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Kentucky House Democrats' Top Bill Would Borrow $3.3 Billion For Teacher Pensions

Ervins Strauhmanis/Creative Commons

State House Democrats will once again try to push through a bill that would allow the state to borrow $3.3 billion to shore up the ailing teacher pension system, which is short $24 billion to make future payments.

Last year, the bill passed out of the House but was met with stiff opposition from leaders in the Republican-led Senate, which favored studying the problem to come up with structural changes to the pension system.

House Speaker Greg Stumbo, the top Democratic official in Frankfort, said even if lawmakers come up with changes to the pension system, the fund needs an influx of cash.

“It requires some funding source to make up the revenue or to start to make up the shortfall in the unfunded liability, and it probably requires some changes for new hires,” Stumbo said.

Republican Gov. Matt Bevin has proposed moving future hires onto 401(k)-style retirement plans so the state won’t have to pay new pensions and can focus on existing retirees' pensions.

But new hires are also an important source of revenue for the pension system — they pay into the fund but won’t draw from it for years.

Bevin and other lawmakers have also proposed increasing contributions from pension-holders.

Stumbo’s $3.3 billion bond bill was requested by officials of Kentucky Teachers Retirement Systems, which manages the pensions of about 120,000 current and retired teachers.

“Everybody says they’re going to solve it,” Stumbo said.  “I’m waiting for someone else to come up with a plan. I’ve got a plan.”

As the amount of money in the teacher pension fund dwindles, the state’s contribution to the system will continue to grow.

Teachers’ pension system leaders say in the 2016 fiscal year, the state will need to pay an additional $520 million to maintain current funding levels. That’s up from an additional $380 million the state paid this year.

Senate Republicans have been firm in opposing Stumbo’s package, although Republican Senate President Stivers said he’s willing to consider all proposals.