Pension plan "in far worse shape than people realize," Sen. McDaniel says

10/20/2016 12:14 PM

FRANKFORT — Even after substantial reforms to the state pension systems Republicans and Democrats in the state Capitol have serious concerns about the state of the retirement system.

Senate Budget Chairman Chris McDaniel, R-Taylor Mill, says the “biggest thing” lawmakers need to do is “be honest with ourselves” about the state of the Kentucky Retirement Systems.

“The fact of the matter is some of the underlying assumptions inside of this pension system are just not holding true,” McDaniel said, pointing to assumptions on returns and payroll growth.

The Taylor Mill lawmaker said the KERS non-hazardous pension plan “is in far worse shape than people realize.”

At the same time assumptions are not panning out a Northern Kentucky judge has upheld a ruling clearing the way for the city of Fort Wright to sue the pension systems.

“It’s unfortunate that we’ve gotten to this place with the system,” McDaniel said “…The fact of the matter is going to hold out that there have been a lot of questionable decisions that was nothing more than a bunch of political appointees who had no business being in those positions.”

“Frankly, every decision over there is suspect and has been for a long time.”

McDaniel lauded Gov. Matt Bevin’s moves to “clean up the mess” by reforming the pension board of trustees. The Northern Kentucky lawmaker also predicted that this type of lawsuit is “likely not last thing like that the state will see.”

The two-year state spending plan earmarks more money for the pension systems, but McDaniel said the state will not be able to pay off $31.2 billion in unfunded pension liabilities over the next 30-years.

“The problem is even over the next three decades we’re not going to be able to fully erase this unfunded liability, and frankly that’s too long to continue to wait on this solution,” he said.

McDaniel is hopeful an outside audit of the pension systems will set a path to correct poor investment performance and other short comings. The Taylor Mill Republican is also calling for transparency reforms to legislative pensions and is expressing a willingness to move the funded legislative pension system into the KERS non-hazardous plan.

“Should we close that plan and move all legislators over to KERS non-hazardous? I absolutely think we should,” he said, questioning if other lawmakers would be willing to move in that direction during the legislative session.

McDaniel already participates in the KERS pension plan.


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