House OKs bill to reduce teacher retirement system’s unfunded liability

LRC Public Information

Tuesday, Feb. 24, 2015 — A House proposal to authorize $3.3 billion in bonds to reduce the unfunded liability of the Kentucky Teachers’ Retirement System’s pension fund is heading to the Kentucky Senate.

House Bill 4, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, was approved in the House today on a 62-31 vote. The bill needed 60 votes to pass the House because it proposes authorization of funds in an odd-year, or non-budget, legislative session.

The bill would authorize the Kentucky Asset/ Liability Commission to issue the bonds in fiscal year 2015-2016 to reduce the system’s growing $14 billion unfunded liability. Supporters say the bonds, along $116.7 million already budgeted for now-completed state improvements, would help the teachers’ pension system pay off its unfunded liability over 30 years.

Stumbo said before a committee vote on HB 4 earlier this month that the bill is expected to guarantee the solvency of the pension fund to 2035 and beyond.

An amendment offered by Rep. Brad Montell, R-Shelbyville, was defeated by a vote of 43-52. Had it passed, the amendment would have authorized $520 million in bonds—the same amount, said Montell, that would be bonded in the first year under the original bill– to fully pay the actuarially required contribution to the KTRS pension fund for one year. It would have also required the state Public Pension Oversight Board to study the issue during that year to “see what can be done not only to provide funding, but to address the other issues that could be driving the unfunded liability.”

The amendment would have made the teachers “whole,” Montell said. “They get everything they (would get) in the big bond for the first year. It gives us time to do some work.”

Stumbo called the amendment “a Band Aid for a bigger wound,” and said that the larger bond issue is needed. “We’ve got to do something to fix the bigger wound,” he said.

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