UPDATE: The primary, and only remaining, sponsor of SB 144 withdrew his sponsorship earlier today, February 19th, in the Senate chamber, effectively killing the bill!

As many of you are aware, Kentucky faces a tremendous financial crisis in its public pension system. To date, the funds are over $33 Billion in the hole, and we continue to dig ourselves deeper - until now. Last week, the Kentucky Senate passed a bipartisan bill, Senate Bill 2, that makes broad changes to the way public employees' retirement accounts are managed and grown. The plan proposed in SB2 is neither a "defined benefit" plan (like what is currently in place), nor is it a "defined contribution" plan, such as a 401(k). Rather, SB2 creates a hybrid, "cash-balance" plan. There are two important things to note about SB2:

  1. The bill does not do anything to the Teachers Retirement System.
  2. The bill only affects new hires after July 1, 2013.

Many of you have contacted me over the last two days, however, about a newly filed bill, Senate Bill 144. This well-intentioned bill, sponsored by Sen. Chris McDaniel, takes a substantial step in righting the sinking pension ship. However, I believe the bill goes further than necessary. As many of you have noted, and correctly so I believe, SB144 carves away the income earned above your base pay scale.

...payments for overtime, compensatory time, living allowances, expense reimbursements, lump-sum payments for accrued vacation leave, lump-sum bonuses, severance payments, lump-sum payments for accrued sick leave, uniform and equipment allowances, employer-provided payments for service purchases, or any other payments determined by the board to be in excess of the employee's base regular rate of pay...

It is important to note that SB144 is technically valid, in that these payments above base pay are not part of whats called the "inviolable contract." In other words, while the Commonwealth is obligated by law to honor the base pay part of retirement, it is not technically required to honor all the payments above and beyond it.

However, while I am prepared to make difficult decisions - even politically unsafe and unpopular decisions - to address our pension problems (after all, if we don't fix it now no one will have anything waiting for them when they retire), but I believe SB144 goes too far. I would rather that everything that has been accumulated up to this point by employees be kept in place and honored. While the Commonwealth may not have the same obligation to honor these amounts as with base pay, I simply believe its the right thing to do. State employees worked extra hours, avoided calling in sick, etc., believing that this time would be accruing to their benefit down the road. It'll hurt financially, but I can't justify robbing folks of what they expected (and worked) to get.

While it's not widely popular, I might (emphasis on the "might") be ok with eliminating these payments above base pay going forward on a sliding scale based on tenure of service. For example, if you've got 30 years of service under your belt nothing is changed; if you've got 20 years in we tinker with the calculations a bit; if you've got 10 years in we tinker with the calculation a bunch; and if you've got 5 years in or less we tinker the most. That's the only fair and equitable way to handle the change and still keep the funds afloat - though I'm happy to hear your suggestions! Call me at 502-564-8100 (ask for me), leave a message for any legislator by calling 800-372-7181, or email me by visiting the Contact page (it comes straight to me).

In the meantime, rest assured that SB144 in its current state does not have my support. I hope to work with Sen. McDaniel (who is a fantastic senator that is working hard to bring Kentucky's fiscal house back into order) to create a solution that makes hard changes but does so in a fair and equitable way.