FRANKFORT — Legislation that would require the state to fund the Kentucky Teachers’ Retirement System on an actuarially sound basis starting in fiscal year 2017 is on its way to the Senate.
House Bill 1, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, would require state employers to pay 100 percent of the additional contribution rate needed to fund the KTRS pension fund to keep the fund fiscally sound. Stumbo said the bill will help protect the state’s bond rating—which he said has been hurt by underfunding of the pension system—by sending a message to the bond rating agencies.
“We can make a statement as to what our goal is,” he said, with that goal being to fund KTRS to the full actuarially required contribution, or ARC. “I believe that … it will improve our bond rating and thus in the long run cost us less money,” said Stumbo.
Over $1 billion to fully fund the KTRS ARC over the next biennium without any bonding is included in the House state budget plan found in HB 303 as passed by the House last week. That bill is now in before the Senate for its consideration.
Rep. Brad Montell, R-Shelbyville, attempted to amend the bill with provisions that would have phased in the KTRS ARC over four years. That plan would have used around $600 million provided in the budget as proposed by Governor Matt Bevin to fund the ARC over the next biennium and around $313 million total over the following two fiscal years to fully fund the ARC over four years.
“A four-year phase-in is an acceptable phase-in by all accounts,” said Montell. “We’re preparing every year to be able to better meet the requirements so that in four years we’re fully funding … with recurring revenue.”
Stumbo spoke against the amendment, saying it would “kick the can down the road” for funding of teachers’ retirement.
“The truth of the matter is, it’s up to the next General Assembly to find those dollars,” said Stumbo. “Here’s what it means… it means that we would appropriate $487 million less in fiscal year 2017 and $457 million less in fiscal year 2018 than what the system needs.”
The amendment was defeated on a vote of 44-53.
HB 1 was approved by the House on a vote of 86-11 and goes to the Senate for consideration.