Kentucky education groups say newly filed pension reform bill needs changes
A day after the General Assembly's long-awaited pension reform bill was filed, education groups are still poring over details of the nearly 300-page legislation.
FRANKFORT, Ky. (WDRB) -- A day after the General Assembly's long-awaited pension reform bill was filed, education groups are still poring over details of the nearly 300-page legislation.
But from what they've seen in Senate Bill 1 thus far, representatives of those organizations say they hope lawmakers will tweak the legislation after hearing their misgivings on how the bill will affect pensions for current, retired and future teachers.
Pension changes contemplated in SB 1 -- notably moving new teachers into a hybrid-cash-balance plan from the current defined-benefit program -- is "not going to help" the state attract future educators, said Kentucky Education Association President Stephanie Winkler.
"We can't find teachers to fill positions we have now," Winkler said. "This is not going to do anything to entice folks to want to come to Kentucky and teach, or to stay in teaching, for that matter."
SB 1, which would allow the General Assembly to amend benefits enacted by July 1, does not change defined-benefit pensions for current teachers, but new teachers will be enrolled in hybrid-cash-balance plans, which include elements of defined-benefit and defined-contribution retirement accounts.
The legislation also caps sick-leave balances as of July 31 for retirement calculations and lowers cost-of-living adjustments for current retirees from 1.5 percent each year to .75 percent through July 1, 2029, as long as the Kentucky Teachers Retirement System is less than 90 percent funded.
For future retirees, that COLA reduction would last up to 12 years after leaving the classroom unless KTRS is 90 percent funded.
SB 1 also calls on school districts to contribute an additional 2 percent of payroll toward pensions for those hired in the hybrid plan and 3 percent of payroll for retiree health benefits.
The legislation unveiled Tuesday has shifted dramatically from Gov. Matt Bevin's pension reform proposal in October, which was endorsed by leaders in the House and Senate and called for moving most government workers into defined-contribution plans.
Winkler said legislators should do more to find revenue to shore up the state's struggling pension systems, which face unfunded liabilities totaling some $43 billion.
"Cash-strapped" school districts will struggle to find more money to pay toward pension benefits, she said.
"We've been doing more with less for years and years, decades literally, and we are at a breaking point right now in public education, and until we figure out the revenue problem and get more revenue in this state, we are going to continue to every year have problems needing funds," Winkler said Wednesday.
"If it's not for pensions, it'll be for public schools, it'll be for state police, it'll be for firefighters, it'll be some kind of public service that we're always going to have a crisis."
Eric Kennedy, government relations director for the Kentucky School Boards Association, said SB 1 showed signs of significant compromise from October, but his group also had two major concerns with the bill: increased contribution rates for employees in the County Employees Retirement System, in which some school employees participate, and the 2 percent contribution rate hike to cover new teachers in the hybrid plan.
Some school districts have already weathered budget cuts and may face more in the upcoming two-year spending plan, and others in coal-mining communities have seen unmined coal assessment receipts plummet in recent years, leaving them "at the breaking point," he said.
"Any new additional cost or mandate or expenditure is concerning in any amount," Kennedy said. "… It's almost the death by a thousand cuts situation."
Brent McKim, president of the Jefferson County Teachers Association, said SB 1's current form "is not acceptable" because it cuts COLAs for current retirees and moves new teachers into the hybrid pension plan.
The original pension reform proposal unveiled in October suspended COLAs for all retired teachers for five years, and McKim said the current version of SB 1 hurts retirees more financially. He cited a Kentucky Center for Economic Policy analysis that found the original COLA suspension would cost the average retired teachers about $71,000 in benefits compared to $73,000 in lost COLA income under SB 1.
"Those are benefits they already prepaid for, and so we believe that's a violation of the inviolable contract," McKim said.
Education-focused groups say they hope to convince lawmakers to amend SB 1 as it moves through the legislative process, starting with next week's committee hearing.
McKim noted that the opinions of rank-and-file lawmakers helped shift the conversation on pension reform during the fall, when leaders had hoped to call a special session and act on pension reform ahead of this year's legislative session.
He says he hopes legislators hear from all stakeholders in public education ahead in the coming weeks, not just those who are members of his and other education groups.
"The rank-and-file members of the Senate and especially of the House may be much more responsive to these concerns of citizens and employees," McKim said.
Winkler said KEA talked with House leaders as they considered changes to the state's pension offerings, but not Senate leaders.
"There is room for compromise, but we have to be at the table to tell them," Winkler said. "And that's still not happening."
Reach reporter Kevin Wheatley at 502-585-0838 and email@example.com. Follow him on Twitter @KevinWheatleyKY.
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