FRANKFORT (AP) — An independent consulting group says Kentucky lawmakers should take away some cost-of-living raises awarded to state retirees over the past 20 years as part of a strategy to keep the retirement systems solvent.
The PFM Group told the Public Pension Oversight Board that lawmakers need to make dramatic changes to keep the state’s retirement systems from running out of money.
From 1996 to 2012, state lawmakers approved cost-of-living raises for state retirees receiving monthly benefit checks. The consultants say lawmakers should eliminate those raises. They also recommended lawmakers increase the retirement age to 65 for most workers, stop letting workers use leftover sick days to boost their benefits and offer a 401(k)-style plan for all new hires.
Republican state Sen. Joe Bowen noted lawmakers would make the final decision. The General Assembly is expected to take up a special session this fall to craft legislation on the issue. According to the Courier-Journal, Gov. Matt Bevin has estimated the current debt to total more than $64 billion in pension debt, plus an additional $6 billion in retiree health plans.
Kentucky’s budget director says the state will need nearly an extra billion dollars every year to fix the state’s public pension system.
John Chilton says the state will need $700 million per year to pay toward its pension systems for state workers and teachers. Plus, the state will need an extra $200 million to put into the state’s reserves.
To find this money, lawmakers would have to make deep cuts in the state’s annual operating budget. If lawmakers exclude services like public education and Medicaid, it would require budget cuts of 34.4 percent. Chilton said lawmakers could cut $510 million from K-12 education funding to soften the severity of the cuts. If they did that, it would require budget cuts of 16.8 percent.
PFM’s findings were recommendations to the oversight committee for legislators to consider. No vote has been held on the matter.
See consultants’ full report here.