pensions of most state workers, adopted more pessimistic assumptions for investments and payroll growth. As a result, government employers have to kick in more money to keep the system going.

Both bills proposed by Democrats would freeze the payments at the lower rate and shift money from the state’s retiree health insurance fund to the pension system for five years.

Democrats said Kentucky’s health insurance fund is better-funded than other states’ and would be replenished by higher payments in the future.

One of the bills put forward by Democrats would adopt slightly more optimistic assumptions for pension investments and payroll growth — moving current predictions from 0 percent payroll growth to 1 percent and 5.25 percent returns on investments to 6.25 percent.

Rep. Joe Graviss, a Democrat from Versailles, said the state needs to find more revenue to fund payroll growth.

“We believe that we cannot continue to cut and take away services away from Kentuckians and provide a government to them that serves their needs by continuing to shed employees and cut and cut and cut,” Graviss said.

The number of employees in Kentucky’s main pension system has been declining for years, while the number of retirees has been increasing.

The system’s assumed rate of return on pension investments is the lowest of 129 state pension plans across the country, according to the National Association of State Retirement Administrators.

House Speaker David Osborne issued a statement saying he was reviewing the proposals, but that he already had concerns.

“Our preliminary concern, of course, is that these are the very same policies that led to the pension problems we face today. Adopting assumptions that defy ten years of trends with regards to investment returns and payroll growth is particularly concerning,” Osborne wrote.

“As always, we have to realize that this money has to come from either the pockets of Kentuckians or from the services that state government provides.”

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