BRADENTON, Fla. - The Kentucky General Assembly ended its session March 25 without passing a major funding bill for the Teachers' Retirement System.
The move could potentially imperil the Bluegrass state's credit rating; in January, Standard & Poor's warned that state's AA-minus issuer credit rating could be downgraded absent action in this year's legislative session to address pension reform and funding.
Lawmakers, who adjourned before 4 a.m., took no action on House Bill 4, a measure that originally provided additional funding for the state's annual required contribution and pension obligation bonds to chip away at KTRS' $14 billion in unfunded liabilities.
While the House approved those funding sources, the Senate stripped away the bonding authority. The impasse resulted in the appointment of a conference committee that did not reach agreement before the session officially ended.
"I am disappointed," KTRS general counsel Robert "Beau" Barnes said Wednesday, when asked how he felt about inaction on HB 4. "I am not aware of other ARC funding elsewhere [in the budget]."
The state budget does include a portion of ARC funding, though it is not based on an actuarial amount. By law, Kentucky is required to contribute a fixed rate of 13.1% each year based on teachers' payroll. The state has not contributed additional funding above the fixed rate since 2009.
Barnes said the additional amount necessary to adequately fund the ARC in fiscal 2017 is now projected to be $510 million.
"I don't know where these dollars can be found given current revenue streams, unless they issue a bond," he said.
Gov. Steve Beshear signed a bill on March 20 placing oversight for KTRS with the Public Pension Oversight Board. The legislative panel oversees all of the state's retirement plans, reporting to the General Assembly on each plan's benefits, administration, investments, funding, regulations, and legislation.