Daily Independent (Ashland, KY)

January 9, 2013

Much to do

Fix state pension problems now and the rest in near future

The Independent

ASHLAND — While pension reform is expected to be a major topic during the 2013 General Assembly, no one should expect legislators to “solve” the problem of unfunded pension liabilities during the 30-day session. Probably the best anyone can hope for is legislators will approve the recommendations of a special legislative task force.

However, that task force only deals with the estimated $12 billion unfunded pension liability in the state employee retirement system. It does not address the unfunded liabilities in the pension funds for teachers and for county and city employees. When all pension liabilities are combined, they total aa whopping  $33 billion and growing. Legislators opted to limitthe task force’s role to just the state employee pension fund and address the problems with the other retirement funds at a later date.

Not wishing to be ignored, the mayors of Kentucky’s two largest cities — Greg Fischer of Louisville and Jim Gray of Lexington — had a joint press conference in Frankfort on Monday to call on state lawmakers to not delay in enacting reforms that would help curb pension obligations crippling their budgets.

Mayors of other Kentucky cities joined them at the press conference but did not speak. Instead, they were there to offer their support for Fischer and Gray and let legislators know Louisville and Lexington are not the only cities with pension woes.

Pension payments have ballooned during the past decade in Lexington and now account for 20 percent of Lexington’s annual budget, Gray said. In 2000, pension obligations were just 6 percent of the city’s budget.

Fischer said Louisville’s pension obligations account for 15 percent of its general fund, reporting that figure was 6 percent seven years ago.

“You usually hear about the pension problem in the context of a state problem ... but this is a real local problem for us all,” Fischer said.

“Our pension costs have spiraled out of control,” Gray said. “It is the biggest financial issue our city faces.”

Gray and Fischer stopped short of supporting specific reforms, but urged lawmakers to take immediate action to prevent further unfunded costs. The cities are looking to state lawmakers for reform because the pension systems they pay into are guided by state laws.

The pleas of Gray and Fischer may have been stronger if they had spoken out in support of specific reforms, because that would have given legislators a starting point in deciding what to do. Instead, all the mayors did was in effect tell legislators they have a problem and it is up to the state to help them fix it.

In dealing with the state’s unfunded pension liability, the legislative task force has suggested repealing cost-of-living increases for retirees and moving state employees to a hybrid plan similar to a 401(k). The task force wisely rejected a suggestion to invest in bonds to help pay for the shortfalls.

Republican Sen. Damon Thayer, who is co-chairman of the task force, said a draft bill based on the task force’s recommendations would be introduced in the Senate in the upcoming General Assembly. House Speaker Greg Stumbo, a Democrat, said in November he believed a proposal for pension reform would pass in some form in the next legislative session.

Approval of pension reform package should be the top priority of the 2013 General Assembly. Doing nothing will mean the problem will keep getting worse and the liability will keep growing. At the very least, legislators must stop the red ink in the state’s pension fund.

There probably is not enough time in the session for legislators to address the problems with the other pension funds. However, whatever legislators do this session, they should all be aware it won’t “solve” the problem. More still will need to be done. Much more.