Proposed changes would provide
$37.5 million in immediate financial relief
FRANKFORT, Ky. – Gov. Steve Beshear today said he is asking the state’s retirement system boards to enact policy changes that will provide more than $37 million in immediate relief to cities, counties and school districts struggling with shortfalls in the wake of the country’s financial crisis.
Specifically, Beshear recommends that cities and counties be permitted to spread their required contribution obligations over a 10-year period instead of the current five-year required time frame. The move, which has been found to be actuarially sound by the Kentucky Retirement Systems (KRS), would provide about $37.5 million of immediate relief to cities and counties next fiscal year, while ensuring a fiscally sound pension system.
“Just as the state is struggling to cope with the worst national financial crisis since the Great Depression, cities and counties are straining to provide the most basic services to their residents,” said Gov. Beshear, who was joined in today’s announcement by Louisville Mayor Jerry Abramson, Lexington Mayor Jim Newberry, Sylvia Lovely, executive director of the Kentucky League of Cities (KLC) and Bob Arnold, executive director of the Kentucky Association of Counties (KACo). “My proposal will provide more than $37 million of immediate relief to our local governments in a way that keeps our pension systems financially sound for years to come.”
Gov. Beshear’s recommendations are in response to the report of his bipartisan Public Pension Working Group, chaired by Finance and Administration Cabinet Sec. Jonathan Miller. Gov. Beshear said he hoped the KRS board would meet prior to the start of the upcoming legislative session to address his recommendations.
“Allowing additional time to achieve full funding of the actuarially required contribution is a critical component of our strategy to bring desperately needed financial relief to county government,” said Bob Arnold of KACo. “We look forward to working with the governor and legislative leaders to assure that the public pension system and the local governments that support that system remain financially strong.”
“With city budgets already cut to the quick, this proposal is an important component in our efforts to make employer contribution rates immediately more affordable for cities,” said Sylvia Lovely of KLC.
“Governor Beshear’s proposal is a responsible and fair approach that ensures the soundness of the retirement system and bridles the increasing costs to local governments,” said Louisville Mayor Jerry Abramson.
“First, cities must do right by their citizens, who have every right to expect excellent services,” Lexington Mayor Jim Newberry said. “But responsible public officials also want to do right by public retirees by honoring the retirement agreements that were made with them when they were hired. Striking a balance is hard, particularly in this economic climate and particularly when some retirement costs have not been adequately addressed in decades. The Governor’s proposal will help us through a very difficult year.”
Today’s recommendations encompass a broad range of other pension reform issues, including providing financial relief to cities and counties, pursuit of securities’ litigation claims, refining state funding procedures, and reforming the delivery of health care. Other recommendations include:
House State Government Committee Chairman Mike Cherry has pre-filed legislation to provide the $37.5 million of relief to cities and counties, if the KRS board doesn’t adopt the recommendations.
- Adopting effective securities’ litigation policies to enable the pension systems to claim millions of dollars of damages from Wall Street losses where companies have engaged in illegal or unethical practices;
- Exploring creative health-care reforms adopted in other states to provide affordable health benefits, while ensuring the long-term financial stability of the funds;
- Promoting the state’s existing optional defined contribution, 401(k)-style plan, the Kentucky Public Employees’ Deferred Compensation Authority, to encourage individual retirement savings;
- Providing more oversight and transparency of pension system funds to enable the Governor and the General Assembly to ensure that the systems are properly funded; and
- Amending enabling law to authorize the Kentucky Asset Liability Commission (ALCo) to issue pension-related bonds when funds are appropriated by the General Assembly to pay off unfunded liabilities of the pension systems. Specifically, consideration should be given to authorize the issuance of bonds, if market conditions are favorable, to repay funds to the KTRS pension fund that have been used to cover health insurance costs for KTRS members.
“I strongly commend Rep. Cherry for his leadership on the pension issue, both in terms of his pre-filed bill but more importantly for shepherding the significant pension reform and modernization legislation passed in last summer’s special session,” said Gov. Beshear.
“I think this extended timetable is fair and reasonable,” said Rep. Mike Cherry. “Given the current stark economic situation, any relief we can responsibly provide to our cities and counties should be done.”
“Each of the governor’s recommendations help ensure the objectives of HB 1 from this year’s special session,” said Sec. Miller. “These objectives are to provide teachers and state employees a safe and secure retirement, in a manner that is sustainable into the long term for Kentucky taxpayers.”