With the debate over how to solve Kentucky’s pension crisis, legislators heard testimony on pension system reforms contained in Senate Bill 1 but did not take a vote on the proposal as the actuarial analysis of the plan and a committee substitute making changes to the bill are not yet complete.
Wednesday’s meeting of the Senate State and Local Government Committee was the first time a hearing was held on the Senate Bill 1 proposal since it was rolled out last week.
Senate Bill 1 sponsor Sen. Joe Bowen opened his remarks in the meeting by discussing the reasons Kentucky is severely underfunded and stated the General Assembly is “dead serious” about reforms, funding the plans, and keeping promises to public servants. (Get an overview of what is in the pension reform legislation here.)
In the budget being passed this year, Bowen said, more than $3 billion total will go to the state’s pension systems—which is more than 14 percent of the state’s two-year state budget.
Bowen said there will have to be some sacrificing by multiple parties in order to solve the pension crisis.
“We want to save these systems. We don’t want these systems to languish and fail. But if we fail to act, that is in fact what’s going to happen,” Bowen said to reporters after the committee meeting. “Should this bill fail, I really believe we are going to be on the wrong side of history.”
In terms of the provisions of Senate Bill 1, Bowen stated the hybrid cash balance plan included in the bill for new teachers has a benefit projection of more than $700,000 with a calculation looking at a teacher starting at age 27 and working 30 years to age 57 (view image for more info).
Under the committee substitute, the cost of living adjustments (COLAs) for current and future teachers will be placed at 1% each year until the system is 90 percent funded—a change from the original proposal which reduced the current 1.5% COLA to .75% per year for 12 years or until the plan is 90 percent funded.
The percent some Kentucky Retirement System (KRS) employees will pay into the health insurance fund also changes under the committee substitute, changing from the originally proposed 3 percent of salary to 1 percent under the new proposal.
Bowen said once the committee substitute and actuarial analysis are finalized and released, the committee will reconvene to vote on the measure.