The Senate has voted to establish a task force to examine the state’s underfunded teacher pension plan in lieu of issuing $3.3 billion in pension obligation bonds.
House Bill 4 passed with a 26-10 vote after the Senate adopted a committee substitute that removed language about the bonds and replaced it with language creating a bipartisan task force.
Senate President Robert Stivers II, R-Manchester, said the committee substitute represented the “measured approach” that would ensure the pension plan would remain solvent in the long term. He said the bonding plan would be just a short-term fix that would not address the systemic problem of an underfunded plan.
“We are willing to go on that journey to see what we can do to make sure of one thing: That is the current teachers that are in the system and the retirees … will receive their benefits, not just for 10 or 15 years, but … in perpetuity,” Stivers said.
He predicted the task force would come back with a set of recommendation in nine months that both chambers could agree upon. Stivers said he was seeking to recreate a similar process that resulted in to the overhaul of the Kentucky Employees Retirement System in 2013.
Sen. Ray S. Jones II, D-Pikeville, a critic of not issuing the bonds, said the Senate was “kicking the can down the road.”
“A lot of us have some concerns borrowing $3.3 billion,” said Jones, the minority floor leader. “That is a lot of money, but at some point we have to ante up. There will be a day of reckoning.”
He said the problem with the Kentucky Teachers’ Retirement System is the unfunded liability, which stood at $14 billion as of June 30. Jones said that represents benefits that have already been earned but for which there are not enough assets to pay.
“We can talk about studying this issue … but when you are in a hole the first thing you need to do is stop digging,” he said. “If we put off this decision for even one more year, it will cost the taxpayers of this commonwealth … .”
Stivers said he hoped opponents were not trying to couch the debate as a pro- or anti-teacher.
“I doubt there are many people in this body that have as many teachers in their family as I do,” Stivers said. “My mom spent 37 years teaching. We are committed to our teachers, which is why we must ensure that any KTRS investment is viable in perpetuity.”
A bill that would allow certain employers to voluntarily leave the Kentucky Retirement Systems or be forced out if they no longer qualify to participate is on its way to becoming law.
House Bill 62, sponsored by House State Government Committee Chairman Brent Yonts, was amended with Senate changes and given final passage in the House by a vote of 96-1. The bill spells out a clear pathway for “nonstock nonprofit corporation” agencies—or nonprofit agencies not owned by stockholders—to voluntarily leave the state pension system or be forced out if they don’t meet qualifications determined by the KRS board of trustees.
“This is the buyout bill where an agency can buy its way out or finance its way out in case the Internal Revenue Service makes rulings that may put in jeopardy the status of some of the quasi-governmental agencies we have,” said Yonts, D-Greenville.
HB 62 was filed in response to federal bankruptcy protection awarded last year to Louisville-area mental health agency Seven Counties Services which allowed the agency to withdraw from the public pension system. KRS has since appealed the federal bankruptcy judge’s decision, arguing that the agency owes the pension system at least $90 million in “unfunded liabilities” along with unpaid retirement contributions.
To protect employees of agencies that leave KRS, HB 62 would require agencies that leave KRS to set up another pension system in its place. It would also give those agencies as much as 20 years—up from 10 years originally proposed in HB 62—to buy their way out of KRS, with the understanding that the KRS may seek legal action against the agency to recoup any payments owed.
State income tax refund check-offs to support pediatric cancer research and Kentucky’s rape crisis centers would be placed on state individual income tax forms beginning next tax year under a bill that cleared the Kentucky House today.
The bill is Senate Bill 82, sponsored by Sen. Max Wise, R-Campbellsville, which passed the House by a vote of 97-0 and was returned to the Senate for consideration.
SB 82 was originally focused solely on creating a tax check-off to support pediatric cancer research. The House added an amendment today to include a check-off for rape crisis centers.
The amendment was proposed by Rep. Chris Harris, D-Forest Hills, who sponsors a bill that passed the House last month aimed at creating a tax form check-off to fund rape crisis centers.
The check-off boxes for pediatric cancer research and rape crisis centers would appear on tax forms for the 2015 tax year, should SB 82 become law.
The Kentucky Legislature Home Page, www.lrc.ky.gov, provides information on each of Kentucky’s senators and representatives, including phone numbers, addressees and committee assignments. The site also provides bill texts, a bill-tracking service, and committee meeting schedules.
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You may also write any legislator by sending a letter with the lawmaker’s name to: Capitol Annex, 702 Capitol Avenue, Frankfort, Kentucky 40601.
From Legislative Research Commission