HIGDON PROPOSES BILL TO FURTHER STABILIZE AND STANDARDIZE BENEFITS IN THE KENTUCKY TEACHER RETIREMENT SYSTEM
Senate Bill 9 prioritizes school district maternity leave
FRANKFORT, KY (Feb. 18, 2025)—Sen. Jimmy Higdon, R-Lebanon, co-chair of the Public Pension Oversight Board (PPOB), has introduced Senate Bill (SB) 9 to address rising costs within the Kentucky Teachers’ Retirement System (TRS), standardize benefits among districts and administrators and teachers while ensuring greater transparency in how sick leave impacts pension liabilities.
Under current law, Kentucky school districts must provide teachers with at least 10 days of sick leave annually, though some districts offer more. At retirement, teachers are compensated for 30 percent of the value of their unused sick leave, which is factored into their final average salary and increases pension benefits. TRS then bills the state for the cost. Administrators hired before July 1, 2008, can accumulate up to 60 days of annual leave, to be paid out at retirement. Administrators, however, are paid at 100 percent of value for their unused annual leave days at retirement.
A review of the program by PPOB has revealed growing expenses beyond initial projections.
The state's costs for the sick leave program have more than doubled from previously reported figures and prompted additional general fund appropriations to address the liability. Since 2017, these costs have been covered through the Actuarially Determined Employer Contribution (ADEC). However, TRS had not previously disclosed that they were included within the system’s unfunded liability.
Some districts allow personal and emergency leave to be rolled into sick leave, which increases retirement payouts. A review found that 177 districts/co-ops provide personal days, with 166 allowing unused personal days to be added to sick leave at the end of the year. Eighty-five districts/co-ops provide emergency leave, and 19 allow those days to roll over. There is no consistency between school districts. SB 9 makes every district eligible for 10 sick days and two personal days for a total of twelve. School districts may continue to award additional days and pay that share of the actuarial contribution.
Administrators hired before July 1, 2008, are eligible to be compensated for up to 60 days of accrued leave, which adds to overall pension costs at a disproportionate disadvantage compared to teachers. Administrators will also be capped at 10 sick days and two personal days, a total of 12 per year.
In recent years, through the work of PPOB, Higdon and fellow members received confirmation from the TRS actuary that the liability for the sick leave program was around $800 million—more than double what was previously reported to the legislature. In fiscal year 2022, the Kentucky General Assembly paid off nearly $480 million in costs primarily attributable to the TRS sick leave program. The remaining balance is being covered over time through the overall annual contributions to TRS in the state budget. Lawmakers have provided TRS a combined $6.3 billion from the general fund above the statutorily required contribution amount since 2017.
Despite continuous record funding prioritized by the Kentucky General Assembly for TRS, including $1.2 billion in fiscal year 2024 alone, the unfunded liability has only improved marginally. Required state contributions are expected to surpass $2 billion by 2035, and the employer contribution to TRS is expected to max out at $2.6 million in 2043.
SB 9 is not retroactive and does not take away any previously earned benefits. The bill preserves all sick leave accrued before June 30, 2025, and ensures those amounts remain covered by the state. Moving forward, it caps the amount of sick leave factored into retirement calculations at 12 days total per year. Districts may still offer more sick leave if they choose, but they—not the state—will be responsible for covering the additional associated pension costs. Administrators are also capped at 12 days total under SB 9. Ten days are for sick days and the other two are personal days.
The measure would increase accountability by establishing standard sick leave reporting requirements and directing TRS to disclose these costs in its annual actuarial valuation. Additionally, the state auditor of public accounts would be required to audit school district sick leave policies, including how leave balances are accumulated and paid out at retirement.
SB 9 also includes a provision requiring all school districts to allow 30 days of maternity leave per year by 2030. Kentucky law does not currently provide for maternity leave, and teachers must rely on using sick or other forms of leave.
SB 9 is now awaiting committee assignment in the Senate.
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Sen. Jimmy Higdon, R-Lebanon, represents the 14th Senate District, including LaRue, Marion, Nelson, Spencer, and Washington Counties. Higdon serves as chair of the Senate Transportation Committee, overseeing efforts to craft biennial road plans, advance Kentucky’s transportation infrastructure, and improve public safety. He also serves as Senate co-chair of the Public Pension Oversight Board, focusing on stabilizing and strengthening Kentucky’s pension systems through reform and surplus investment. Additionally, Higdon is a member of the Senate Committees on Education; Veterans, Military Affairs, and Public Protection; and Licensing and Occupations. During the 2024 interim, he served as a Kentucky Housing Task Force member.
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