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Kentucky Gov. Matt Bevin releases plan he says will fix state pension system

WDRB 41 - Louisville, Kentucky
Kentucky Gov. Matt Bevin releases plan he says will fix state pension system

On Wednesday morning, Kentucky Governor Matt Bevin, flanked by top state legislators, outlined a 10-point plan he said will fix Kentucky's ailing pension system, fully funding state workers' pensions in 30 years.

Bevin says the plan is called "Keeping the Promise."

"When we first began -- I don't think it's telling tales out of school -- we were looking to try to resolve this problem more expediently than we ultimately have come up with," Bevin admitted. "We've come up with a plan that will save this over the course of the next 30 years. It takes more time, but it will allow us to deliver on the promise."

Bevin's plan makes several promises, the first of which is that the plan will "save Kentucky's pension systems and meet the legal and moral obligations owed to current and retired teachers and to public servants."

Bevin says one of the ways he plans to do that is by requiring legislators to completely fund the Annual Required Contribution (ARC) on a year-by-year basis, something Bevin says has previously been optional.

"What was also in the statutes were certain language that allowed some things to may be done or may not be done - and that included things like the ARC," Bevin said. "And so in the past, some legislative sessions and some administrations chose not to fund the ARC. It was not statutorily required."

Bevin says the new plan, "requires us to not kick the can down the road. It requires us to fund the actual amount every single year for the next 30 years. That's how it's going to be paid for."

He argued that "this provision alone should cause every legislator in both parties -- Republican or Democrat alike -- to vote for this bill."

"There's not a retiree or a person working toward retirement in Kentucky that should not be thrilled by this provision in the bill," he added.

Republican Jeff Hoover, speaker of the Kentucky House, told reporters that the plan will not result in an increase in retirement age for any state workers who are currently employed. He also promised that there will be "very little, if any" change in healthcare benefits for current retirees, adding that there would be no enactment of any so-called "clawback" provision, requiring workers to pay back pension or health care funds.

On the other hand, Hoover said future non-hazardous employees and teachers (i.e., "new hires") would be required to enroll in a defined contribution plan similar to a 401(k).

"We're going to do what we have to do because failing to act will result in this public pension system in Kentucky -- which is already one of the worst-funded public pension systems in the country -- to go bankrupt, and this is simply not an option for us," Hoover said.

"How did we get here? Frankly, years of kicking the can down the road. Not casting aspersions on anyone, but as I said in my opening remarks, there's just been a lack of resolve to really address this issue at every branch of government."

Kentucky Senate President Robert Stivers told reporters that under the proposed pension fix, hazardous duty employees will maintain the same benefits package they are currently in. He also promised that the plan would close a loophole that blocks some hazardous employees from qualifying for death benefits because the law isn't clear on whether or not they died "in the line of duty."

Additionally, the proposed pension fix would stop a so-called "defined benefits plan" for state legislators, transferring them to the same "defined contribution plan" as other state employees.

Bevin said the plan contains no emergency clause and would not go into effect until July 1, 2018.

Supporters of the plan say they believe the changes should improve the state's credit rating, which has been downgraded because of unfunded pension burdens.

Bevin listed several groups -- including the Kentucky Association of Professional Educators, the Kentucky Education Association, the Jefferson County Teachers Association, as well as county attorneys and Kentucky jailers -- that he said he and his fellow legislators had met with while the plan was formulated.

"For months and months, we have been hashing out in great detail how we're going to deliver on the promise of saving the pension system," Bevin said.

"Everybody wants it to be done, everybody knows it needs to be done. It's easy to talk about doing it. It's harder to actually come up with a document in a bill that will allow it to happen. And yet through a tremendous amount of time and a lot of conversations with a lot of outside groups, we have exhaustively gone through everything we can to ensure that we do in fact deliver on the promise."

Kentucky Democratic Party Chair Rep. Sannie Overly had this to say about Bevin's proposed plan:

"Switching new teachers and new nonhazardous state employees to a 401(k)-style plan will not only weaken local economies throughout the state but will continue to decrease our ability to attract and retain a skilled state workforce," Overly said.

"This is purely a move touted by ultraconservative groups across the nation to privatize state services, remove a skilled state workforce and drive down wages for our future educators. The war on the working class and public education must stop. This plan will do nothing to pay down our current pension obligations and ensures less retirement security for future generations to come."