Kentucky pension law a ‘negative’ for credit rating
Moody’s finds costs are pushed
FRANKFORT, Ky. – Kentucky’s new pension law looms as a “negative” for the state’s credit rating, according to a credit rating agency’s report.
Gov. Matt Bevin, who urged lawmakers to enact the law, said Monday he wasn’t surprised by the Moody’s report, saying it backs up his claims that considerably more work is needed to shore up public pensions.
Critics of the new law pounced on the report. They said it reinforces their arguments that the measure was flawed.
It passed during a special legislative session that the Republican governor convened last month. It cleared the Gop-dominated legislature over objections from Democrats, who offered alternatives.
Moody’s said in a news release Monday that the new law is “credit negative” for the state. The assessment was given, it said, because the law “pushes pension costs into the future and raises the likelihood Kentucky will take responsibility for a greater share of the Kentucky Employees Retirement System’s unfunded liabilities.”
Kentucky has one of the country’s worst-funded pension systems. The law is aimed at regional universities and dozens of community social services agencies that faced massive increases in pension costs. It allows affected agencies to decide next year whether to stay in the state’s retirement system and face a big increase in contribution rates or agree to leave. It spared the agencies from the spike in pension costs by freezing rates at the much lower amounts for another year.
Moody’s said the “credit negative” assessment doesn’t signal a rating outlook change for Kentucky’s credit rating.
Bevin said he wasn’t surprised by the conclusion. The new law’s critics said the Moody’s determination underscored the flaws with the measure.
“The bill was designed to address an employerfunding issue without providing more funding,” said Jim Carroll, president of Kentucky Government Retirees, an advocacy group for thousands of retirees and active employees. “So the inevitable result was simply a shift in liabilities from quasi-employers to the state budget.”