Daviess County education officials said proposed changes to the state’s public employee and teacher retirement systems could impact the ability of school districts to attract and retain quality educators.
But Owensboro-area state legislators said people should not jump to conclusions about changes to the systems, with one legislator saying he believed “some, if not most” of the recommendations would not be included in the bill that lawmakers contemplate in an expected special session later this year.
On Monday, officials from the PFM Group presented several potential changes to the public employee, county employee and teacher retirement systems. According to media reports, the pension systems have $33 billion less than what’s required to meet the needs of retirees. At Monday’s meeting, state Budget Director John Chilton said legislators would have to come up with $1 billion in the next budget for the pension plans.
Some of the recommended changes included moving current state employees in non-hazardous jobs into standard 401(k) retirement plans, away from the current plan that give workers a guaranteed return on their investments. Current teachers and workers in hazardous-duty positions would keep their guaranteed benefit plans.
But new teachers would be placed in traditional 401(k) plans. One of the recommendations included increasing the retirement age of current and new teachers to 65 years old.
No decisions on how to proceed have been made, local legislators said.
“PFM is not a law-making body,” said Sen. Joe Bowen, and Owensboro Republican and co-chairman of the state Public Pension Oversight Board. “Ultimately, the decision would be made by the legislature and the governor. The pension reform plan will look different from what PFM proposed.”
Officials in other government jobs, such as law enforcement, have previously expressed concern that people are retiring early out of concern of possible pension changes. Matt Robbins, superintendent of Daviess County Public Schools, said a rush of people retiring before any pension changes go into effect would hurt the reform process.
“If economics is the reason for doing this, the shock to the system of an group of immediate retirees, who would be eligible to work longer … would not bode well” to the reform effort, Robbins said.
Gov. Matt Bevin, who has been an advocate of addressing the pension problem, spoke on Facebook about the pension recommendations Monday night. While saying the government would not “pass anything that would cause a person to retire earlier because of it,” Bevin followed up by saying, “If you happen to be a teacher who would walk out on your classroom in order to serve what’s in your own personal best interest, at the expense of your children, you probably should retire … If that’s truly where you are at this stage of your career, I wouldn’t suggest that being in a classroom is probably the best use of your time.”
Rep. Robby Mills, a Henderson Republican who represents part of Daviess County, said officials need to work together on the issue.
“I’m a supporter of the governor, and support a lot that he’s doing, and those comments were not helpful to the situation,” Mills said. “It’s not an easy situation, and I think sometimes it’s portrayed as an easy situation … We all need to pull back on the rhetoric and work on a solution, and I think that goes for all sides.”
Nick Brake, superintendent of Owensboro Public Schools, said, “I think those recommendations are the plan of the governor’s, and I don’t think those are a reflection of the legislature in general.
“Rep. (Jeff) Hoover and Sen. Bowen … have made clear they are interested in honoring the commitments to teachers and employees at the state level,” Brake said.
Hoover, who is speaker of the Republican-controlled House of Representatives, said in a statement that he appreciated the work of PFM Group, but “please know that these are only recommendations.”
“We are committed to meeting our legal obligations in regard to our pension system,” Hoover said in his statement.
Brake said if the teacher pension system is altered, officials will have to increase teacher pay to attract people into the profession. He also said he had concerns about how teachers had been portrayed during the pension debate.
“I think … teachers have been painted in a negative light,” Brake said. “I don’t think teachers are there” for the pension, he said.
“We don’t need to look at the financial piece (of the pension issue) in isolation,” Robbins said.
“Any time you’re dealing with a benefit of any kind, certainly one as large as this one, to say (changing it) has no consequences is obtuse,” he said.
Rep. Suzanne Miles, an Owensboro Republican, said she is cautioning people to not make decisions on their careers in state government before a plan is put before the public.
“These are only recommendations,” Miles said. “… The reality is we’ve got a major problem and we have to come up with a solution.”
“I want people to be patient with us and not jump to conclusions,” Miles said. “These are real people’s lives, and we are very aware of that.”
Rep. D.J. Johnson, an Owensboro Republican, said he expected, “some, if not most of what (PFM) recommended would not be in the plan.”
“I can’t see us doing anything that would affect existing retirees,” Johnson said. “… I think we have to look hard at new employees and the structure we have now, whether we like it or not. It’s not sustainable.”
Of people in the workforce already in the pension systems, Johnson said, “I’m going to do everything I can to honor (commitments to) existing retirees and current employees.
“It’s a problem, and it’s a real serious problem,” Johnson said. “We will do what’s necessary to resolve the problem, but we recognize the contract (employees) have been working under their entire lives, and we are going to honor those contracts.”
Mills said legislators “need to look at every option” when addressing the pension issue.
“I think the report given to us by the consultants was the worst-case scenario, and I hope we can do something that is a little less” than what PFM recommended, Mills said.
“I’ve always been told a good compromise is something everyone can live with, but no one loves it,” Mills said. “The governor’s got to give us some suggestions, and the leadership in the House will give us some suggestions, and we’ll see what we can get 50 votes for.”
Miles and Johnson said they had not seen Bevin’s comments during his Monday session on Facebook, and could not comment.
When asked about Bevin’s comments about teachers, Bowen said, “you are not hearing that from me. That’s not my attitude. Not once have I conveyed that message.”
Several stakeholder groups have been involved in discussions about pensions, including the Kentucky Education Association, the state’s teacher union.
“As a matter of fact, part of this has been conversations with KEA,” Bowen said. “We know the consequence of every potential change that will be made … I think where there will be changes, most of those changes are not going to be a surprise for folks. Most of the changes are expected.
“We’ve talked to KACo (the Kentucky Association of Counties), we’ve talked to KLC (the Kentucky League of Cities) and KEA. We’ve talked to retirement groups.”
A special session likely won’t happen before early November to give the committee working on the pension plan some time, Bowen said. The bill would be presented to the public shortly before the session, he said.
“Obviously, our goal is to save the pension system and to honor the commitments that have been made,” Bowen said.
The PFM recommendations are a “framework” for legislators to craft their own plan, he said.
“PFM proposed some changes that will, in all likelihood, not be part of the final pension reform bill, as it relates to current retirees and current employees,” Bowen said, but declined to say more. Of the reform effort, Bowen said “this is being borne out of necessity. “
“When you’re talking about an additional $1 billion we have to come up with (in the next budget), it’s time to stop kicking the can down the road.
“Previous administrations have stuck their heads in the sand on this,” Bowen said. “… We’re facing up to the challenge.”