Kentucky State Capitol

A bill to overhaul the state’s underfunded public pension system has finally been filed in the Kentucky General Assembly, though it varies greatly from the dramatic changes of the original proposal released by Gov. Matt Bevin and Republican leaders of the state legislature last fall, which pushed most government workers from a defined benefit plan to a 401(k)-style plan.

Senate Bill 1 — filed by Sen. Joe Bowen, R-Owensboro, Tuesday evening — no longer requires that teachers and public employees be moved from their traditional pension plans into 401(k) plans, with GOP leaders explaining that the previous proposal was too expensive.

Introducing his bill Tuesday evening, Bowen said that GOP leaders had heard loud and clear the many voices of teachers and state employees who strongly opposed and protested the original pension plan released last year, adding that “we adjusted our thinking because of your voices.”

Among the concessions of the new pension bill is that it eliminates the provision in which teachers and public employees would have had to pay an additional 3 percent of their salaries for a retiree health benefit fee. Instead of suspending the 1.5 percent increase in cost-of-living adjustments for teachers over five years, it cuts that increase in half over the next 12 years.

Additionally, new teachers will be placed in a hybrid cash balance plan that includes both a traditional defined benefit plan and a 401-(k)-style plan. Such hybrids plans are similar to what new state workers have received since 2013, though teachers remain ineligible for Social Security.

At a news conference on Wednesday morning to discuss the pension bill, Republican Senate President Robert Stivers, House Speaker Pro Tem David Osborne and Bowen said that the bill would save the state $4.8 billion over the next 30 years, after which the massive unfunded liability of Kentucky’s public pension systems would be eliminated.

Asked if there is any wiggle room to change SB 1 in the coming weeks before it is passed by the General Assembly, Bowen said he did not think so, as they already “made countless concessions” to teachers and public employees, adding “I can’t imagine there being a lot of pushback on this.”

Though a preliminary financial scoring of the bill was conducted, the Republican leaders did not immediately release this to the media, with Stivers saying that an official scoring by the Legislative Research Committee will be public before the bill is passed into law.

Asked about the dramatic changes from Bevin’s original pension proposal, Osborne said that bill last fall offered a “starting point” for a discussion on pensions that moved it from the realm of theory to reality, and SB 1 is the result of months of debate and analysis. He added that Bevin was happy that a bill had finally been filed and the legislature can now more forward.

Bevin’s spokeswoman did not reply to an email from Insider Louisville seeking the governor’s thoughts on the new pension bill.

Republican Party of Kentucky chairman Mac Brown was one of 19 prominent individuals to sign a public letter last week urging legislators to move public employees to 401(k) plans, which drew loud protests from government workers — including police and firefighter unions — as well as a number of Republican legislators.

In a statement released by the RPK Wednesday morning, executive director Sarah Van Wallaghen said that Democrats had “consistently refused to deal head on with the problems facing” Kentucky during their many years in power, and now Republicans “are doing what the voters sent them here to do: get Kentucky back on track.”

“I hope all Kentuckians appreciate the time and attention legislative leaders put into hearing the concerns of current and retired state workers and teachers and the work they did to make the bill something that both ensures the long-term viability of our state pension system while not overburdening taxpaying families and businesses,” stated Van Wallaghen. “I am very proud of our House and Senate Republican Majorities and their efforts on this vital issue.”

In a statement on SB 1, the Kentucky Public Pension Coalition — largely made up of public employee unions — noted the changes made in Bowen’s bill and the governor’s recommendation to fully fund the actuarially recommended contributions for pension in the state budget, but concluded that the bill “is still unacceptable.”

“After a brief review, we are very concerned about many aspects of the bill that harm dedicated public servants, including unfairly reducing the benefits they have earned,” read the KPPC statement. “We look forward to a more in-depth review of this bill in the coming days.”

The progressive think tank Kentucky Center for Economic Policy analyzed SB 1 Tuesday evening and found that the 12-year cut to teachers’ COLA increases would actual cost them more in benefits than the five-year freeze in the original proposal, in addition to capping the use of sick days in the calculation of their retirement benefits.

Greater Louisville Inc. CEO Kent Oyler issued a statement applauding legislators for incorporating several important GLI priorities into SB 1, while encouraging them to “continue exploring and debating the best strategies to ensure the long-term stability of our public pension system and to find new revenue streams, such as expanded gaming and an increase in the cigarette tax, to pay off unfunded liabilities.”

This story has been updated.

Joe Sonka is a staff writer at Insider Louisville focusing on government, politics, education and public safety. He is a former news editor and staff writer at LEO Weekly and has also freelanced for The Nation and ThinkProgress. He has won first place awards from the Louisville Metro chapter of the Society of Professional Journalists in the categories of Health Reporting, Enterprise Reporting, Government/Politics, Minority/Women’s Affairs Reporting, Continuing Coverage and Best Blog. Email him at [email protected]


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