FRANKFORT, Ky. (KT) - House Democrats unveiled their legislative proposals to shore up the state’s ailing retirement system and – Surprise! - there are differences from the version coming out of Gov. Matt Bevin’s office.
House Minority Leader Rocky Adkins, D-Sandy Hook, told reporters during a Thursday press conference that “we are here in very good faith to try to work out a way forward to really bring about a bipartisan effort.”
Adkins says they met first Tuesday with Speaker David Osborne, R-Prospect, and other House Republican leaders, and said the meeting went well.
“It was a chance for us to lay out the plans that we are ready to put forth,” said Adkins, who said they had another meeting Thursday morning. He said the GOP promised to give the proposals a fair look.
“We’re not here to grandstand,” Adkins said. “We’re not here to do anything but to try to make proposals that we believe are sound and will bring about a bipartisan effort on a very, very important issue.”
The House Democrats have two proposals they have drafted that will solve the unfunded liability over a 24-year period. Both would, among other things, do the following:
--Freeze the payments from quasi-governmental agencies such as the universities, local health departments at their current rate, instead of nearly doubling the amount as in the governor’s proposal.
--The state’s contributions for their employees will be set by the actuaries and be allowed to float up or down to reach the 24-year goal.
--For the first five years, part of the health insurance contributions, which are in much better fiscal shape, would be used to supplement the pension system payments.
--Puts a floor on contributions at the current positive cash flow for the 24-year amortization period; which they believe would remove incentives to cut employees or farm out their jobs.
--Takes a 20-year investment outlook versus short-term reactions.
--Limits the Kentucky Employees Retirement System to changing the investment assumption rate to one-quarter percent per year.
--Requires annual updates to the General Assembly.
One of the two plans would also raise the investment assumption rate from 5.25 to 6.00 percent.
Adkins says their plans are “faster, cheaper, legal and eliminate uncertainty,” than the governor’s plan. Here’s why:
--Faster, because they pay off the unfunded liability, estimated to be at least $40 billion, four years faster.
--Cheaper, since among other things, they keep employees in the system who are needed to pay down the liability.
--Legal because they do not violate the so-called “inviolable contract,” and acknowledges it would take a supermajority in both the House and Senate to pass, avoiding a costly legal battle.
--More certain for the quasi-governmental agencies, because they disincentivize employee layoffs, control their costs, won’t force them into bankruptcy, doesn’t change benefits already earned by active employees, doesn’t bind future General Assemblies and doesn’t leave the state with a balloon payment at the end of 24-years.
Bryan Sunderland, Gov. Bevin’s Deputy Chief of Staff, who attended the press conference, said he hadn’t had an opportunity to read all the documents, but had some concerns.
“Political manipulation and changing of the assumptions to allow less money to go into the pension system is the very thing that put us in this problem to begin with,” he said. “Taking money out of one pot to put in another pot, a pot that’s only 36 percent funded, is like paying VISA with a MasterCard. It’s very concerning.”
On a positive note, Sunderland added, “They came in good faith, they offered up some ideas; we’ll be happy to take a look at them.”
Gov. Bevin has said he wanted to call a special session as soon as possible, but Sunderland wouldn’t say if it would begin July 19, as some lawmakers have said seems likely.