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Tuesday, the Senate went back in to session for the second part of the 2013 General Assembly session.
I will be filing Senate Bill 2, the public employee pension reform bill. It will mark the eighth session that the Senate has presented ways to preserve and protect the retirement of state employees. It is my hope that with the cooperation of the House of Representatives and the Governor, this will be the last. SB 2 will make no changes to the Kentucky Teacher Retirement System. It will also not create a new tax on the pension income of former public and private sector employees.
Senate Bill 2 reflects the recommendations of the bipartisan Task Force on Kentucky Public Pensions. This task force consisting of senators and representatives, Republicans and Democrats, held of six intensive meetings last summer. The task force heard from public employee groups, businesses, unions, retirement system officials, retirement and pension experts, as well as nationally-known independent organizations and think tanks such the PEW Center and the Laura and John Arnold Foundation.
Here are the cold facts: Kentucky’s state employee pension system teeters on a fiscal cliff facing $30 billion in unfunded liabilities. This means state employees have been promised $30 billion more in benefits that the retirement system currently has in assets. How does this big problem affect you? If you’re a public employee, your retirement is safe because of the “inviolable contract.” But if you are a college-student nervous of tuition increases, a grandmother needing public transit, a small-business owner trying to meet pay-roll, or if you just need to get to work on a state road; then you should have some concerns. Because every extra dollar needed to pay for pension benefits is a dollar unavailable for another worthy purpose.
SB 2 protects taxpayers while creating a sustainable retirement benefit for state employees by recommending full funding of the actuarially-required contribution to the retirement system and creating a new hybrid cash-balance plan for future employees. The legislation provides the guarantee of at least 4% return of the money put in but also allows the state employee, if they wish, to leverage their contributions for higher gains. Further, any benefits accrued could be taken with them if they switch jobs. This hybrid cash-balance plan will provide future state employees with a secure retirement income and provide taxpayers with predictable costs that can be met without raising taxes.
President Dwight Eisenhower in his farewell address said, “We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage.” There are no easy answers but the Senate looks forward to a candid and robust debate on this important issue.