An ailing pension system threatening our state’s financial stability is the number one issue facing our great Commonwealth. As your State Senator, I am committed to addressing the pension in a comprehensive, effective, and fair manner, and I am hopeful that the pension reform plan proposed by Governor Bevin and the Kentucky General Assembly will do just that.
The framework of the proposed reform focuses on restructuring the pension funding mechanism to ensure the systems are on the pathway to solvency. In this plan, there will be no Cost of Living Adjustment (COLA) “clawbacks,” and checks for those already retired will not be reduced. Those who are still working will not be forced into an older retirement age and their current defined benefits will remain the same until the employees reach their promised level of service for their pension type. Additionally, future non-hazardous employees and teachers will be enrolled in a defined contribution retirement plan that provides comparable benefits to the previous plans.
For those enrolled in hazardous plans and future hazardous employees, their benefits will remain the same. This reform will also close a loophole in death benefits for families of hazardous employees, ensuring those who lose their family members in the line of duty will receive their full benefits.
It is important to me that current employees understand that I am not insensitive to the fact that these changes will have a financial impact on each of you at varied levels. However, the fact remains, if changes are not made the system will reach insolvency and the entire state will suffer the consequences. It is also important that everyone understand that these changes alone will not solve the pension crisis. There is no doubt that a substantial amount—hundreds of millions of dollars—in additional revenue must be infused into the system each year.
For months now I have supported a balanced approach to addressing the pension crisis, which includes changes to the system, an infusion of additional revenue generated through tax reform and additional contributions made through savings found through efficiencies in state government. I believe the proposed plan makes needed changes while protecting retirees at the highest level and then those close to retirement and on down the line. When considering the totality of the crisis we are facing and the impact it will have on our entire state if not addressed, I believe it is difficult to argue against the fairness of the proposal set forth.
Many people have also asked how legislative pensions will be addressed in pension reform. The proposed plan ends the Legislative Retirement Plan and transfers its assets and administration to the Kentucky Retirement System (KRS) Board. New legislators and legislators elected after 2013 will be placed into same defined contribution (DC) plan as public employees. Other legislators will see their pension benefits reduced as any future benefits will be in the KRS plan. The legislation also ends the ability of current legislators to “supersize” their pensions and it will reduce the monthly benefit of retired legislators who did increase their pension by closing a loophole and recalculating benefits. As officials elected and held accountable by you, the citizens of our great Commonwealth, we want to ensure these reforms are put in place across the board.
Lastly, I want to emphasize that there will be no emergency clause attached to this proposed legislation. That means the reforms will not go into effect until July of 2018, offering sufficient time for current state employees to consider how the changes may affect them. Ultimately, we hope these reforms help us better utilize taxpayer dollars, improve the Commonwealth’s rating with credit agencies to strengthen our economy, and most importantly, provide a sustainable retirement for our public servants.
I want to thank all of you who have contacted me to voice your concerns about the proposal or your support for the proposal. During my time in the Legislature, I have always made decisions that allow me to sleep at night, knowing that I did the right thing. On this, issue I will not sleep well regardless of my vote. I fully realize that sacrifices will be necessary and families will be affected. However, my first priority must be what is best for the state as a whole and the solvency of the pension system. It is imperative the next generation does not suffer for our collective unwillingness to make a difficult decision.
If you have any questions or comments about these issues or any other public policy issue, please call me toll-free at 1-800-372-7181 or email me at danny.carroll@lrc.ky.gov. You can also review the Legislature’s work online at www.lrc.ky.gov.
