Legislators' Great Pension Bonanza

When labor unions tried to organize state government workers in 2001, thousands of state employees resisted on the grounds they didn’t need to be paying union dues because their salaries and fringe benefits were already the “best in the nation, second to none,” the leader of a state employee organization told The Kentucky Gazette.

That’s borne out in part by a survey conducted by a secretary of the Personnel Cabinet during the Fletcher administration, which found that state employees are paid better, on average, than employees in the private sector in 117 of Kentucky’s 120 counties.

The state and local government retirement systems as of June 30, 2008, had a $29.7-billion unfunded liability, which must be paid. The Kentucky Constitution requires it: public employees have an inviolable contract with their government employer, which means retirement benefits in place on the first day of employment cannot be reduced and must be paid. The choice: raise taxes or crowd out other services, such as education.

The legislature last year reduced the retirement benefits for new hires in state government, but it enacted no provision to avoid benefit-creep. Within two or three decades, if not sooner, legislators will have gradually added enough new retirement benefits to bring the systems back to today’s crisis. You can almost count on it, because a majority of legislators love public employee pensions — especially their own.

Members of the General Assembly created a retirement system for themselves in 1980. At their very next chance, in the 1982 session, they made their pensions richer by giving every legislator who had served more than four years a 5 percent “service credit rating,” instead of the 3.5 percent in the original plan. The SCR is one of three factors used to calculate the size of a pension check.

That action became widely known as the “greed bill.”

Then, starting in 1998, legislators who had “maxed out” on their General Assembly retirement plan, and who continued to serve in the legislature, began drawing a second pension, this time in the state employees’ retirement system, KERS.

Eight lawmakers have reached the “max” on their legislative pension, and seven of them have a second pension: Sens. Walter Blevins and David Boswell; and Reps. Tom Burch, Danny Ford, Jody Richards, Tom Riner and Greg Stumbo.

The eighth legislator, Rep. Harry Moberly, had a second pension at KERS, but he dropped that plan so he could enroll in the Kentucky Teachers’ Retirement System — not as a legislator — but as an Eastern Kentucky University employee.

This means Moberly’s legislative pension will be based on his university salary, not his legislative pay. As a result, his legislative pension from serving part-time as a member of the General Assembly for 25 years will be at least $168,000 a year, a lifetime increase of around $2.4 million.

His case is an example of how legislators enriched their pensions through a little-known law they passed in 2005 without any public hearings, in seemingly a planned maneuver to take advantage of the confusion during the mad rush of bills in the closing days of the session.

The main element of the bill allows legislators to base their legislative pensions on the average of their highest three years of taxable income in local or state government jobs after (or before) their legislative service.

Other examples

• House Speaker Greg Stumbo’s four years as attorney general boosts his legislative pension about $1.1 million
• Sen. David Boswell’s four years as commissioner of agriculture boosts his legislative pension about $700,000
• Former Rep. Joe Barrows' Homeland Security job, which he started last month, will boost his legislative pension about $850,000
• Former Rep. J.R. Gray’s $136,000-a-year job as secretary of the Labor Cabinet boast’s his legislative pension about $1.8 million — all for working three years.

The above examples are payouts based on a life expectancy table and on an assumption the legislator has not previously started his legislative pension.

The 2005 “reciprocity bill” enriches legislators so much it makes the 1982 “greed bill” pale in comparison. And it handed the office of the governor a new tool that he and all future governors can use to sway legislators on votes and even to resign their seats, as former Sen. Charlie Borders did last month.

In short, the bill has changed the dynamic of legislative politics — and lobbying. Recently, a source told me, “A lot of legislators have asked the governor for jobs.”