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No ‘Rejoicing’ From State Employee Reps Over Bevin’s Pension Fix

Pile of Money
Getty Images/Ingram Publishing
Pile of Money

Representatives of state employees, teachers and police officers aren’t happy with Gov. Matt Bevin’s proposal to offer less-generous retirement plans and tinker with state worker benefits in an effort to save the state’s ailing pension systems.

David Smith, executive director of the Kentucky Association of State Employees, said the organization will hold a “torches and pitchforks” rally at the state capitol if Bevin calls a special legislative session for lawmakers to vote on the proposal.

“We want to let them know that if they need to be drug out of town, they need to be drug out of town,” Smith said. “You can do what’s right and you don’t have anything to worry about —  but if you don’t, doggone it, we’re there. Because the monsters need to leave.”

On Wednesday, Bevin, House Speaker Jeff Hoover and Senate President Robert Stivers unveiled a multi-point plan that would — among other changes — phase out the state’s use of a defined-benefit pension system, which guarantees payments to state employees throughout their retirements.

Nearly all future and some current employees would be moved into defined contribution plans like 401(k)s, which require the state to put less money into employee retirements.

Bevin said state employees and retirees should be "rejoicing" over the proposal.

Stephanie Winkler, president of the Kentucky Education Association, called the proposal a “disappointment,” saying 401(k)-type plans aren’t appropriate for teachers.

“For the degrees and the amount of education that teachers are required to obtain statutorily, there’s no reason for anyone to stay in education when they could use those degrees in the private sector and actually make a salary where they could afford to contribute to a 401-type plan,” Winkler said.

“For the sacrifices to serve the public and serve the students of Kentucky, we rely on the promise of a defined-benefit pension that after we serve the public we will be taken care of as retirees.”

The plan would, for five years, suspend cost of living adjustments given to retired teachers. Winkler said that provision would violate the contract rights of teachers.

Bevin’s proposal was unveiled after months of closed-door negotiations with the Republican leaders of the legislature.

Combined, Kentucky’s pension systems are among the worst-funded in the nation. Lawmakers diverted contributions to the systems for decades, leading to an unfunded liability ranging between $30 billion and $70 billion.

Employees who are considered to have “hazardous” duties — like police and firefighters — have the fewest changes under Bevin’s plan.

But not all first responders will avoid major changes. Over the years, local governments have designated about 47 percent of their police officers as “non-hazardous” for budgetary reasons, said Nicolai Jilek with the Kentucky Fraternal Order of Police.

Because of that designation, police officers hired after 2013 and future hires would be moved out of their current hybrid 401(k) program that guarantees a rate return on their retirement account and into a less-generous 401(k).

Jilek said police departments will have a hard time attracting and retaining new recruits with that model.

“They’re going to have the ability to just leave whenever they find something more lucrative or when they just realize the pressures of the job," Jilek said. "It’s not worth it for them anymore."

All state employees would also have to pay 3 percent of their salaries towards a retirement employee health plan under Bevin’s proposal.

Jilek called it a “tax on people who choose to go into public service.”

“Anytime the government takes money out of your paycheck without a direct benefit to you, it’s a tax," said Jilek.

Bevin and Republican leaders spearheading the pension issue haven’t officially released a bill detailing the changes. So far only an outline has been released.

Bevin said he plans on calling a special legislative session for lawmakers to vote on the measure later this year.

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