FRANKFORT — Gov. Steve Beshear and leaders of the House and Senate said they had productive talks Friday morning about how best to fix Kentucky's ailing public pension system, but they remain at a stalemate on the issue.
Participants gave few details about the discussions but said there will be meetings in coming days. All said that they hope to avoid a special legislative session, which could costs taxpayers more than $60,000 a day.
"I start off being optimistic," Beshear said. "I expect that we will have a number of meetings over the next several days. We're all committed to using every bit of the time between now and the last day of the session on the 26th to try to find some solutions."
Lawmakers have only four working days left in this year's 30-workday legislative session. After meeting Monday and Tuesday, lawmakers are scheduled to return to Frankfort March 25 and 26 to conclude the session.
House Speaker Greg Stumbo, D-Prestonsburg, said Friday's meeting was a good start. Still, he acknowledged that House Democrats and Senate Republicans "aren't even close" to reaching an agreement.
Senate President Robert Stivers, Stumbo and other legislative leaders met with Beshear at the Governor's Mansion for about 90 minutes. House Democratic leaders then met privately with Beshear in his Capitol office.
Stivers said he doesn't expect the legislature to set up a conference committee made up of representatives from both chambers to try to resolve the chambers' differences on Senate Bill 2, the pension reform bill.
Still, Stivers said Friday's meeting was "productive."
"I say this in a serious tone: hope springs eternal," he said.
Pension reform is widely seen as the most important issue on the agenda of the 2013 General Assembly, but the Republican-led Senate and Democrat-led House have different prescriptions to cure the ailing pension system.
Kentucky's public pension system, which covers nearly 325,000 people, faces more than $30 billion in unfunded liabilities. It has only half the money needed to pay current and future retirees.
The House has proposed a plan to help finance the pension system that relies heavily on proceeds from expanded lottery games and instant racing games at horse racetracks. The Senate has said the legislature can wait to address pension funding in the 2014 General Assembly, when lawmakers will create a new two-year state budget.
The Senate's version of SB 2 includes recommendations from a task force that suggested moving new employees into a hybrid 401(k)-style plan and eliminating cost-of-living increases for retirees. The House plan keeps the traditional defined-benefit structure and allows for cost-of-living increases only when there is money to pay for them.
Beshear said he would like to find a dedicated funding source for the pension system, which is expected to require an additional $100 million in General Fund revenue by July 1, 2014. That obligation would continue to balloon for several years afterward.
Some Republicans have said the additional costs can be funded with natural growth in state revenue as Kentucky's economy improves. But Beshear has repeatedly warned that any additional money the state collects from existing taxes will be needed to cover other escalating costs, such as education and Medicaid.
"I think there are some real strong beliefs in the House and by myself that we do need to fund whatever solution we come up with," Beshear said. "I am wide open to different suggestions on how we fund it."
Beshear did not rule out a broad overhaul of Kentucky's tax system as a way to fund the pension system.
The governor put together a task force in 2012 that recommended a host of tweaks to the state's tax system that would generate about $650 million in additional revenue for the state. He did not, however, push tax reform this legislative session, noting that any revenue-generating bill needs approval from a super-majority of lawmakers during odd-year legislative sessions.
Beshear declined to say Friday whether he would call a special legislative session this year to address tax reform. Only a simple majority of lawmakers would be needed to approve tax changes during a special session.
"I think all of us have said all along and feel strongly that if we can resolve all of these issues in this session, we want to," Beshear said.
Meanwhile, the Kentucky Chamber of Commerce and the Kentucky League of Cities launched radio and Internet advertisements Friday urging the passage of SB 2. The ad warns of draconian cuts to education and public safety if the pension bill is not passed.