Big changes proposed for Kentucky pension system


FRANKFORT, Ky. (KT) – Independent consultants are recommending that Kentucky lawmakers take away some of the cost-of-living raises awarded to government retirees over the past two decades as part of a strategy to restore financial solvency to Kentucky’s beleagurered pension system.

That was one of several recommendations the consultants with PFM Group made to the Public Pension Oversight Board on Monday.

The consultants also recommended that lawmakers increase the retirement age to 65 for most workers, stop letting workers use leftover sick days to boost their benefits and offer a 401(k)-style plan for all new hires.

Those changes and more will be necessary, the consultants said, to keep the state’s retirement systems for government employees, including teachers and police officers, from running out of money.

Kentucky's budget director, John Chilton, said the state will need $700 million a year for the pension systems, plus an additional $200 million to into a reserve fund.

Gov. Matt Bevin said in a statement that the PFM report “confirms the need for urgency as we resolve Kentucky’s pension crisis.”

“Change is necessary,” Bevin said. “Time is not our ally – we must act now to get our financial house in order. There is no other viable option. I am convinced we can get this done and am committed to doing so. For those now retired, for those still working and for those yet to come, we will save the public retirement systems. We will not kick the can down the road any longer. We were elected to fix this problem and we will. The fiscal abuse of Kentucky’s retirement systems is over." 

House Speaker Jeff Hoover said the pension crisis has become so dire that it affects ever level of government funding, from educating children to protecting the state’s residents to providing services to the needy.

“For several weeks, we have been involved in intense weekly meetings, each meeting lasting four to five hours, regarding this issue,” Hoover said. “This is a complex, multi-faceted problem. We, as a state, simply cannot financially sustain the current system. Changes need to be made, but what those changes are, or how we address them, right now we are not sure.”

Hoover reiterated that the PFM consultants made only recommendations in the report, and that lawmakers will seeking public input before making any decisions.

“We are committed to meeting our legal obligations with regard to our pension system,” he said. “I promise you we will continue to work hard, listen, gather facts, and make the best decision possible. I know that is what is expected and deserved and that is what we will do.”

The PFM also recommended raising the age to collect benefits by those under the hazardous duty retirement systems (police, fire, etc.) to 60.  It’s currently 25 years of service, regardless of age, and used to be 20 years, until recent changes.

It was also sugeested that new teachers be placed under Social Security. 
Current teachers would not be affected.

Bevin made a hour-long presentation on Facebook Live later Monday night, vowing again to save the pension system.

“There are promises made that we are going to keep,” he said. “We are not going to take things from people that have already been earned.  That includes people who are retired and people that are working right now. Even if it were legally allowed, it would be morally inappropriate.  I will not sign such legislation.  I don’t believe in any conversation I’ve had that our legislators want to do this this.  We want to deliver on our promise.”  

Bevin said he will call a special session this fall to address pension reforml, even though it will cost a minimum of $300,000. 

“That’s a lot of money.  But, trust me, compared to the scores of billions of dollars of unfunded liability, and the effect of allowing the system to fail, $300,000 is worth it.”

He said while there has never been a pension as poorly funded as Kentucky’s, many other states are in nearly as poor shape.


“What we do here to save our system will be the model that others will follow.”


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