The leader of the state Senate said there is a “limited and difficult path forward” for the Republican plan to overhaul the state’s pension systems because there isn’t enough support among lawmakers.
Senate President Robert Stivers also said that as a result, the Senate would likely not consider a bill to provide relief to local governments from ballooning contributions into the pension systems scheduled to begin in July.
Stivers said without structural changes to the pension system, the legislature can’t afford to let local governments pay less than already planned.
“Until we get a solution to this unfunded liability growing, it does no good to try to phase something in. Because you can’t have a target to strive for,” Stivers said.
Last fall, Budget Director John Chilton sent a letter to local governments, universities and other quasi-governmental agencies stating that they will have to contribute about 50 or 60 percent more into the pension systems.
That’s because last year, the Kentucky Retirement System Board of Trustees voted to assume that the state would make less from investments and employee contributions than previously predicted.
Under Senate Bill 66, local governments and other agencies would be allowed to phase in their increased contributions.
But Stivers said he was unwilling to allow the phase-in without passing a plan to limit the unfunded pension liability.
“That’s where I think people will have to assess where they are to see how districts, counties, cities, quasi-governmental agencies survive with these extraordinary costs that they’re going to have to bear to maintain some integrity of the system,” Stivers said.
Senate Bill 1 has stalled after intense pressure from state workers, some of whom would have seen reductions to their retirement benefits under the proposal.
Teachers rallied hard against the bill, partly because it would have reduced retired teacher benefits from 1.5 percent to 1 percent, and moved future teachers into less-generous retirement plans.
The bill was scheduled to be voted out of the state Senate last Friday, but was sent back to committee after Republican leaders realized it didn’t have enough votes to pass.
House Speaker David Osborne said Republicans in his chamber are committed to passing some sort of bill to address the ailing pension systems.
“I think there is still an interest in our caucus to addressing the pension issue,” said Osborne. “I don’t know exactly what that will look like in the long run.”
Osborne also said that he hadn’t talked to Stivers about considering the pension overhaul independently from legislation to phase-in local government contributions.
“I know that county officials and school board officials are very, very concerned about that legislation not passing,” Osborne said.
Lawmakers have 10 working days left in this year’s legislative session. Stivers said if the pension proposal doesn’t pass, he hoped Bevin would call a special legislative session.