State employees organizations tell Public Pension Oversight to live up to their obligation to retired state workers

06/26/2017 07:32 PM

FRANKFORT – Members of the Pension Oversight Board heard from many interest groups on Monday who have state pensions about pension reform and the message was clear: take the necessary steps to give what was promised to the states employees.

Larry Totten, State President of the Kentucky Public Retirees had a suggestion which would require legislative intervention in changing the funding mechanism from the current level-percent-of-payroll amortization to a level dollar amortization plan.

“Whatever reform plan is adopted, it must include guaranteed, consistent baseline funding of the full ARC plus significant dedicated revenues applied to the unfunded liabilities,” Totten said.

Totten also warned members of the committee about some current debate related to a potential shift to traditional 401(k) accounts becoming the primary retirement savings instrument provided for new state employees, saying that the ramifications of such a move could create even more issues with the current pension crisis in terms of cash available.

“If new employee retirement contributions are put into their own personal accounts, these funds are no longer part of the employee contributions going into KRS,” Totten said. “Over time, this would become an increasingly large hole in the funding stream for the current retirement plans.”

Sen. Chris McDaniel, R-Taylor Mill, questioned Kentucky Government Retirees President Jim Carroll and Totten about what they would do if they were making the decision to fix Kentucky’s pension difficulties.

“These are the choices that we are going to have,” McDaniel said. “Raise taxes, and it’s going to be about a 10 percent tax increase for all Kentuckians, or cut all other areas of government about 12 percent, that includes the SEEK formula, higher education, justice, everything. Those are really the options in front of us. If you had to sit in our seats, would you choose to raise taxes or cut government?”

The Kentucky Retired Teachers Association includes over 30,000 retired educators, and President Romanza Johnson suggested to committee members that they stay the course in the funding of teachers pensions and refrain from making the mistake to
switch teachers from pensions to 401(k) type accounts because it would increases costs to taxpayers, undermine economic security in retirement and could potentially harm education by causing many teachers to leave the profession.

“I like to think of pensions like a home mortgage,” Johnson said. “You have to keep up with your payments. And if you don’t, you can’t just switch to another house. Switching doesn’t eliminate missed payments or underfunding – it just creates more costs and confusion.”

Others organizations who testified included the Kentucky Association of Transportation Engineers, Kentucky Firefighter’s Association, Kentucky Fraternal Order of Police, Kentucky Education Association, Kentucky Association of School Superintendents, Kentucky Association of Counties and the Kentucky League of Cities, as well as University Employers and the Kentucky Chamber of Commerce, and their messages were all similar, do not cut our pensions.

The next meeting is scheduled for July 31.


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