Legislation to reform to the state’s woefully underfunded pension plans cleared its first legislative hurdle Wednesday passing the Senate State and Local Committee with a 7-4 vote.
Senate Bill 1 sponsor Sen. Joe Bowen said the changes made to the bill since it was filed would take the savings from $4.8 billion to $3.2 billion over 20 years, when he stated the teachers’ retirement system would then be 90 percent funded. The largest difference between the savings in the original and revised bill is that the revised bill lessens the reduction in the cost of living adjustments (COLAs) for teachers reducing them to 1% per year instead of .75%.
In the discussion of the legislation, with a lot of commentary from retired teachers in the audience, Bowen stated continuing to do nothing to fix the pension crisis means tax increases that will be felt by everyone.
“If we miss this opportunity to save the systems, we may not get a chance again before it’s too late,” Bowen said.
The actuarial analysis by the Kentucky Teachers’ Retirement System (KTRS) of the legislation shows the system will have a lowered unfunded liability of $3.8 billion after 20 years. Bowen stated the analysis shows the legislation puts the state on the road to recovery.
As for funding of the systems, moving to the level-dollar funding formula will require $400 million additional state dollars in the first year alone—according to the actuarial analysis. Despite the large price tag, legislators continued to state the importance of the larger amount and new formula to ensure responsible payments is the way to get the systems on track.
Senate Bill 1 now moves to the full Senate for a vote on the floor.