Stivers’ Legislative Update

Kentucky’s pension crisis has become one of the most dominating news stories across the Commonwealth in recent months. The bottom line: if our state pensions are not addressed in the very near future, we will face huge cuts in state funding. My colleagues and I have been working diligently in recent months to come up with a solution that will keep the promise to current retirees and employees, while avoiding draconian cuts to education, Medicaid, and other vital government services. So how did we get to this point? In the early 2000’s Kentucky’s pensions were in a healthy condition. While there was not one single cause for the pensions’ downhill slide, one major factor was erroneous actuarial assumptions made by past board members of these systems. The Kentucky Senate led a bipartisan charge in attempts to reform our state’s ailing pensions back in 2007. Unfortunately, that 2007 proposal fell on deaf ears in the House of Representatives.

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There have been some reforms that have been enacted since 2007, but none have gone far enough in addressing the root of the pension problem. On top of that, it seems past assumptions were often manipulated by the prior pension board members in efforts to minimize the “cost” of pensions to the state budget. Unreasonably high investment expectations were made and funding was based on inaccurate payroll numbers. The result was to provide a false sense of security and justify smaller-than-necessary contributions to the pension plans.

In 2013 the General Assembly took significant steps toward reforming the Kentucky Employees Retirement Systems (KERS) and the County Employee Retirement System (CERS), but the Kentucky Teachers Retirement System (KTRS) was not included in those measures and the problem continued to grow.

In 2016 the General Assembly made a commitment to address the issue. This started with a dedication of an additional $1.2 billion annually to help address the shortfalls in KERS and KTRS, as well as the establishment a permanent pension fund. We also hired a third party organization, the PFM Group, to investigate the state of our pension systems.

On Monday, August 28, the PFM Group gave its final presentation to the General Assembly’s Public Pension Oversight Board, offering its recommendations on how to best address the problem. I, along with my colleagues in the General Assembly and Governor Bevin, have been working diligently to review the PFM Group’s recommendations. It is important to understand that the recommendations from PFM Group are only recommendations. Ultimately, it is up to the General Assembly to craft a proposal and vote on legislation in a special session, which will take place later this fall. I am confident that our proposal will keep our promise to current teachers and state employees, as well as current retirees in our systems.

We cannot afford to keep “kicking the can down the road.” If we do not address these pension concerns now, our Commonwealth will be forced to cut funding in other areas of state government in order to make necessary pension contributions. Public education (K-12) would bear the brunt of the cuts, creating larger class sizes, fewer teachers, and a lower-quality education for our students. Higher education at our public universities would also feel the cuts and make college less affordable. Medicaid, public safety, and infrastructure would also suffer in this unfortunate scenario.

But there are ways to avoid that situation. There is a path forward that allows us to balance our legal and moral obligation to our retirees while reforming the broken systems. Our priority is ensuring our retirees have a secure retirement that will provide for them in the years to come without taking away from other priority state programs. Addressing this crisis is no easy task, but I will continue to work alongside my colleagues in the Legislature and with Governor Bevin’s office to ensure we find a solution that provides for our retirees while being responsible stewards of taxpayer dollars.

Senate President Robert Stivers represents the 25th District, which encompasses Clay, Knox, Lee, Owsley, Whitley, Wolfe counties. He serves as chairman of the Senate Committee on Committees and Rules Committee and the co-chairman of the Legislative Research Commission. Additionally, President Stivers is a member of the Senate Judiciary Committee.