Issue of pensions looms for lawmakers
By JOE BIESK
Associated Press Writer
FRANKFORT, Ky. (AP) _ Kentucky lawmakers return next week to deal with a myriad of issues - from casino gambling to making "cornhole" the official state game.
But one looming issue could someday cost the state billions of dollars if it's not addressed - the state employees' pension system. Some lawmakers have warned that failing to act soon could exacerbate the problem to a point that it would eventually consume mammoth proportions of the state budget.
"It's tough now; it's going to get exponentially more difficult going forward," said Brian Crall, a former top executive in Gov. Ernie Fletcher's administration.
Currently, the state employees' pension system is facing a staggering near-$20 billion - the number fluctuates - in unfunded liabilities. Fully funding pensions this year would likely cost between $500 million to $700 million, Crall said.
A task force Fletcher set up - and led by Crall - to study the issue recently completed a report for the Legislature to consider this session.
Kentucky's retirement systems cover more than 445,000 people in the state, according to the commission's report.
Last year, the General Assembly split on the issue and left town without passing a fix. One plan floated in the Republican-controlled Senate called for selling more than $800 million in pension bonds to give a cash infusion to the retirement systems for public employees and a separate one that handles public school teachers. The measure also would have altered benefits for future employees but kept existing workers' benefits intact. It cleared the Senate before stalling in the House.
Senate President David Williams and other legislators have claimed that without quick action, the state's retirement system could collapse within the next two decades.
The proposed change would have converted future employees' retirement plans from defined benefits to a hybrid version that included investing in the stock market.
It's uncertain whether Gov. Steve Beshear will focus more energy on the matter.
Compounding the situation, however, is an already grisly financial forecast for the state. Beshear said last week the state is short $290 million for its bills in the current fiscal year and is facing an even larger financial shortfall next year.
The pension issue "is a big problem. I don't look at it as an immediate crisis," Beshear said recently. "By that I mean people are going to continue to get their benefits if we don't take action tomorrow, but we need to take action over the long term."
Although the pension issue is pressing for local governments across the state, lawmakers would likely wait to see Beshear's plan, said Williams, R-Burkesville.
"He ought to have an opportunity to take a look at this issue," Williams said. "It's a big- ticket item."
Nevertheless, Williams said he didn't think it was possible to solve the looming long-term pension problem without some benefit changes for future employees.
Among other things, pensions are a financial strain on county governments across the state. As employers, local governments pay into the County Employees Retirement System - which is part of the state's retirement system. The amount local governments are having to pay into pensions could force some into cutting services or personnel, Crall said.
Beshear, who took office earlier this month, said his administration would continue studying the problem leading into the legislature's upcoming session, which begins Jan. 8.
"I'm going to be looking for the answers and the ways that we get the pension system on solid ground over the long haul so that the folks down the road - several years from now - will also be assured that their retirements will be secure," Beshear said.
House Speaker Jody Richards, D-Bowling Green, said he wants to address pensions this session, and said he had hired an actuary to make additional recommendations.
"I think that problem can be solved, and it can be solved over a period of time," Richards said. "We will have to address that in this session."
Crall said the while the matter needs quick attention, the situation was not yet at "crisis level."
"Is it at crisis right now? No," Crall said. "But if we don't get a hold of this unfunded liability, then it's just going to run away from us in exponential form in years to come."
Story created Jan 02, 2008 - 12:01:11 EST.
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