As we’ve discussed before, public pensions in Kentucky have been the subject of much debate this year. Kentucky has some of the most poorly funded pension systems in the country, the result of years of underfunding by the state government. Earlier this year, Gov. Matt Bevin said he planned to call a special legislative session to deal with tax reform and public pensions. As we’ve also mentioned before, Kentucky’s tax code is riddled with loopholes. Gov. Bevin quickly dropped tax reform from the discussion, however, and the debate regarding public pensions has not gone well.
Back in October, Gov. Bevin and the leaders of the state legislature unveiled their proposed pension legislation. Their proposal contained a number of harmful provisions, including forcing some current and all future public employees into a meager defined contribution plan. This remarkably ungenerous plan would harm the retirement security of teachers, sanitation workers, and other public employees across the Bluegrass State.
Following the unveiling of this proposed legislation, two separate analyses were conducted: one to assess its impact on the Teachers Retirement System (TRS) and one on its impact on the Kentucky Retirement Systems plans (KRS). So far only one of those has been publicly released. The study of the legislation’s impact on TRS found that it would increase costs to taxpayers by $4 billion over 20 years. Not only would this legislation decimate retirement security for Kentucky teachers, but it would cost more while providing less. Following the release of this report, the governor’s office demanded that the independent actuarial firm that conducted the study redo it.
The report on the legislation’s impact on the KRS plans has not yet been released. The governor’s office refuses to release it. While we can’t say for sure until the report is made public, it’s safe to assume that the proposed legislation would have similarly harmful effects for KRS as for TRS, if not more harmful effects. Given the already poorly funded status of the KRS non-hazardous plan, closing the plan off to new hires would only worsen its funded status, as the example of West Virginia shows.
Despite months of promises, the governor has not yet called a special legislative session. News reports indicate that the governor does not have the votes in the state legislature to pass his proposed legislation. Considering the devastating impacts on retirement security for public employees and the increased costs for taxpayers, it’s not surprising that legislators would be reluctant to vote for it. The 2018 session of the Kentucky legislature convenes on January 2nd. With all the controversy and lack of publicly available information, it seems to be very unnecessary at this point to call a special legislative session in 2017.