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Teacher Pension Bill Clears House, Heads to Senate

A House proposal to authorize $3.3 billion in bonds to reduce the unfunded liability of the Kentucky Teachers’ Retirement System’s pension fund is heading to the Senate.

House Bill 4, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, was approved in the House today on a 62-31 vote. The bill needed 60 votes to pass the House because it proposes authorization of funds in an odd-year, or non-budget, legislative session.

The bill would authorize the Kentucky Asset/ Liability Commission to issue the bonds in fiscal year 2015-2016 to reduce the system’s growing $14 billion unfunded liability. Supporters say the bonds, along $116.7 million already budgeted for now-completed state improvements, would help the teachers’ pension system pay off its unfunded liability over 30 years.

Stumbo said before a committee vote on HB 4 earlier this month that the bill is expected to guarantee the solvency of the pension fund to 2035 and beyond.

An amendment offered by Rep. Brad Montell, R-Shelbyville, was defeated by a vote of 43-52. Had it passed, the amendment would have authorized $520 million in bonds—the same amount, said Montell, that would be bonded in the first year under the original bill-- to fully pay the actuarially required contribution to the KTRS pension fund for one year.  It would have also required the state Public Pension Oversight Board to study the issue during that year to “see what can be done not only to provide funding, but to address the other issues that could be driving the unfunded liability.” 

The amendment would have made the teachers “whole,” Montell said. “They get everything they (would get) in the big bond for the first year. It gives us time to do some work.”

Stumbo called the amendment “a Band Aid for a bigger wound,” and said that the larger bond issue is needed. “We’ve got to do something to fix the bigger wound,” he said.

Early Childhood Ratings Bill Clears House

Early care and education programs would be mandated to follow a state quality-based rating system under a bill passed today by the Kentucky House of Representatives.

House Bill 234, sponsored House Education Chair Derrick Graham, D-Frankfort, would require state agencies to work with early care and education providers to develop and fully phase in the system for child-care and certified family child-care homes, state funded preschool, and Head Start by June 30, 2017.

Funding for the program would come from the state’s Race to the Top Early Learning Challenge Grant. Graham explained that the bill would require a report be submitted annually to state lawmakers which, among other things, would include recommendations for the “long-term viability” of the system when federal grant dollars run out.

An amendment to the bill offered by Rep. Addia Wuchner, R-Florence, was narrowly defeated by a vote of 47-50. Had it passed, the amendment would have: sunset the rating system at the end of calendar year 2017 (unless extended by the General Assembly); restricted the use of state monies for the rating systems once federal funds are gone, and; required the state to report plans for continuing the system when federal money is no longer available. 

Wuchner said the amendment was a “responsibility measure” to require the state to consider what funding would be needed to continue a mandated system that, under current law, is voluntary. 

HB 234 passed the House by a vote of 81-16. It now goes to the Senate for consideration.

From the Legislative Research Commission