Members of the General Assembly are getting an earful from the 8,554 retired teachers younger than 65 whose health insurance costs could quadruple under Gov. Matt Bevin’s two-year budget proposal, which would end the $145 million state subsidy that keeps their coverage affordable.
“I’m overwhelmed with emails requesting that we do not support the executive branch budget as presented,” an exasperated state Sen. Joe Bowen, R-Owensboro, told his colleagues at a recent meeting of the Public Pension Oversight Board in Frankfort.
Carla Breeding is among those protesting. Breeding was a teacher, principal and administrator in Hardin County schools for 27 years before she retired last August at age 55.
A decade shy of Medicare eligibility, she pays $260 a month for coverage for herself and two teen daughters from the Kentucky Employees’ Health Plan. Without the state subsidy, she would be on the hook for $978 a month, she said.
“When I first heard about this, I completely freaked out and I started crying,” Breeding said.
“It came as a total surprise,” she said. “I try to be politically aware. I follow the news. I know there’s been a lot of talk about our pensions. But I had no idea that our health insurance plan was even on the table. I’m hoping, hoping, hoping that this won’t happen, because I just don’t know how my family could afford it.”
The budget plan that Bevin presented to lawmakers a few weeks ago included more than $3.3 billion for pension contributions for teachers and state workers — every dollar that was requested — reflecting the high priority that Bevin has placed on shoring up the state’s ailing pension systems.
But without raising any additional revenue, larger pension contributions would force cuts across the rest of state government, including elimination of the insurance subsidy for teachers younger than 65 who have retired since July 2010. (At age 65, retired teachers enroll in Medicare and are no longer eligible for the state employee health plan.)
That could cost as much as an extra $500 a month for a single retiree drawing a monthly $3,000 pension, according to the Kentucky Retired Teachers Association. For a retiree on a “parent plus” coverage plan, it could cost more than $800 a month, the group estimated.
“This is beyond devastating for a retired teacher on a fixed income, putting the financial livelihood of thousands of retired teachers in real jeopardy if this budget is enacted,” KRTA president Tim Abrams said.
The state began paying the subsidy for retired teachers younger than 65 as part of the “shared responsibility” plan that then-Gov. Steve Beshear signed into law with House Bill 540 in 2010. The plan requires larger contributions for active and retired teachers’ insurance from the state, school districts and the teachers themselves to make up for a long history of underfunding.
At the same Frankfort meeting where Bowen reported getting a lot of unhappy email from retired teachers, state budget director John Chilton was asked why the Bevin administration had targeted the retirees’ health insurance.
We needed the money to balance the budget, Chilton candidly replied. And because the “inviolable contract” that protects teachers’ pension benefits doesn’t shield their insurance benefits, we could take it, he said.
“There was just not enough funding to satisfy all of the needs and desires that people might project into the budget,” Chilton said. “And we know (insurance) is not subject to the inviolable contract. So funding was reduced to zero.”
Some Republicans on the Public Pension Oversight Board seemed satisfied with that response. They asked Beau Barnes, the general counsel for the Teachers’ Retirement System of Kentucky, whether the agency was explaining to active and retired teachers across the state that their health insurance is not legally protected.
“We are all of us getting a lot of emails right now stating, ‘It’s a promise!’” state Rep. Jerry Miller, R-Louisville, told Barnes during the meeting.
“What has TRS done to communicate what exactly is and is not in the inviolable contract?” Miller asked Barnes. “Because the emails that I am seeing, they have the impression that health care is in the inviolable contract. Or at least, that’s their perception. Has there been anything to educate teachers on that fact?”
Barnes replied that TRS regularly explains to its members that medical insurance is not covered by the inviolable contract, although he’s sure that some teachers mistakenly think that it is.
State Rep. James Kay, D-Versailles, told his colleagues that they might be missing the point. Retired teachers won’t be any happier about the state yanking its insurance subsidy out from under them just because it’s legally allowed to.
“Taking this approach that all you get is what is given you in the inviolable contract takes away from the reality of what these teachers do every day in the classroom,” Kay said.
“If this budget is only going to be what we legally have to do for you and no more, then we’re not going to invest and we’re not going to make any additional effort to help the professions that this state runs, both teachers and state employees,” Kay said.