Editorial: Pension solution must end legislators' special benefits

Cost of the loophole is relatively small, but the principle is huge

November 4, 2012 

The technical term is "reciprocity." But Kentucky taxpayers can be forgiven if they simply think of it as "reprehensible," if not an outright "rip-off."

We're speaking, of course, of the lavish pension loophole state lawmakers created for themselves in 2005, the one that allows them to double or triple their legislative pensions by spending as few as three years in another public-sector job that pays them considerably more than they earn as legislators.

Gov. Steve Beshear now has exploited this loophole three times by offering high-paying jobs to Republican senators, the latest being the appointment of Senate President David Williams to a vacant circuit judgeship, which comes with a salary of $124,000 a year. Williams was sworn in Friday.

In accepting the judicial appointment, Williams made no firm commitment to forego increased pension benefits. His failure to do so should surprise no one, since this pension-padding ploy originated in a Senate he totally controlled.

As David Draine, a consultant working with a legislative task force studying public pension reform, told the panel Monday, the way reciprocity is handled in the Kentucky Legislative Retirement System "has created outsized rewards for retiring policymakers. There is nothing wrong with playing by the rules, but there is sometimes something wrong with the rules."

Kentucky's public pension systems have myriad problems, including a collective unfunded liability exceeding $30 billion. By comparison, the cost of this loophole is miniscule.

But the principle is huge. Even without this reciprocity, the rules lawmakers have created for computing their own pensions are more generous than the rules used to determine the benefits of rank-and-file public employees.

The reciprocity loophole just rubs the faces of those rank-and-file workers — and of taxpayers — deeper in the dirt. It must end as part of pension reform.

The loophole was created in the final hours of the 2005 session. The Senate gutted a House bill dealing with state employees' pensions and inserted language allowing lawmakers to count all years of service under any state retirement plan toward the minimum number of years required to earn a full legislative pension — 27 for most current lawmakers.

More importantly, the new language provided that legislative pension benefits be based on the high three years of salary regardless of where in state government the salary was earned.

So, someone with 24 years of service at the relatively modest salary of a part-time legislator can double or triple his or her pension benefits by latching onto a high-paying job elsewhere in the public sector.

Not surprisingly, a number of former lawmakers have taken advantage of this opportunity. And unless the loophole is repealed, others are positioned to do so in the future.

For instance, House Speaker Greg Stumbo's legislative pension benefits should be greatly enhanced by the salary he earned during four years as attorney general.

Perhaps the most symbolically significant recommendation this current task force could make would be to roll the legislative pension plan into the Kentucky Employees Retirement System, making lawmakers subject to the same rules that apply to other state workers and assuring they feel the same pain those workers will feel from whatever other reforms emerge from this process.

If the legislative members of this panel can't find the gumption to make such a bold statement for fairness, the least they can do is recommend repeal of the reprehensible reciprocity rip-off.

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