By Ronnie Ellis
CNHI News Service
FRANKFORT — A bill to address Kentucky’s growing unfunded liabilities in its pension systems is now in the hands of the House State Government Committee.
The bill, sponsored by Sen. Damon Thayer, R-Georgetown, and passed by the Republican-controlled Senate is based on recommendations of a task force co-chaired by Thayer and former Rep. Mike Cherry.
Those recommendations are to retain current benefits for existing employees and retirees but move new employees into a hybrid, cash-balance plan, end cost-of-living adjustments and fully fund the annually required contribution to the funds.
Though economic and stock-market trends affected the health of the funds, a major problem has been the legislature’s decision in previous years not to make that full payment.
But Thayer’s bill only says it is “the intent” of the legislature to fully fund the ARC beginning next year. It does not specify where that money will come from.
Democratic Gov. Steve Beshear and House Speaker Greg Stumbo, D-Prestonsburg, have said they want to know how to pay for the ARC before passing the Senate bill.
As Thursday’s committee meeting began, Chairman Rep. Brent Yonts, D-Greenville, said a committee substitute to Thayer’s bill is being drafted and will be sent to legislative staff for “scoring,” indicating the substitute will include some funding method.
Stumbo has said Democrats have discussed a variety of options, from increasing the cigarette tax to perhaps using state proceeds from historical wagering if a legal challenge to that form of gambling fails.
Thayer told the committee it is important to pass the framework of reform now and determine funding sources next year when the General Assembly meets for its biennial budget session.
The estimated cost of fully funding the ARC in the first year of next year’s budget is around $327 million. But some of that comes from non-general fund sources, and the legislature is currently paying a portion of the ARC which will also be available next year.
Thayer said that means about $120 to $130 million in new general fund dollars will be needed for the ARC, and he contends that can easily be handled by projected revenue growth of $370 million or more.
Beshear and his budget office, however, have told lawmakers that any growth in revenues is already accounted for, either to replace one-time, stop-gap funding measures in the current budget, money which won’t be there next year, or to cover growth in Medicaid and state employee health costs.
Rep. Brad Montell, R-Shelbyville, said the legislature should act now and resolve the funding issue next year as Thayer suggests.
He noted that some, including the governor and speaker, have suggested a special session to take up tax reform (to generate more state revenues) and pension reform in tandem.
But Montell said tax reform is controversial and combining the two “runs the risk of this blowing up.”
The meeting concluded without action as members raced to make chamber sessions about to convene in the Capitol Building.
Yonts would only say the committee substitute was being drafted and would be discussed at a future committee meeting.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at firstname.lastname@example.org. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.