by Allen J. Schuler, Retired Teacher
Finally, the other shoe has dropped. Since October, when the first pension “reform” proposal fell upon pensioners like a meat cleaver, we’ve been waiting for a new proposal. Late Tuesday, February 20, the state legislative leadership cabal that worked in secret for weeks on a new “reform” bill, came down from their mountain-top and gave unto us their stone tablets, their pathway to make teachers pay for the state’s inability to fund TRS adequately. Stone? Yep, stone. Legislative leadership insists there will be no changes to Senate Bill 1. They worked too long and too hard on their “data driven and … thoughtful to all the stakeholders” bill (per House Speaker Pro Tem David Osborne); they excreted too much sweat on the task for any lawmakers, especially those who had no access to or input in the construction of it, to be allowed to amendment it. The bill is, the lords of the legislature have decreed, take it or leave it. According to Sen. Joe Bowen, its sponsor, “Lawmakers aren’t going to accept changes to the bill even if people do raise objections” (Lexington Herald Leader, February 22).
SB 1 is so wonderful, says Bowen (who’s not running for re-election), “I can’t imagine there will be a lot of pushback on this.” Hmm. Respectfully, sir, what we have here is a failure of imagination.
Shouldn’t teachers be grateful, though? After all, didn’t the Governor’s budget propose fully funding the TRS ARC this time? Why, yes, it did. Thank you very much. But—there’s always a “but”—guess who’s paying for that full funding? If you guessed, “Teachers!” then you’re correct. You know, it’s difficult to be grateful for receiving money we were owed when we’re the ones paying for it. How? By our representatives taking money out of our pockets. Yes, indeed, that’s the plan: take from us in order to “give” to us. This slight-of-hand maneuver would be interesting, in an abstract way, if the situation didn’t involve denying us millions of our own dollars. So, here we are: our GOP lawmaking leaders—our “we refuse to kick the can down the road any longer on pension reform” leaders—find that while they can continue to kick the can on tax reform down the road, they apparently have no problem kicking and taxing teachers. Yes, teachers, what our legislators have concocted in SB 1, boiled down to its essence, is a way to impose a TAX on teachers.
Naturally, there are a lot of moving parts in SB 1’s 289 pages (which, to be fair, is considerably shorter than the Governor’s October proposal). The complete bill deals with every state retirement plan: the Judicial/Legislative, the state workers, and TRS. The TRS section alone covers return-to-work policies, sick leave changes, high-three years considerations, cash hybrid plans, health insurance and more. Read the entire bill at http://www.lrc.ky.gov or read a six-page summary of its major points here.
Have fun.
For now, though, let’s look briefly at two of the bill’s major “teacher tax” areas, the COLA cut and the broken promise for under-65 retiree health insurance. SB 1 proposes cutting teacher retirees’ pre-funded (as in, we paid for it) 1.5 percent COLA to 0.75 percent for twelve years. Supposedly. That twelve-year time frame is slightly disingenuous, for unless TRS achieves 90 percent funding within that time, then the withholding period could be longer … as in never to return. Yes, it’s easy to think, “Aw, 0.75 percent is not that much; that’ll be okay.” No. It won’t “be okay.” A quick look at a COLA calculator (see http://teachfrankfort.org/cola ) illustrates what we’re being required to give up. Consider this: the average TRS pension runs roughly $36,000 a year. When compound interest is calculated over twelve years, that .75 percent COLA cut adds up to $73,000. That’s your money. Gone. Or, put another way, in twelve years all retired teachers will forego TWO YEARS worth of income by losing their 1.5 percent COLA, for which they paid and is in statute (see KRS 161.620[2]. And, yes, the 1.5 percent COLA is part of the inviolable contract. See KRS 161.714. Think there might be a law suit?). Two years of income. Feeling taxed yet? Does anyone still believe 0.75 percent is an insignificant figure?
Here’s a further kicker: remember that PFM audit? The one Kentucky taxpayers spent $1.1M on in order to tell the Governor what he wanted to hear (hey, the report said so). According to their second report, which doled out “blame” for our pension crisis, the TRS COLA contributed 0 percent — that’s ZERO — to the state’s unfunded pension liability. Why zero? Say it with me: Because it was PRE-FUNDED. With our own dollars. (For some reason, a TTC statute, “Thou shalt not steal,” comes to mind).
And, there are other “teacher taxes.” Consider the under-65 health care insurance cost. This topic’s a little tricky because the damage comes at retirees from two ways, through SB 1 and via the state’s budget. Remember that in the Governor’s original pension “reform” plan, the idea was to add another 3 percent to what active teachers already pay to pre-fund their retiree health care. Not surprisingly, people weren’t happy with that proposal. Well, an add-on is back, only this time at 1 percent. According to SB 1, the TRS board is to increase the employee contribution to retiree health care by up to 1 percent IF the retiree health care fund “falls below 25 percent funded.” Sounds good; right now, thanks to HB 540’s Shared Responsibility (2010), the pre-funding of teacher retiree health care is a little over 26 percent. The fund is well on its way to being fully funded before twenty years, the original target date. But … and this is a big BUT: the Governor’s budget proposal calls for eliminating the state’s share of “Shared Responsibility,” choosing instead to disregard a law unanimously voted for by both the Senate and the House in 2010. Well, what’s a little law for the folks who make the laws, eh? If enacted, that budget cut will cost under-65 retirees an additional $6,000 to $8,000 a year. For single coverage. A family plan will be thousands more. Feeling taxed yet?
Here’s another kicker (our representatives like talking about kicking things): if legislators do not reject the Governor’s “ditch the state’s share” of Shared Responsibility in this biennial budget, then TRS’s pre-funding of retirees’ health care insurance will fall below 25 percent and, guess what? Active teachers will find a 1 percent increase — or pay cut—in what they contribute to their under-65 health care. Of course, once SB 1 takes effect, teachers probably won’t be able to afford retirement before age 65 anyway.
SB 1 not only damages current retirees, but also contains plenty of provisions taxing to active teachers and newly hired ones. (Will there be any “new hires” if this bill passes?). SB 1 is, flat-out, an “a-tax” on teachers. Period. While it’s not the meat cleaver the original October “reform” proposal was, this bill instead is a fillet knife slicing our retirement pensions. As for Sen. Bowen’s thought that there shouldn’t be a “lot of pushback.” He’s wrong. There should be, and needs to be, a lot of “pushback.” Simply put, any representative who votes for this punitive bill should be voted against when he or she is next on the ballot.