House Speaker Greg Stumbo’s $3.3 billion bonding bailout of the Kentucky Teachers Retirement System won’t pass this session, but a smaller study-and-finance package may still be in the works.
The retirement system only has 53 percent of the money it needs to make future payouts to more than 140,000 retired and active teachers in the state. The state’s required contributions to the system will double by 2026, according to KTRS officials.
On Tuesday, the Senate rejected $3.3 billion in bonding for the retirement system proposed by the House, replacing it with language that would require a committee of lawmakers and experts to identify problems in the pension system and come up with a report on possible solutions by December.
Now a conference committee comprised of representatives and senators will try to come up with a compromise to the two proposals.
Stumbo, a Democrat from Prestonsburg said the legislature was in a similar situation in 2013 when lawmakers addressed the cousin of the teacher retirement system—the Kentucky Retirement Systems.
“The Senate kind of wanted reforms but it didn’t want to address the pending issue of financial stability and money,” Stumbo said. “We want to make sure that the fund is financially sound, and we’re willing to listen to some of their suggestions on reforms if they’re willing to do something on the financial stability side.”
In that 2013 session, the legislature required the state to make recommended contributions to the KRS, created a separate pension fund for new hires and limited their benefits. The reforms have been considered successful by some, however KRS still only has 21 percent of the money it needs to make future payouts.
Stumbo said bonding should be included in a solution this year because interest rates are favorable. KTRS officials said the state can borrow money at a 4 percent interest rate and a 7 percent return from its investments in the system.
Senate President Robert Stivers, a Manchester Republican, hasn’t said if he would consider bonding in a final bill. But he said he’s willing to compromise.