Last Wednesday morning, Gov. Matt Bevin, Senate President Robert Stivers and House Speaker Jeff Hoover unveiled their “Keeping the Promise” – a comprehensive plan to save Kentucky’s ailing public pension system.
The pension reform proposal outline includes no change to full retirement age, but does call for no cost of living adjustments for employees for the first five years after they retire.
There would be no change in hazardous duty retirement, but other new hires would be put into a 401-K style retirement system instead of the pension system.
“There is no such thing as an insurmountable obstacle,” Bevin said in a release. “We, as a Commonwealth, have a moral and legal obligation to fulfill the promises that have been made to our public employees. This is not just about fixing our present underfunding problem. It is also about ensuring that we leave a better, financially stable Kentucky to our children.”
During a meeting of the Kentucky Public Retirees Cumberland Valley Chapter Wednesday afternoon in London, Kentucky Attorney General Andy Beshear gave some of his views on the pension proposal.
Beshear told the crowd of more than 60 retirees that we won’t really know what’s in the pension reform proposal until it is put down on paper and there is a date for a special legislative session.
“I am a product of Kentucky public schools. I don’t think teachers are disgusting. I think you are amazing. I think you help drive the very best parts of Kentucky. I think each and everyone of you were made promises. None of you took your jobs for the money. It is OK to laugh at that,” he told the crowd.
“Every single one of you could have gone to work at a public sector job and earned more. You know what they would have given you? A 401-K. You went to work with a promise. A promise that for accepting lesser pay, you would work with purpose – and you truly did work with purpose – and the state was going to make it up to you with a secure retirement.”
“As your Attorney General, I believe that is an inviolable contract that your commonwealth formed with you and I am not going to let them break it,” Beshear said to the applause of the audience.
After his address to the group, Beshear said that of the pension reform proposal unveiled last Wednesday, he liked that at least there is some kind of structure that has been put out there so people can comment on it.
“So at least today we are starting to see what some of the steps may be. Again, until there is a bill and it is down in writing, it is hard to evaluate,” he said.
Beshear said there are a couple of good things in the proposal, such as no claw backs of past cost of living adjustments for current retirees.
Beshear said that if there were efforts to claw back previous cost of living adjustments, he would file suit.
“I think that would have violated the inviolable contract. The government couldn’t have done it, but it is good they are not going to go there,” he said. “I do have some concerns with just the general presumption that moving to a 401-K for new hirers is a good thing. Of the states that have tried it, there have only been a few and in at least three of them it went very poorly. West Virginia actually had to switch back to a regular pension plan.”
So how would Beshear reform the pension system if he were governor of Kentucky?
He said the first thing he would do is look for new revenue.
“My granddad was a primitive Baptist minister. I can understand some of the objections, but we have to look at gaming. It can provide between $200 and I believe upwards of $300 or $400 million a year that could be dedicated to solely to paying for benefits until the system is fully solvent,” Beshear said.
“Then we could look at some other tax loopholes, like corporate jets on the federal level. Those folks can afford to not have a loophole or two. Once you create enough new revenue, it may be that there are some small budget cuts in state government that are targeted that don’t fall on the backs of our children or compromise our public safety. Very quickly you start to have the money you need to put in every single year. The secret is fully funding that arc.”
Beshear said he agrees with the governor that it is going to be a 30-year fix because that is realistic.
After speaking to the retirees, Beshear drove south to Corbin where he toured Southeast Kentucky Rehabilitation Industries (SEKRI) talking with several employees and learning about the facility.
SEKRI, Inc. was established in Corbin, Kentucky, in 1971 for the purpose of serving people with mental and physical disabilities. The company now manufactures various military apparel, and has expanded to providing various other types of products.