Bowen believes KRS and KTRS unfunded liability total is somewhere between $32 billion and $82 billion
02/27/2017 04:43 PM
FRANKFORT – Sen. Joe Bowen, co-chair of the Public Pension Oversight Board believes that the correct number of unfunded liability total for the Kentucky Retirement System (KRS) and the Kentucky Teachers Retirement System (KTRS) is between the original $32 billion dollar estimate and the $82 billion that Gov. Matt Bevin stated in his State of the Commonwealth Address.
Bowen said the reason for the difference of opinion is the fact the governor was tying the rate of return to a 30 year treasury note.
“Its yield is a lot less than what the assumption is at 6.75 percent, and then we’re going to see what the group that auditing the plans suggest, but it looks like 4.5 percent,” Bowen said.
Bowen says that a number of factors have contributed to the state’s public pension woes such as low rate of return, but one factor which is often overlooked is payroll growth.
“I think that’s what the biggest disappointment for those of us on the Public Pension Oversight Board is the fact that the actuary never suggested a change in the payroll growth,” Bowen said. “We didn’t provide for zero payroll growth and so that’s been as big a problem or as big a challenge as any of the other assumptions that we’ve had to deal with.”
Bowen acknowledges while he believes that the General Assembly has stopped the bleeding in regard to the pension crisis, but it’s something that the state will be dealing with long into the future.
“That’s simply because of the unfunded nature of it all,” Bowen said. “It is going to be with us for a long time because we can’t invest our way out and we don’t have the money to appropriate our way out.
“Moving forward, we are going to have accurate assumptions,” he continued. “So, we’ve stopped the digging, and that’s the main thing. If you’re going to fill up a hole, you’ve got to stop the digging. We’ve stopped the digging, now we’re going to have to incrementally fill up the hole.”
Bevin is seeking a special session on tax and pension reform to address the unfunded liability in the pension systems.
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