Senate Republican leaders are considering possible changes to the public pension overhaul bill filed this week but it appears they will not alter one of the most controversial parts of the bill — cutting retired teachers’ cost-of-living adjustments.
A proposal to cut the cost-of-living adjustment for retired teachers from 1.5 percent a year to 0.75 percent for the next 12 years has generated much criticism, said Sen. Joe Bowen, the bill’s sponsor.
Bowen, R-Owensboro, would not say Friday what might be changed in a planned committee substitute for Senate Bill 1, but Senate Majority Leader Damon Thayer, R-Georgetown, said he thinks the cost-of-living adjustment will not change.
“It’s appropriate just the way it is,” Thayer said.
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The cut “saves a couple of billions of dollars over the next several years,” said Thayer.
Republican leaders have said the pension bill will save the state $4.8 billion over 30 years while eliminating the state’s unfunded public pension liabilities — estimated at $40 billion to $60 billion. Lawmakers, though, have released only one portion of a financial analysis of the bill, which showed $4.07 billion of those savings would come by cutting retirement benefits for teachers and shifting some of the state’s costs onto local school districts.
Thayer noted that a proposal by Republican legislative leaders and Gov. Matt Bevin unveiled last October took retired teachers’ COLAs “to zero,” suspending them for five years.
The financial impact of either proposed cut, though, is about the same, legislative leaders and independent analysts have said. The plan to halve COLAs for 12 years would cost a 59-year-old teacher getting the average pension about $73,000 over the remainder of her life, which is slightly more than the original proposal to suspend COLAs for five years, according to the Kentucky Center for Economic Policy.
Thayer said state employees have not received a COLA since 2013. “These are an important part of the savings that we will achieve over the long term of the bill,” he said.
House Speaker Pro Tempore David Osborne, R-Prospect, said Friday he thinks any changes to the pension bill will “be relatively minor.”
Thayer was asked if cutting teachers’ benefits will be politically risky in a year when all 100 state House seats and 19 of the Senate’s 38 seats are up for grabs.
“There are a lot of things here that are politically risky,” said Thayer. “I would argue that in 1776 when our Founding Fathers met in Philadelphia what they did was politically risky. We are elected to make difficult decisions.”
Thayer said he hopes the legislature will approve the pension bill and send it to the governor for his consideration within the next three weeks.
Bowen said he expects some changes to the bill, as usually occurs with large, complex bills. He called the likely committee substitute “a work in progress.”
The bill is tentatively scheduled to be heard in the Senate State and Local Government Committee next Wednesday, he said.
Bowen said many people are overlooking the fact that legislators are committed to fully funding the pension systems and getting them back to solvency.
“We are finally going to stop kicking the can down the road and get to full funding in these systems — something that hasn’t been done in this body in years and years and years,” he said.