Keeling: Republicans shouldn't expect pension fix without paying for it

Herald-leader columnistFebruary 10, 2013 

Larry Dale Keeling

FRANKFORT — Senate Bill 2, Senate Republicans' version of pension reform, expresses the "intent" of the General Assembly to begin fully funding the actuarially required contribution to the Kentucky Employees Retirement System and the State Police Retirement System on July 1, 2014.

No full funding now. No indication of where the money will come from when the time arrives to make those full ARC payments. Just the "intent" of the General Assembly.

We all know which road is paved with intentions. And Kentucky's troubled public pension systems have been in the news so often in recent years, we all should also know the first and foremost reason they collectively have amassed more than $30 billion in unfunded liability has been the General Assembly's failure — year after year after year — to fully fund the state's ARC.

Now, we're supposed to put our faith in the "intent" of the General Assembly? What kind of suckers do Senate Republicans think we are? More to the point, what kind of suckers do they think House Democrats are?

Pension "reform" without additional revenue from tax reform or a single tax increase dedicated to funding the ARC is no reform at all. If House Democrats are suckers enough to fall into the trap of passing SB 2 without the revenue stream (and House Democrats being House Democrats, I don't entirely rule out the possibility), Senate Republicans will insist money for the ARC has to come from cuts elsewhere in state government when the time comes to live up to the General Assembly's "intent." What else would you expect from folks whose gospel preaches no government at any level ever had a revenue problem, just spending problems?

Republican gospel also preaches "defined benefits" pension plans for public employees are the work of the devil. They're not. Adequately funded "defined benefits" plans with rational rules are viable.

But in addition to shirking their responsibility to meet the ARC payments, lawmakers also approved some overly generous benefits back in better fiscal times — including some real beauties for their own pensions. The consequences of these legislative mistakes have created a political climate in which it is difficult if not impossible to defend the status quo.

It's worth noting, though, that some of the strongest advocates for switching the pension systems to a "defined contributions" plan or the hybrid combination of defined benefits and defined contributions proposed in SB 2 already have their lucrative defined benefits pensions assured.

They include leading lawmakers and leaders of non-profit agencies brought into the system over the years who are now squawking about the amount of money their groups must contribute to the system.

In the current climate, a switch to something along the lines proposed by SB 2 for all pension plans except the one covering teachers may be inevitable. But a victory for Senate Republicans on this issue should not come free. They must share the responsibility for generating a new revenue stream for funding the ARC. House Democrats should insist on this.

If they do, pension reform probably joins tax reform on the agenda of a special session where lawmakers can pass revenue measures by a simple majority instead of the 60 percent vote required during odd-year regular sessions.

In his State of the Commonwealth address, Gov. Steve Beshear clearly indicated he expects lawmakers to work some overtime in 2013. The agenda he outlined was for "this year," not for this session.

One biggie not currently on that agenda is expanded gambling. Lately, Beshear's been talking about proposing a clean constitutional amendment that doesn't guarantee any benefits for Kentucky's Thoroughbred racing industry, because a clean amendment would have the best chance for legislative approval.

Since the racetracks are not united behind a clean amendment, Beshear has indicated the issue will be put on hold until 2014 to give the tracks time to come together.

Two thoughts on this topic:

For years, the 1 and 1A entry of expanded gambling and Thoroughbred racing has lost or failed to get out of the gate. It may be time for the industry to accept the fact it cannot win as an entry, put its trust in the system, back a clean amendment and rely on Kentuckians' love of racing to assure the industry gets a just share of the benefits.

As for Beshear, he's a lame-duck governor growing lamer with each passing moment. Anything he wanted to accomplish, he should have accomplished yesterday. Today is the next best alternative because, by 2014, lawmakers could be asking, "Governor who?"

Reach Larry Dale Keeling at lkeeling@herald-leader.com.

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