Kentucky Pension Bond Bill Rejected, Amended in Senate


The Kentucky Senate has rejected a bill that sought to issue $3.3 billion in bonds to help ease the funding shortfall of the Kentucky Teachers’ Retirement system (KTRS).

The bill passed the House late last month, but was stopped short in the Senate on Monday.

Some lawmakers cited the risk of the bonds as a reason for the bill’s rejection; the success of the plan depended on the system’s investment returns exceeding the interest on the issued bonds.

If that were to happen, KTRS could pocket the difference and funding will improve. But if investment returns lag, the pension-funding situation would worsen further.

Senators amended the bill to call for the creation of a task force to examine the pension system and recommend funding solutions.

More on the new bill, from the State-Journal:

The substitute adopted in the Senate Standing Committee on State and Local Government instead directs the Legislative Research Commission to create a Kentucky Teachers’ Retirement System task force to study and make recommendations for funding and stabilizing the retirement system.

The task force will include:

* Six members of the Senate with four appointed by the Senate president, two appointed by the Senate minority floor leader;

* Six members of the House with four appointed by the House speaker, two appointed by the House minority floor leader;

* The House speaker and Senate president will each appoint one co-chair from their chambers;

* The task force will have monthly meetings during the interim and report its findings to the LRC for referral to a committee by Dec. 18, 2015.

The bill is officially called House Bill 4.


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Kentucky Ends Contract With Non-Profit Looking to Get Out of State Pension System


Last month, a judge ruled that Kentucky-based non-profit Seven Counties Services could legally remove itself from the state’s pension system. But lawmakers aren’t happy with the pension obligations—allegedly to the tune of $90 million—that the organization is leaving behind.

Seven Counties, a group that provides fostering and other family services, filed for bankruptcy in 2013, and as part of the proceedings they were hoping to get out of Kentucky’s pension system to avoid increasing contributions. The judge allowed the maneuver.

But now, angry lawmakers seem to not want the organization in the state at all. They chose not to renew Seven Counties’ contract with the state. From the Courier-Journal:

Prompted by angry legislators, state officials agreed Friday to jettison a $3.7 million contract with Seven Counties Services as the agency continues efforts to exit Kentucky’s underfunded pension system.

The contract provided family preservation services in the Louisville area, using in-home counselors to help families in crisis with the aim of keeping children at home or reuniting them with parents.

It will remain effective through Oct. 31 as families and children are transitioned, and officials “will move with all due haste” to execute a contract with a new provider, according to a letter from the Cabinet for Health and Family Services.

Seven Counties has provided the services for decades, and warned that cancelling the contract would harm at-risk children and around 300 families that participate in the program.

But last week, the Government Contract Review Committee rejected a proposal to renew the deal for two more years after lawmakers cited concerns over Seven Counties’ high-profile bankruptcy case.

Lawmakers are concerned that if the Seven Counties ruling stands, other state agencies will rush to get out of the state’s pension system. That would mean less contributions coming into the system.

From WFPL:

The state would have to cover $2.5 billion in unpaid pension obligations, Kentucky Retirement Systems executive director Bill Thielen said.

“The actuaries have determined it would increase the contribution rate over a 20 year period, it would ratchet up a little bit each year over 20 years about 6.5 percent, which would amount to about $2.4 billion of additional moneys over the 20 year period that would have to be picked up by the remaining employers in the system,” Thielen said.

In that vein, the contract non-renewal sets a precedent for other groups looking to follow in Seven Counties’ footsteps: if you leave the pension system, you leave the state too.