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.

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.

CJPAC Update

As was announced in this space a couple of months ago the Bevin administration and legislative leaders from both parties and chambers were joined to create the Governor's Criminal Justice Policy Advisory Committee.  Since the creation of "CJPAC" we've heard a steady stream of data and policy testimony to provide legislative food for thought as we look ahead to the 2017 session.

Last month the CJPAC divided into several subgroups to study specific issues in greater detail:

• Penal Code
• Reentry
• Recidivism Reduction
• Probation and Parole reforms
• Drug Policy
• Prevention
• Jail reform

I've been assigned to the Penal Code group, tasked with examining any changes to the entire criminal code.  In case you wanted to take a look at every single criminal offense on the books (in the penal code and outside of it) I hope you have some free time on your hands.

Our small group has met once by phone and once in person so far, and we have another meeting scheduled in just under two weeks when we'll discuss continued changes to some of the biggest pain points in the criminal code.  Should some offenses be reclassified to carry more serious penalties?  Lower penalties?  Where are the inconsistencies (possession of child porn carries the same penalty as possession a stolen license plate, for example)?

Last month during the Judiciary committee meeting we heard from prosecutors about the need to eliminate the "violent offense" label in the code.  Especially for everyone outside the court system the suggestion that some crimes are deemed "violent" and others are not is frustrating.  It is also a bit of a misnomer.  There isn't actually a "violent offense" statute, but rather a handful of crimes that carry a "violent" level of parole eligibility.  For these few crimes a convicted individual must serve a full 85% of their imposed sentence before becoming merely eligible for parole.  You can find that statute and the list of applicable crimes right here if you're interested.  It's a short read.  But the bottom line is that there are a great many crimes that anyone of us would deem "violent" that aren't included in that statute.  There's a growing opinion (that I share) that we should remove that label.

We'll take a look at parole eligibility across a number of crimes.  Should the eligibility threshold move up; drop down; stay put?  We have crimes at 15%, 20%, 50% and 85% (50% is a relatively new group, containing a specific high-level theft, certain cases of heroin trafficking).

At the CJPAC meeting last week we heard from the Department of Corrections and from Pew Charitable Trusts (examining Kentucky's own DOC data) and we can identify a number of trends that demand further attention.  For example, the rate of women being incarcerated has increased 25% compared to only 5% for men since 2007.  Property offenses in prison admissions have climbed by nearly 50%.  Two-thirds of prison admissions are for violations of supervision conditions (probation & parole).  I strongly encourage you to take a look at the charts and takeaways in that data presentation.

Needless to say, no small task awaits us.

Bookmark this page or visit my Apple News channel to stay up to date on what's happening with the CJPAC and other legislation as we approach the 2017 session in January.  If you have some input or feedback please contact me here or here!