FRANKFORT, Ky. (AP) - State government would borrow more than $800 million to finance a plan key lawmakers say would keep the pension systems for teachers and government employees from eventual financial collapse, under a plan the Senate approved Tuesday.
State government would finance the plan to keep the state pension system from financial collapse by selling bonds, which would be repaid over the next 20 years, said Senate President David Williams, R-Burkesville.
The Senate approved the plan on a 35-2 vote, sending it to the House for consideration.
If the bond issue were approved, the state would have to pay about $60 million per year over the next 20 years, Williams said.
A key component of the proposal, Williams said, was a plan to alter pension benefits for future employees. Current retirees' and employees' pension benefits would not change, under the proposal. However, employees hired after the proposal took effect would have a different retirement plan.
Currently, state employees are allowed to retire with full benefits after 27 years with no age limit. If the proposal were enacted, employees would need to be at least 55 years old and work an extra five years before they could retire with full benefits.
House Speaker Jody Richards, D-Bowling Green, said he was "cautious" about the proposal and wanted to make sure existing employees and retirees would not be hurt by the proposal. Richards said he might be open to the bond sale to help out the retirement systems, but wasn't sure about changing benefits.
Gov. Ernie Fletcher said similar plans elsewhere have been effective, and his staff was reviewing the proposal.
The retirement system for state employees currently has about $12 billion in unfunded liabilities over the next 30 years, while the plan for county and municipal employees is facing about $7 billion in unfunded liabilities.
Sen. Ernesto Scorsone, D-Lexington, said he voted against the bill because he had not had enough time to review the proposal. The state found itself in this situation after years of passing budgets that most lawmakers had little input in crafting, Scorsone said.
"It may very well be the best thing since sliced bread but the trust factor is just not there," Scorsone said.
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