FRANKFORT, Ky. -- The solution to Kentucky's public pension crisis could include issuing bonds to cover previous funding shortfalls and reducing benefits for future hires, reports the Louiisville Courier-Journal in its Sunday edition.
Both will likely be among the recommendations of a special commission studying the state's pension problem, reports the C-J.
The final report is expected to be released Jan. 1, in time for the General Assembly session, where shoring up an estimated $18 billion shortfall in the retirement systems for 432,000 state employees, teachers and retirees likely will be a major priority.
If nothing is done to address the shortfall in the pension funds, they are expected to be broke by 2022 -- a scenario that would leave the state unable to issue pension checks to retirees and pay for their health care.
Commission members -- who represent government, employees and other related fields -- told The Courier-Journal they largely agree that a necessary first step is issuing bonds to replenish pension funds that for several years have received less funding than experts recommended, writes the newspaper.
The amount of bonds could be as little as $500 million and as much as $1.5 billion, said Personnel Cabinet Secretary Brian Crall, the commission chairman.
"We believe through bonding we can bring them up to full funding," said commission member Brent McKim, who represents the Kentucky Education Association.
The idea is to borrow money at a lower interest rate than would be expected once the money is invested by the retirement systems, the C-J reports.
Republican Senate President David Williams, of Burkesville, proposed issuing $800 million in pension bonds during the last session, but the House wanted more time to study the potential risks to the state's credit rating.
"I believe that it has cost us at least $100 million because they didn't do anything about it," Williams said of the House's inaction. "Our unfunded liability increased at least $80 million because we didn't go ahead and pass a bond."
But Williams' plan includes a controversial proposal to eliminate traditional pension plans for new hires and move toward a system that mirrors the 401(k) plans widely used by private businesses.
Crall told the Courier-Journal the proposal has not emerged as a recommendation for the commission's final report.
copyright: Louisville Courier-Journal