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Kentucky Lawmakers Get Expensive Ask For Pension System

Pile of Money
Getty Images/Ingram Publishing
Pile of Money

Kentucky taxpayers need to pay nearly $1 billion extra over the next two years to keep solvent a retirement plan for most state workers.

The Kentucky Employees Retirement System board of trustees told state lawmakers Thursday they need to spend $2.8 billion per year on a retirement plan that covers state workers and police officers. That's $954 million more than was required the previous two years.

Nearly all of that increase is because the board of trustees believes the state will earn less money on its investments and have fewer employees contributing to the system over the next three decades. Board chairman John Farris says the numbers, while more expensive, are more realistic.

"Our role should have been in the past to calculate these numbers correctly and give them to the Legislature. Previous boards didn't do that," he said.

The numbers approved Thursday do not include the Kentucky Teachers Retirement System, which is governed by a separate board of trustees. When you include them, state budget director John Chilton said he expects the state would need an extra $700 million a year.

The huge increases come at a bad time for the cash-strapped state government. The state ended the most recent fiscal year with a $138.5 million deficit. State economists predict the government is headed for another shortfall next year of $155 million.

Republican Gov. Matt Bevin has indicated he wants to impose mid-year budget cuts of 17.4 percent to cover the shortfall and replenish the state's savings account. But most state agencies outside of his direct control, including the judicial branch and the department of education, have resisted.

State lawmakers could decide not to fully fund the pension system, as previous Legislatures chose to do for much of the last decade. But Bevin and other Republican leaders have sharply criticized that approach, indicating they are committed to paying the full amount regardless of the impacts it has on the rest of state government.

Bevin has proposed a 500-plus page bill to overhaul the pension system, but has been met with significant opposition among state employees and even within his own political party. Bevin has vowed to call a special session of the Legislature to vote on the bill by the end of the year. But Wednesday, more than half of the majority House Republican caucus signed a letter asking Bevin not to call a special session.

Thursday's vote also affects local governments. All together, they would have to pay an additional $317 million each year for the retirement plan that covers local city and county government workers. Some board members wanted to soften that blow by phasing in the increases over the next five years. But an attorney for the board said only the Legislature could decide to do that.

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