In a major setback to Republican efforts to reform Kentucky’s ailing pension system, the Senate decided not to vote on Senate Bill 1, the controversial pension proposal, Friday.
Senate President Robert Stivers, R-Manchester, fumed from the Senate President’s chair as Senate Bill 1 was sent back to committee Friday afternoon. The announcement led to a cheer from the hundreds of teachers and public workers who came to the capitol to protest the bill.
“After long discussions last night, today, this morning, this afternoon, individuals wanted more time to consider the position that we’re in,” Stivers said.
Afterward, Stivers was asked if the pension bill was dead. “No,” he responded.
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Stivers said it would be difficult to pass the bill in its current form, but did not indicate what changes would need to be made to receive more support.
The Senate had been set to vote on the controversial plan to overhaul the state’s ailing pension system after Stivers indicated Thursday that the Senate had the votes to pass the bill.
Contrary to an assurance from House Speaker Pro Tempore David Osborne, R-Prospect, there were rumblings among lawmakers and staff that the House may not have the votes to pass the pension bill. A lack of support in the House would put Senators in a difficult position of voting for a controversial bill that was destined to eventually fail.
As they walked to the chamber, Senators were greeted by cheers and boos from Kentucky teachers and public employees. Almost all of them held signs ranging from “A pension is a promise” to “Do we need a bake sale to fund this?” and their chants permeated the Senate Chambers.
Senate Republicans spent most of the morning in caucus as they discussed whether there was enough support for the bill. Shortly after returning from a lunchtime recess, Senate Majority Leader Damon Thayer, R-Georgetown, asked to send the bill back to the Senate State and Local Government Committee.
At issue is a bill that would cut retirement benefits to teachers and public workers to find funding for a pension system that has an unfunded liability of more than $40 billion.
Stivers has been adamant that change is needed because funding was a maximum of 20 percent of the problem with the state’s pension system.
Many of the changes are similar to those made to public retirees in 2013, when future employees were put into a cash balance plan. Cost of living increases were frozen for state employees in 2013 but the bill only proposes a cut for teachers because they have paid into their cost of living increases and because they don’t collect social security which provides cost of living adjustments.
All future teachers and public workers would be moved into a new cash balance plan which is considered less generous than a traditional pension but more reliable than a 401(k). The bill makes changes to prevent teachers and public employees from “spiking” their pensions.
The largest change, and the part of the bill that saves the state the most money, would cut cost of living adjustments for teachers from 1.5 percent to 1 percent until the plan is 90 percent funded.
According to an analysis of the bill by the Kentucky Public Pension Coalition, cutting the COLA would decrease the purchasing power of the average retired teacher by 34 percent over 20 years.
The bill also bases current teachers' retirement benefits on a five-year average of their salaries instead of a three-year average. The provision would decrease teacher benefits by 3-4 percent on average.
Stivers wouldn’t speculate on whether the Senate would remove the changes to teachers’ COLA, but said the bill would still make a difference without its most significant cost saving measure.
“If you go to certain portions of the bill you will at least stop the digging,” Stivers said. “Because we continue to have a deeper and deeper hole and we will have to have more and more money even above and beyond what we are putting into the budget this year.”
Kentucky Education Association President Stephanie Winkler said the KEA will not support a pension bill, even if it doesn’t cut teacher COLAs.
Attorney General Andy Beshear, a Democrat, has warned that if the Senate passes the bill they would be breaking the law.
Teachers in the Capitol celebrated in the aftermath of the Senate’s non-vote.
“We think it’s a victory today,” Winkler said. “We hope that we can keep having conversations so we get some kind of common sense legislation around pensions.”