'Hit the road Joe.' Public workers sing message to pension bill sponsor Joe Bowen.
Teachers in at least eight counties plan to protest at schools Thursday after their shouts of disgust were not enough to stop a Senate committee Wednesday from approving a controversial plan to overhaul Kentucky’s ailing public pension systems.
The Senate State and Local Government Committee voted 7-4 to approve Senate Bill 1, with three Democrats and one Republican, Stan Humphries of Cadiz, opposing the measure. The bill now goes to the Republican-led Senate.
Senate President Robert Stivers, R-Manchester, said he fully expects the bill to pass the Senate sometime later this week. It then goes to the House, where Stivers said “I have been given assurances that it would (pass).”
The pension bill would cut billions of dollars in benefits for teachers and other public workers over the next 20 years in an effort to eliminate an unfunded liability of more than $40 billion.
Most of the $3.2 billion in projected savings comes from changes to the Kentucky Teachers’ Retirement System. According to state Sen. Joe Bowen, the sponsor of the bill, the majority of savings would come from decreasing the annual cost of living adjustments for teachers from 1.5 percent to 1 percent until the system is 90 percent funded and from putting new teachers into a hybrid cash balance plan, which are considered less generous than traditional pensions but more reliable than 401(k)-style plans.
An actuarial analysis of the bill does not break down exactly how much the state is saving by making those individual changes.
Attorney General Andy Beshear, a Democrat, has warned the bill violates 21 legally-binding promises the state has made public workers and retirees.
Wednesday afternoon, the Kentucky Education Association said employees at 28 schools in eight Central Kentucky school districts will hold “walk-in” rallies before school Thursday to protest the pension bill.
“Promises were made to us by the commonwealth, and those promises need to be kept by the commonwealth,” Erin Grace, a teacher at Rockcastle County High School, said in a news release from KEA. “We need, as a state, to treat funding for our schools, the services our kids need and the people who devote their working lives to providing those services as a top priority, not as a burden.”
Teachers and other employees plan to gather outside their schools in the morning and walk in together in Clark County, Danville Independent, Franklin County, Garrard County, Lincoln County, Montgomery County, Rockcastle County and Woodford County, according to KEA.
As Bowen, R-Owensboro, entered the meeting Wednesday, the audience stood, held hands and started chanting “find funding first” and “we vote.”
Republicans fully funded the pension systems in the budget passed by the House last week, but at the expense of several other state programs. The House bill contained two new revenue sources, described as “stop gap” measures: a tax on prescription opioids and increasing the cigarette tax. It also takes $480 million from the Kentucky Employees Health Fund, twice as much as Gov. Matt Bevin proposed, to balance the budget.
Bevin, who has remained mostly silent on the pension bill since it was introduced two weeks ago, said those who oppose the bill are ill-informed.
“The reality is, I’m saving the pension system,” he said. “If they are upset about it, it’s either they are ill-informed or willfully blind… I think the vast majority of teachers are none of the above. They are very aware of the fact that they want the pension. Their leadership has their reason for fomenting things. God bless them. But I’m still going to save the pension whether they like it or not.”
In particular, teachers are defensive of their cost of living adjustments. Unlike other state workers, they don’t collect Social Security benefits, which include an annual cost of living increase. COLAs were frozen for other state and local government workers in 2013.
If it takes 20 years for the Teachers’ Retirement System to be 90 percent funded — it now has 56 percent of what it’s expected to need for teachers’ future pension checks — the plan 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.
The changes in the bill are not limited to teachers.
It puts limits on how teachers and public employees can apply their unused sick days to their pensions and changes how long teachers can work before they receive enhanced benefits. It also requires public employees hired between 2003 and 2008 to pay 1 percent of their paycheck toward health insurance and moves state and local government workers who are in the state’s existing cash balance plan into a new version. The existing plan guarantees workers a 4 percent annual rate of return, but the new plan only guarantees that their investments won’t decline in value.
State Sen. Morgan McGarvey, D-Louisville, said he is concerned that future teachers would not be covered by an inviolable contract, which guarantees that lawmakers can’t take away previously promised benefits. Without that protection, which the legislature stopped offering newly-hired state and local government workers in 2013, future teachers will be at risk of having their retirement benefits cut repeatedly in coming years.
“If we are going to make changes going ahead for teachers, I would make them a part of the inviolable contract,” McGarvey said.
Herald-Leader Reporter Mike Stunson contributed to this story.