Kentucky is 'alone in a dreadful economic state of cash available,' head of retirees group says

09/16/2014 08:15 AM

In order for one of the most shakily funded pension plans in the country to survive it needs an infusion of cash, says a state retiree who has been following the state’s pension problems.

Jim Carroll, a former communications director for the states parks department, has kept a watchful eye on pension developments over the last two years. Along with his wife, Eva Smith-Carroll, who is also a retired state worker, Carroll keeps nearly 4,000 other retirees in the loop on pension related activities and politics on their Facebook page.

The KERS non-hazardous plan, which Carroll is a member, is among the most underfunded pension plans in the country with a 23 percent funding level. KERS only has $2.6 billion in assets to cover more than $11 billion in retirement commitments, and pays out $915 million a year to retirees.

“The immediate problem is simply the cash problem of KERS non-hazardous. Since 2008 this plan has lost half its value…it’s hemorrhaging every year it’s losing money and our concern is that it’s going to get to the point that a normal market downturn…could put us into insolvency,” Carroll said.

Carroll’s group has been mailing and calling legislators to ask them to better fund the system. In 2013, the legislature passed Senate Bill 2 which mandates the state pay the full required contribution into the system.

However, Carroll said the General Assembly’s employer contribution will make a difference in cash flow, but the law did not put in place a “catch up” provision for the more than a decade when the system was underfunded by the legislature — meaning they’re still well behind the curve.

Bonding, or borrowing the money, “could inject some money into the system and give it some cushion so that it could withstand the usual market variations until it’s on solid ground,” Carroll said.

“There aren’t any good answers to this,” Carroll said adding that the political will does not seem to be behind raising taxes to pay more into the system.

While all the solutions seem difficult, Carroll argues that there could be even more chaos if the fund goes belly up.

“I would say too the taxpayer insolvency would be economic chaos. If the fund runs out of money the state is going to have to scramble around to find assets somewhere to pay our benefits…and it would be absolutely a mad house,” Carroll said. (3:20)

Advocating for a solution to come from government, Carroll said his group has had informal discussions about litigation to possibly force action on the funding crisis.

“That’s a last resort. We want this to be a political solution in the general assembly with the support of the governor,” Carroll said. “No one benefits when you have a judge presiding over the decisions of the legislature.”

The Kentucky Retirement Systems board of trustees also has a fiduciary duty to make sure the system is adequately funded, and Carroll questioned if it would be in that groups best interest to follow up with lawmakers as well.

Watch the interview below to see what Carroll has to say about the lawsuit with Seven Counties and the role of his group in the 2015 governor’s race.


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