Kentucky Teachers Pension May Call for Special Legislative Session for Bond Proposal

Kentucky’s legislature concluded its 2015 session last week without resolving the debate over proposals to fund the state’s Teacher Retirement System.

The Senate and House both passed competing bills regarding the issuance of up to $3 billion in bonds to help fund the Teachers’ pension system.

But lawmakers couldn’t agree on specifics, and negotiations had fallen apart by Friday.

Now, the board of the Teachers’ Retirement System may call for a special legislative session to tackle the issue.

From BenefitsPro:

The KTRS Board of Trustees may request a special legislative session to reconsider the proposal.

Gary Harbin, executive secretary of the system’s board of trustees, said $14 billion in KTRS’s unfunded liabilities will grow to $21.6 billion by July without a new funding plan.

“We’re going to be looking at asking for a special session,” he told CN2 News in Frankfort, Kentucky.

The state legislature’s next regular session won’t begin until next January.

Harbin told the news station that he hopes the state will reconsider the POB before next session, citing fears that waiting that long could mean issuing a bond after the Federal Reserve raises interest rates, which would dramatically increase the cost of issuing the new debt.

“The sooner this is solved (the) better for members (of KTRS) and better for taxpayers,” said Harbin. “Every time the Fed raises interest rates by 25 basis points, the cost of utilizing this plan goes up by $166 million over 30 years.”

Kentucky pension officials are worried that interest rates could rise significantly between now and the next legislative session.

The efficacy of a pension bond relies on investment returns outpacing interest rates. If rates rise, the odds of a successful pension bond decrease.