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January 4, 2018 4:59pm

Pension reform on the horizon in Kentucky’s 2018 Regular Session

Pensions InsertWith lawmakers back in Frankfort for the 2018 Regular Session of the Kentucky General Assembly, pension reform is on the horizon. The state is currently facing a $64 billion unfunded public pension liability. Left unsolved, pensions will consume a greater-and-greater share of the state budget, siphoning off critical funding for education, health care, and infrastructure. In addition, the crisis will lead to more downgrades of Kentucky’s credit rating, further restricting the Commonwealth’s ability to borrow.

In lieu of dealing with the problem in a special session, lawmakers are expected to deal with the issue early in the 2018 Regular Session. Since last Fall—when legislators and the governor’s office released an initial draft of a major pension reform bill—the issue has only become more pressing. A new study of public pension systems’ funding ratios throughout the country ranked Kentucky number 49, sandwiched between Illinois (48) and Connecticut (50). On top of this, State Budget Director John Chilton explained late last year that legislators would need to contribute an additional $700 million per year in General Fund dollars, bringing total spending on pensions to 20 percent of the state budget. A decade ago, pensions accounted for 6.7 percent of the budget. For additional context: In the last budget, education accounted for 45 percent; Medicaid accounted for 17 percent. Pensions won’t just impact the state budget, however; they will affect Louisville’s too. Next year, Metro’s Gov’s pension costs are expected to rise from $76.5 million to $115 million.

Pensions Funding

States ranked according to the funding ratio of their public pensions systems. American Legislative Exchange Council, 2017.

GLI remains as committed as ever to solving Kentucky’s pension crisis, and we are doing everything we can to make sure pension reform becomes a reality this year. Just in 2017 alone, GLI published op-eds, wrote letters, contacted legislators, and even hosted Governor Bevin here in Louisville to discuss pension reform with our investors. Most recently, we added a last-minute addition to our 2018 Legislative Agenda dedicated specifically to this important issue. Read it here.

To keep up with the progress of pension reform and other issues relevant to Greater Louisville’s business community, follow GLI Advocacy on Twitter and subscribe to our newsletter, Policy Distilled.