Last year I was appointed to serve on a joint task force to study the state pension systems closely and offer recommendations for solvency.
Upon the conclusion of the task force, several recommendations were formulated about which I expressed deep reservations to the committee, given both the associated costs and the serious consequences for state employees who have contributed to their retirements on time every time.
As the Senate defends these same proposals in Senate Bill 2, I would like to again voice my concerns. The legislation would drastically change the pension system as we know it. The bill would implement a cash balance plan that would alter the defined benefit plan that currently serves Kentucky public employees at the state and local levels. This plan has been in place for decades and is crucial to providing retirement security to thousands of Kentuckians.
Recently, some proponents of the cash-balance plans have all but charged that public workers are greedy and living off generous pensions. This may score political points among some, but it denigrates an entire group of hardworking Kentuckians and is quite far from the truth.
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The fact of the matter is that the vast majority of workers receive a modest pension to which they have contributed from every paycheck.
What is the real solution to strengthening our public pension system? It is making our full contributions and ensuring that the plan is funded so that we can continue to pay for our obligations.
While both the House and Senate agree that we must make our full contribution to the retirement systems every year, only the House has made a proposal that helps to address payment without relying on extra tax dollars.
The Senate, however, recommends taking funds that would go to our schools and many other critical services that have borne the brunt of more than $1.6 billion in cuts during the last five years.
Furthermore, the House approach would better the odds of funding much-needed cost-of-living allowances (COLA) in the future compared to the Senate plan. These COLAs help retirees cover the increasing costs of housing, food, medical care and other critical expenses.
What many may have forgotten in all of this debate is that the pensions deliver both financial security and economic growth across the commonwealth. That means these pensions — totaling hundreds of millions of dollars a year — benefit not only our firefighters, police officers and thousands of other public employees, but also our local and regional businesses. In fact, each dollar paid in pension benefits supports $1.24 in total economic activity.
When we cut pensions, we not only threaten retirement security and the commonwealth's local economies, we also face the prospect of diminishing quality in public services. If retirement benefits are reduced as the Senate recommends, it would be tougher to attract the high quality candidates we all want to carry out the public's work. This negative spiral would increase turnover and training costs.
As the legislator who primarily represents the bulk of state employees, I believe I have an even greater responsibility to do the right thing. In doing so, I must serve the needs of my constituents by strengthening the retirement system that has historically performed exactly as designed and, more important, protects the Kentucky taxpayers far better than the plan the Senate proposes.
With the reasonable changes the House is recommending, we can maintain our promise to state employees and do it in a way that is fair to current and future public workers, retirees and every taxpayer. To do anything less would be harmful to all who live, work and retire in our great commonwealth.