Governor Says CERS Separation "Topic of Discussion"

Posted on August 25, 2017

     Governor Bevin provided a passionate speech at the Governor’s Luncheon during the Annual Governor’s Local Issues Conference in Louisville Thursday. Governor Bevin criticized the previous management of the Kentucky Retirement Systems. He called the status of the state’s pensions unstainable and accused prior pension officials of criminal, negligent and irresponsible behavior. The governor also addressed the push to separate the County Employees Retirement System (CERS) from the Kentucky Retirement Systems (KRS), saying lawmakers are “having a very frank discussion about that.”

     The Kentucky League of Cities, along with a coalition of 23 other agencies, are advocating for CERS separation. Senator Joe Bowen (R-Owensboro) filed Senate Bill 226 in the 2017 Regular Session of the General Assembly for separation, but the bill was tabled at Governor Bevin’s request so the issue could be revisited in the special session. Thursday, the governor said the issue is being discussed in pension meetings between his office and legislators. “This is a very, very real topic of conversation,” said Bevin. “One that will lead to a very thoughtful resolution on this front.”

     Kentucky League of Cities Governmental Affairs Manager Bryanna Carroll says the League welcomes the news that Governor Bevin is taking a serious look at the proposal. “We respect and applaud Governor Bevin’s commitment to addressing the state’s pension problems. KLC knows firsthand that it’s not easy to tackle pension reform as we were on the front lines of advocating for the passage of Senate Bill 2 in 2013, which stabilized the County Employees Retirement System and provided a long-term path of sustainability. The frank reason why it is such a difficult topic is because it deals with life decisions made by those who have committed their careers to public service.”

     While the governor and lawmakers discuss the future of CERS, they’re also looking for possible fixes to the state’s entire pension system. Thursday, Governor Bevin promised a new approach to the problem. “We’re not going to try to copy the X, Y, Z model, or do what they did in some other state, or some other county or city,” promised Bevin. The governor disputed rumors his administration is trying to drive the pension system into the ground, calling the suggestion “insane.” He told the hundreds of locally elected officials, community leaders and advocates at the luncheon he ran on the promise of fixing the pension system and intends to keep that promise.

     Bevin acknowledged the state’s pension problems are hurting local governments. “Some of you are literally wrestling with budget constraints that are only being compounded by this concern about the pensions,” he told the group. “If we use realistic assumptions and a zero-growth rate, those two changes alone will make the costs of contributions so prohibitive that it will suffocate most of your budgets.”

     Still, the governor said he needed their support. “I’m asking for your confidence that I am applying everything in my ability, and I am, to save this pension system.” The governor did warn, however, that the state must take into consideration what he called “demographic reality. I’m talking about the fact that you don’t have anymore four, five or six workers for every retiree.”

     The governor also took exception to what he called “a charade” in the public pension system. “There was an employee who just retired from Kentucky who will make about $80,000 a year for the rest of this individual’s life from the taxpayers of Kentucky,” said Bevin. He did not indicate which plan or department the worker was from, but claimed the employee could retire at 41 “because you can buy years.” He questioned those types of practices saying, “It’s a charade and you know it, and now you’re paying the price.”

     The Public Pension Oversight Board will hear more about the state’s pension problems Monday afternoon. The state hired The PFM Group, at the governor’s request, to study the state’s pension systems. Monday, it will present its third and final report on suggested reforms. Lawmakers have said they are waiting on that report before moving ahead with possible reform legislation. Thursday, the Lexington Herald-Leader reported House Speaker Jeff Hoover (R-Jamestown) will call members of the House back on Tuesday for private meetings on pensions. Senate President Robert Stivers (R-Manchester) told the newspaper Senate Democrats and Republicans will meet in separate caucuses next week.

     Carroll says those working for CERS separation are looking forward to Monday’s meeting and “reviewing the long-anticipated report from the Governor’s consultants so we can continue our work with the legislature and our constituencies on the best way forward. The position of cities is to sustain and separate CERS so the governor and the legislature can address and solve problems with greater precision where it’s needed,” said Carroll. The public is encouraged to attend the meeting, which is at 1:00 p.m. EDT in room 149 of the Capitol Annex.