Press Release - July 11, 2019
House Democrats offer plans to help public health depts.,
other quasi-governmental agencies with pension costs
FRANKFORT – House Democratic leaders and two state legislators who serve as the caucus’ representatives on the General Assembly’s Public Pension Oversight Board unveiled legislation today that would provide permanent relief to quasi-governmental agencies facing steep spikes in their public-pension costs.
“We have worked weeks on these proposals, trying to find a way that helps rather than hurts our public health departments, regional universities, rape crisis centers, domestic violence shelters and the others affected by this,” House Democratic Leader Rocky Adkins said. “We have reached out across the aisle to our Republican counterparts and to the governor to share our ideas, and we have communicated with the stakeholders as well. We believe these plans provide the certainty and stability the agencies absolutely must have.”
“Compared with Governor Bevin’s bill, our legislation is faster, cheaper and stands on much stronger legal ground,” House Democratic Caucus Chair Derrick Graham said. “His proposal undercuts the retirement security of thousands of career workers; it burdens the affected agencies with decades of debt many can’t afford; and it weakens what is the nation’s lowest-funded public retirement system. We need a better way, and these bills get us there.”
“Our goal is to make sure these quasi-governmental agencies can keep doing their job,” said House Democratic Whip Joni Jenkins. “If they go bankrupt, the state will be on the hook for many of the mandated services they provide us each and every day. That could cost taxpayers $400 million or more. That’s three to four times higher than what it takes to freeze the quasi-governmental agencies’ payments.”
The House leaders praised the work of Representatives Joe Graviss of Versailles and Buddy Wheatley of Covington, both of whom helped to lead the way in researching and writing the bills the caucus offered today.
“Both Buddy and I have studied this issue closely, and it is vital to note that these proposals have been scrutinized by Kentucky Retirement Systems’ (KRS) actuaries,” Rep. Graviss said. “We and our House leaders believe these ideas deserve to be heard and debated before anything is enacted in a special session.”
Rep. Wheatley agreed. “If the goal is to preserve the state retirement system and those who depend on it, our plans get us there faster than the governor’s and in a way that does not disrupt thousands of lives.”
The two plans offered today by the Democratic House leaders and legislators are identical, with two key differences. Both bills would:
Freeze the retirement payments now paid by the quasi-governmental agencies. Additionally, future annual payments for these agencies could not go lower until the retirement systems’ long-term liability is paid off. The remaining employers in this retirement system – principally state government – would see their annual payments to KRS rise accordingly.
Re-Direct excess retiree health insurance payments for five years to the lower-funded pension side. This would be paid back in future years by higher annual payments to the retiree health insurance fund. Benefits would not be affected, and retirees would not face higher costs as a result of this move.
The caucus’ second bill would go two steps furthers by adjusting assumptions Kentucky Retirement Systems uses to calculate employer costs each year. First, the investment rate would – for one year only –move from the current 5.25 percent to 6 percent, which would still be the most conservative investment rare in the nation and be more in line with historical averages. The KRS Board of Trustees would also be limited to rate changes of no more than 0.25 percent each year thereafter, to avoid a sudden drop like the one the KRS board approves in the summer of 2017.
Second, payroll growth would go from zero to one percent per year. This would not assume a larger workforce, but would reflect increases due to inflation and future raises over the next 24 years.
“Both of these changes are reasonable and easily defendable,” Leader Adkins said. “However, we provided a more scaled-down bill for those who may not want to make any assumption changes. Ultimately, both bills keep everyone in the state retirement system and they should easily be able to get 60 votes and maybe even all 100 in the House. Crossing that threshold is important in a non-budget year, which is why we believe our plan is on much stronger legal ground.”