The report comes as Gov. Matt Bevin continues mulling dates for an anticipated special legislative session on pensions and preparing for an online Q&A on the issue Monday night.
“These are people who’ve made a commitment to us”, said state Sen. She attended Monday’s hearing of the Public Pension Oversight Board wearing a T-shirt declaring her to be a member of the “pitchfork and torch brigade”.
“Change is necessary. Time is not our ally-we must act now to get our financial house in order”.
Kentucky maintains eight pension providing lifetime retirement benefits to different types of state and local government workers – from police to teachers to state bureaucrats – and the PFM Group’s recommendations vary according to the plan and working status.
For public school teachers, the consultant recommends giving new hires access to the Social Security system – in which Kentucky teachers don’t now participate – along with a 401 (k)-style plan. Kentucky’s public pension systems are among the worst funded in the country. Joe Bowen, R-Owensboro, co-chair of the Public Pension Oversight Board.
Before consultants delivered their long-awaited report on recommended changes to the pension system, the board heard from John Chilton, the state’s budget director, on the effect the crisis is already having on the state’s budget.
The consultants say their plan would eventually save taxpayers more than $1 billion a year if all of the recommendations were adopted and other assumptions are met.
“I don’t think most people out there fully understand the way to which people have the ability to game the system”, Bevin said. The Kentucky Public Pension Coalition has opposed creating a 401 (k)-style plan for new hires because it would stop the flow of employee contributions into the existing pension system. The same would be true of teachers now in the system, and all future hires. We can not fail public retirees and current and future employees, and we can not fail taxpayers. But under these recommendations, first responders could retire with full benefits only at age 60.
The recommendations would raise the retirement age to 65 for most people.
The money already accrued by workers under the current plans would be frozen.
Purchasing unearned service time has been mostly phased out of the state’s retirement systems, although some can still do it depending on when they were hired.
The recommendation also include changes to health care benefits that retirees receive, Adam Reese, a consultant with PRM Consulting Group, a Washington D.C. -based consulting firm with offices in several cities, said retirees generally have medical coverage that is “more generous” than what’s available for current state workers. That could happen because many Republicans, who control the Legislature, say the pension system is outdated and should be abolished.
That would make recruiting hard in Kentucky, Wagner said.
But when Chilton told the oversight board, “I don’t think the changes being made will create a rush to the door”, numerous policemen laughed audibly.
“At this point, we don’t have a plan”, Bowen said. Making the changes would put the state “in a much stronger position to weather any future storms that would come along”.