Eugenia Proctor, a retired first grade teacher, drove from Monroe County to the Capitol Wednesday with a handmade sign. On the back read a simple message: “I did my part.”
Proctor, who retired to take care of her dad, was one of hundreds of teachers and other public employees who crowded into the Capitol Annex as Republican Senators discussed their latest version of a bill to overhaul Kentucky’s ailing public pension systems.
The Senate State and Local Government Committee discussed three significant changes to Senate Bill 1 during their noon meeting, the first public hearing for the bill, but did not vote on the plan.
The changes are aimed at making sure the bill is on solid legal ground, while attempting to ease some of the biggest concerns of teachers and state employees.
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“We want to make sure we’re in some place that is legally defensible,” said Senate President Robert Stivers, R-Manchester.
About an hour before the meeting, Attorney General Andy Beshear issued a legal opinion to lawmakers that detailed 21 parts of the pension bill the Democrat believes are illegal.
Instead of cutting retired teacher’s annual cost of living adjustments in half for 12 years, as was proposed last week, a new version of the bill would lower the 1.5 percent annual COLA retired teachers receive to 1 percent. The decrease would last until the Kentucky Teacher’s Retirement System is 90 percent funded.
According to an actuarial analysis of an earlier pension bill, it will take at least 20 years before KTRS is 90 percent funded. It now has 56 percent of the funds it’s expected to need for teachers’ future pension checks. If it takes 20 years to reach 90 percent, the latest proposal would result in $65,019 in lost income for a teacher making an average salary who retires at 59 and lives until they’re 83, according to the Kentucky Center for Economic Policy. That’s about $8,000 less than the cut proposed last week.
“It’s just a different way of doing it, but again feeling like we are on better legal ground to do it,” Stivers said.
The state froze COLAs for state and local government workers in 2013, but those workers pay into and collect Social Security benefits that adjust each year for inflation. Teachers do not get Social Security.
Beshear said he believes the provision cutting retired teachers’ COLAs would violate the inviolable contract, a provision in Kentucky’s law that says the state can’t take away previously promised pension benefits.
The bill also scales back the amount state employees hired between 2003 and 2008 would have to pay toward their retiree health benefits. Last week’s proposal required those employees to pay 3 percent of their salary, but the new bill would have them pay only 1 percent. Other state workers already contribute toward their health benefits.
Fearing legal action, the new bill also eliminates a provision that would claw back retiree benefits from lawmakers who “supersized” their pensions by taking high-paying jobs in other parts of government.
“We think it was wrong and we were initially going to claw back those legislators who had supersized their pension, but when you think about the legal aspect of it, we felt that we would lose in court,” Stivers said.
State Rep. Robert Benvenuti, R-Lexington, supported the claw-back but said he understands the provision would have likely created a costly legal controversy.
“I understand the practical reality,” Benvenuti said. “But I do think there are points in time where you have to send a message and put up a fight.”
The bill keeps most other elements of the plan proposed last week, including limits on how teachers and state workers can apply unused sick days to their pensions and how long teachers must work before they can receive enhanced retirement benefits.
Future teachers and government workers would be enrolled in a less generous hybrid cash-balance retirement plan that reflected investment returns, rather than a traditional defined-benefits pension based on their salary.
Republican legislative leaders have said the bill would eventually eliminate Kentucky’s unfunded pension liabilities, which top more than $40 billion, largely by cutting retirement benefits for teachers and shifting some of the costs to local governments.
As state Sen. Joe Bowen, R-Owensboro, explained his bill, he was met with anger from the crowd of mostly teachers.
When he talked about how Gov. Matt Bevin and lawmakers provided an unprecedented amount of money for the pension systems two years ago, he was booed.
Stivers and Bowen said they have tried to incorporate suggestions from teachers’ groups into the revised bill.
“Every time they have come to us with a change, we have considered it and in large measure have actually addressed that concern and made some type of change to this bill,” Bowen said. “This has been a very fluid process, we’ve considered all of the stakeholders, we have not denied anyone the opportunity to engage in this.”
Stephanie Winkler, president of the Kentucky Education Association, said the changes aren’t enough.
“This takes away promises to public school teachers when they were hired and when they retired,” Winkler said.
The teachers behind her, armed with signs and stickers and t-shirts bearing the slogan “a pension is a promise,” heartily agreed.
“Think of the future of our state,” Bowen said at one point.
“We are,” the teachers responded.