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The Kentucky State Capitol in Frankfort, Ky. 

LOUISVILLE, Ky. (WDRB) – Kentucky lawmakers negotiating the state’s next two-year budget agreed Wednesday to fully fund the Kentucky Teachers Retirement System (KTRS), rejecting the Senate’s proposal to withhold more than $1 billion in funding in exchange for structural reforms to the pension program.

Lawmakers on the budget conference committee are working to put the finishing touches on the biennial spending plan as businesses across Kentucky and the U.S. are reeling from the ramifications of the novel coronavirus pandemic.

In Kentucky, thousands have applied for unemployment benefits as more and more businesses close to in-person traffic as the state tries to limit the spread of COVID-19.

Business has changed at the Capitol as well, with access to the statehouse restricted to legislators, essential staff, credentialed media and invited guests.

The Senate’s version of the two-year spending plan withheld $1.1 billion from KTRS, storing it in the state’s permanent pension fund until structural reforms were made.

KTRS funding in the amount of $551.1 million was at stake in fiscal year 2021, which begins July 1.

If reforms weren’t made by Aug. 1, the Senate’s version of the budget would have transferred that money to the Kentucky Employees Retirement System for state workers in non-hazardous positions, the state’s largest and most underfunded pension program.

That would have meant the legislature would have had mere days to enact such reforms to send that funding to KTRS from the state’s permanent pension fund.

With no opportunity for opponents to voice their concerns with pension bills given the increased COVID-19 restrictions at the Capitol, House members on the conference committee balked at the proposal.

“I don’t think we can have that discussion right now, and I think doing anything less than funding at the actuarially required – not the statutorily required, the actuarially required – (contribution level) is not good policy,” said Rep. Steven Rudy, a Republican from Paducah, Kentucky, who chairs the House budget committee.

“I think all of us can and should agree that fully funding all of our pension systems has got to be paramount as we more forward in these budget discussions,” said House Speaker David Osborne, R-Prospect.

Senate Republicans on the conference committee noted that the onus of structural pension reforms have fallen on state workers, with new hires moved to hybrid cash balance pension plans since 2013.

“Our general thought in this time was while there is uncertainty, we all know that KTRS is well, well outside of the 20-year window to even look at being in a position like KERS whereas KERS could be in a 12- to 24-month window of us questioning whether or not people are going to start getting checks directly from the Treasury rather than from the retirement system,” said Sen. Chris McDaniel, a Republican from Taylor Mill, Kentucky, and chair of the Senate budget committee.

Teachers, who get traditional defined-benefit pensions, have resisted pushes toward defined-contribution plans and staged mass “sickouts” over retirement changes in 2018 that were later overturned by the Kentucky Supreme Court because lawmakers acted too quickly on the legislation.

Rudy agreed that the topic of reforms for future KTRS hires should be discussed during the legislative interim this year.

“We have to consider structural changes,” he said.

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