Funding would potentially come from Club Keno and iLottery games
FRANKFORT, Ky. (Feb. 28, 2013) — The state House of Representatives on Wednesday approved its version of public pension reform and a measure that would boost funding for the pension system.
Kentucky Retirement Systems (KRS) is underfunded by more than $30 billion, and the funding gap for the retirement systems has grown by roughly $3 billion in the past year alone.
As amended by the House, the public pension bill, Senate Bill 2, would help ensure that the state or local government employer pay the actuarial required contribution (ARC) to the public pension systems administered by the KRS beginning in fiscal year 2014, said House State Government Chair Brent Yonts, D-Greenville. Full funding of the ARC is estimated to cost around $100 million per year in state General Fund dollars, he said.
The General Fund dollars would come from a revenue mechanism in HB 416, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, and approved by the House today by a vote of 52-47. HB 416 is aimed at allowing the state to collect an estimated $73.5 million by 2019 — and more in subsequent years — for a new state “pension sustainability trust fund” that would be created in fiscal year 2014 under the bill.
The funding would potentially come from Club Keno and iLottery games that are expected to be offered by the Kentucky Lottery and a portion of the proceeds from instant or “historic” racing — or betting on previously-run horse races — now offered at Kentucky Downs and Ellis Park.
“After these endeavors mature, in about six to eight years, it pretty well takes care of itself from there on out,” Stumbo said.
Stumbo said HB 416 creates a potential “long-term dedicated funding source for our pension problems” while protecting state funding of the Kentucky Educational Excellence Scholarship (KEES) program. The state lottery is the dedicated funding source for KEES under Kentucky law.
Besides requiring full funding of the ARC, the House’s amended version of SB 2 would retain the current defined benefit plan in the KRS (as opposed to the hybrid shared-risk plan proposed by the Senate,) require pre-funding of cost of living raises for retirees by the General Assembly and allow the state to modify benefits and pension eligibility for future employees hired as of July 1, 2013.
The Kentucky Chamber of Commerce has been lobbying for pension reform, saying every day that passes without a fix is putting the state and local governments at greater financial risk.
Failing to act during this legislative session also continues the “short-sighted, downward spiral” of providing less money for education and economic development and more for unsustainable benefits not available to the average taxpayer, said Dave Adkisson, Chamber president and CEO.