State and county employees who are concerned about how coming changes to the state’s pension systems will affect them will have time to make informed decisions before the changes become law, state Sen. Joe Bowen told members of the Rotary Club of Owensboro on Wednesday.
Bowen, an Owensboro Republican and co-chairman of the state Public Pension Oversight Board, said any changes that legislators make to the public employee, teacher and state trooper retirement systems won’t go into effect immediately upon passage. After the meeting, Bowen said the date the changes become law will likely be “closer to July 1 than Jan. 1.”
“This bill is not going to have an emergency clause,” Bowen said, “which means people will have ample time to make the decisions they need to make, if they feel they are going to be negatively affected” by the changes.
The state’s pension system issues have been well-documented. Bowen called the deficits in pension systems “a $60 billion challenge” and said the largest pension system, for state employees in nonhazardous duty jobs, has only 13.8 cents to meet every $1 in retirement obligations.
Other systems are better funded, with the County Employee Retirement
System 59 percent funded, the retired teachers system 54 percent funded and the system for hazardous duty state workers 59 percent funded.
“I would suggest to you if you were in private enterprise and you had a plan that was less than 60 percent funded … the government would step in a take over your plan,” he said.
In an interview after his presentation, Bowen said he anticipates a bill will be ready for release by the end of September. After than, legislators will need about a month to digest the bill before they’re called into special session by Gov. Matt Bevin, he said.
Bowen said he spends up to 30 hours a week in Frankfort with the committee working on the bill. He said he could not give many specifics, but legislators want current retirees to keep their current benefits. The same is true for “Tier I” workers, who have been in the system the longest among current employees, he said.
“We are going to respect the commitments we have made,” he said when asked how the changes might affect Tier I workers. “We are going to respect those promises.”
State workers who come in after the pension bill will have a new retirement system, similar to what people have in the private sector, he said.
Last week, PFM Group, a consulting firm, recommended sweeping changes to the pension systems, such as increasing the retirement ages for teachers and law enforcement officers, and placing new teachers and nonhazardous state workers into traditional 401(k) retirement plans. Another recommendation included taking back cost of living adjustments nonhazardous state workers received between 1997 and 2012.
Bowen said the PFM recommendations were “draconian.”
“For those fearful all (PFM) had to say will be implemented, it won’t be,” Bowen said.
On Wednesday, House Speaker Jeff Hoover told Associated Press reporter Adam Beam that he does not support taking away workers’ cost of living increases as part of addressing the pension crisis. Bowen echoed those comments to the Rotary group in Owensboro.
“Without playing my hand, I wouldn’t stress out over that too much,” Bowen said. “I wouldn’t have too much angst about COLAs,”
Bowen said he is unsure whether the better-funded county retirement system will be detached from the state employee system. Bowen said he supported that with a bill last session that was sidelined at Bevin’s request.
“To me, it made a lot of sense to separate them,” Bowen said.
While Bowen said he favors separating the two, “I’m one person,” he said. “My influence only goes so far.”