Analysis of proposed pension reform at KTRS shouldn't "be surprising to anybody that understands how these proposals work," head of KCEP says

11/17/2017 03:06 PM

As the calendar draws closer to the end of the year, policymakers are still cobbling together a pension reform proposal ahead of a possible special session before lawmakers return to Frankfort in 2018 to write a two-year spending plan.

Last week, the Kentucky Teachers Retirement System released an actuarial report that showed the state would need to funnel an additional $4.4 billion into the pension system if the reform proposal is passed as written and that the system would be 71 percent funded with a $11 billion unfunded liability after 20 years.

Without the proposed reforms and full pension contributions, actuaries with Cavanaugh McDonald predict that KTRS would be 80 percent funded with a $9.6 billion unfunded liability in that timeframe.

Gov. Matt Bevin’s administration has asked for a re-evaluation by the actuaries, saying they should have looked at the 30-year impact of possible reforms and that they used faulty assumptions, but Kentucky Center for Economic Policy Executive Director Jason Bailey says the report’s findings shouldn’t “be surprising to anybody that understands how these proposals work.”

“There’ve been actuaries all throughout the country that have looked at this idea of closed defined-benefit plans and moving to defined-contribution plans and … some of the other changes that are in what is proposed, and they found very similar conclusions to what the actuary in Kentucky found,” Bailey said in an interview Friday. “It’s more expensive to pay off the unfunded liability in a closed plan, and that’s what the actuary found.”

Bailey has been among the critics of the plan to move new government workers into 401(k )-style plans and cut defined-benefit pension accruals at 27 years of service.

He said he would like to see a greater emphasis on revenue and how the state plans to pay down pension debt in pension reform talks.

“A lot of the low-hanging fruit, as far as the benefits themselves, is already gone,” Bailey said, referencing past pension reform efforts in 2008 and 2013. “So it’s not really a pension problem anymore. It’s more of a revenue problem. These liabilities are liabilities from the past where we underfunded those plans, and we need to find the revenue to pay them down over time while also affording the other things we need.”

Hear Bailey’s thoughts on pension reform efforts, actuarial analyses and the prospects of a special session in the interview below:

3 Comments

Comments

  • Dee W. wrote on November 18, 2017 11:17 AM :

    Democrats over decades create a mess with increasing benefits they weren’t paying for and now we need “more revenue” after the money for the pensions was being stolen year after year after year. There was no anger, no rallies, no “pensions are a promise!” slogans from the teacher’s unions over the course of those decades of stealing the pension funds and causing them to become insolvent. But now that it comes time to pay the piper – they protest and blame Republicans for the mess they themselves helped create by their silence because the “right party” was in charge then and the “wrong party” is in charge now and they believe it can be used for political capital to put those who created the mess to begin with back in power.

  • Alex C. wrote on November 18, 2017 02:54 PM :

    Actually, the years of underfunding of public pensions started when Republicans controlled the state Senate, and Ernie Fletcher was in the Governor’s Office. The underfunding continued for several years after Fletcher, but it was always a bi-partisan theft that had the agreement of the House and Senate.

    Dee and other GOP Tea Partiers conveniently forget their role in using pension money for other purposes because they wanted to give away tax money to businesses that support GOP campaigns. After the giveaways,there wasn’t enough left to pay for all the courthouses Justice Lambert and the Republicans wanted to build, so they stole the money from the pension funds.

  • JoeB wrote on November 19, 2017 04:59 PM :

    Amen Alex.There is lots more truth in the statements you added as opposed to those added by Dee W. By the way Dee any benefits added had to be approved by the legislature so it was truly a bipartisan effort to about break KRS and KTRS.Alex was also right when he said Republicans controlled the Senate for years and they have derailed much proposed legislation that would have help solve Kys lack of revenue problems.I am a Republican and as far as Bevin is concerned the sooner he is gone the better.He claims to be an expert on pensions but in 2015 when he was running for office the man had no clue what the “arc” was.

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