Pension Reform Proposal

UPDATED (9:59am CST): According to the Governor's office, the hazardous section was mistakenly omitted from the first document.  I have replaced the linked PDF below.

Senate, House and Executive Branch leadership have met for months discussing and debating what reforms we should pass to address Kentucky's ailing pensions systems.  The finer points of the legislation itself (a bill I'm told that is in excess of 500 pages) is still being put through statute revision (a key step in all legislation to check for errors) and proofread.  In the meantime, the folks working on the bill have prepared a summary of key points based on the bill.  Again, this is not a wishlist.  These provisions are contained in the bill itself.

Click below to download the summary:

As soon as the legislation is available I will be posting the full text here on the blog so be sure to bookmark the site, follow me at the links below to catch all the updates.

Race to the Bottom

I'm deeply discouraged by the announcement of Churchill Downs and Keeneland today regarding their plans for a racetrack in Oak Grove.  As I have been since I first ran for the Senate, I am staunchly opposed to gaming – it is a regressive tax, targeting the middle and lower income earners, and in this case, the military families that live in and around Christian County, many of whom already live on meager salaries.

I believe gaming is bad for the area and the rest of the Commonwealth, and the opening of a racetrack, while adding a few jobs and bringing in some revenue, comes at too steep a price for the community.

Unfortunately, I don't have a vote on this in the legislature, but it is my sincere hope the racing commission denies their application for a license.  If I have any influence on the project I hope that I can stop it.  I'm for all the jobs and economic development we can find for Christian, Todd and Logan counties (and the rest of Kentucky), but not from gambling.  I wish there was a way to help Kentucky’s signature Thoroughbred industry thrive without it.

CERS Pension Update

Yesterday, State Budget Director John Chilton sent an email out to CERS (County Employee Retirement System) employers to explain the dramatic increase in Employers' required contributions into the CERS system.  This is the reality local governments face if we do nothing to make fundamental changes to the systems during the special session.  You can take a look at Director Chilton's email below, showing the required contribution rates grow by 50% for non-hazardous and by 60% for hazardous within CERS.  As you can see from the first page of the letter other KRS plans have a required contribution that grows between 66%-88%.  Remember that cities and counties are already struggling to meet their required contributions.

Click the button to open the PDF.

Pensions Update

Click here to visit KentuckyPensions.com for more information.

Bringing about a flurry of facts and a storm of misconceptions, Kentucky’s pension crisis has become one of the most dominating news stories in recent months. One thing is for certain: if our state pensions are not addressed in the very near future, we will face huge cuts in state funding. Education, Medicaid, and other government services would likely be affected—a risk our state is not in a position to take.

So how did we get to this point? In the early 2000’s Kentucky’s pensions were in a healthy condition. While there was not one single cause for the pensions’ downhill slide, factors such as faulty assumptions led to underfunding which continued throughout the decade. The lack of proper funding over this amount of time eventually led to the critical state of our pensions today. The General Assembly took steps toward reforming the Kentucky Employees Retirement Systems (KERS) and the County Employee Retirement System (CERS) in 2013, but unfortunately the Kentucky Teachers Retirement System (KTRS) was not included in those measures and the problem continued to grow.

This is not a partisan issue. In 2016 the General Assembly—Republicans and Democrats—made a commitment to address the problem. This started with a dedication of $1.2 billion annually to help with the shortfalls in KERS and KTRS as well as establishing a permanent pension fund. We also hired a third party organization, the PFM Group, to investigate the state of our pension systems.

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In 2016, PFM was hired pursuant to legislation that passed 38-0 in the Senate and 99-1 in the House.

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On Monday, August 28, the PFM Group gave its final presentation to the General Assembly’s Public Pension Oversight Board, offering its recommendations on how to best address the problem. I, along with my colleagues in the General Assembly and Governor Bevin, will consider PFM Group’s recommendations and craft a plan that will be implemented in a special session.

What happens if we keep kicking the can down the road? The only path forward would be to cut funding in other areas of state government. Kindergarten-12 public education, already under the burden of larger class sizes, too few teachers, and a shortage of resources, could face cuts. Higher education would also feel the cuts and make college less affordable. Medicaid, public safety and infrastructure—all services of state government many would agree are mission-critical—would also suffer in this unfortunate scenario.

However, there are ways to avoid that situation. There is a path forward that allows us to balance our legal and moral obligation to our retirees while reforming the broken systems. Our priority is ensuring our retirees have a secure retirement that will provide for them in the years to come without taking away from other priority state programs. Addressing this crisis will not be an easy task, but I will continue to work alongside my colleagues in the General Assembly to ensure we find a solution that provides for our retirees while being responsible stewards for taxpayer dollars. Now that the study from PFM has been completed, discussions on specific policies will begin. If you have questions or concerns about pension reform, please do not hesitate to contact my office directly. If you would like to see the reports for yourself, head to kentuckypensions.com.

If you have any questions or comments about these issues or any other public policy issue, please call me toll-free at 1-800-372-7181 or email me at Whitney.Westerfield@LRC.ky.gov.  You can also review the Legislature’s work online at www.lrc.ky.gov.

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A Revenue Shortfall

Yesterday, the Office of the State Budget Director, John Chilton, sent out the press release linked below, indicating that General Fund receipts fell 0.3 percent and that Road Fund receipts fell 5.7 percent in the month of June.

As we head toward an anticipated special session to address pension reforms, and move closer to the 2018 Regular Session when we'll write Kentucky's biennial budget, the fiscal position of the Commonwealth continues to be precarious.  Difficult decisions lie ahead.