Solutions for the underfunding of Ky.’s public pension systems
We agree with Gov. Matt Bevin and his Republican colleagues that underfunding of Kentucky’s public pension systems is one of the most daunting challenges facing the state. Whatever the solution, it will involve billions of dollars and have a profound impact on tens of thousands of Kentucky families.
And that’s why it’s so important to pursue possible solutions with unbiased information, clear eyes, open minds and robust public discussion.
Instead, Bevin and Republican leadership engaged in a secretive process and are now gearing up to steamroll their “fix” through a compliant and confused General Assembly. Those who raise questions about the process, the proposal or the plan to rush it through a five-day special session are trying to “gin up fright and paranoia,” to avoid “shared sacrifice.” They are “fear mongers chicken littles,” using “Halloween scare tactics,” in an effort to “preserve the status quo.”
Despite their own over-the-top language, when the president of the Kentucky Education Association warned about problems retaining and recruiting qualified teachers under Bevin’s plan, her “rhetoric” was decried as doing more damage than anything in the plan.
But that’s the trouble: So few people, even among its defenders, really know what’s in the bill, said to run to 400 pages. On KET’s Kentucky Tonight, Rep. Jerry Miller, R-Louisville, admitted that even members of his party in the House had not seen a draft.
Even fewer seem to understand how it will affect state budgets in the short term, much less the long-term implications.
On that same Kentucky Tonight, Senate Majority Floor Leader Damon Thayer, R-Georgetown, said that without this — still unseen — legislation the state faces deep cuts to the biennial budget that will be passed next year.
But the truth is that without additional revenue the state will remain deeply under water on public retiree benefits regardless.
Here’s why: thousands of current retirees are owed benefits for the rest of their lives, and thousands more who will retire in the next several years are also covered by the existing plans. There isn’t enough money to pay those benefits. Worse, if new employees are transitioned away from the pension system into 401k-type savings plans, they will not be contributing to the pension funds and, worse again, with no new money coming in the plan will have to accept lower returns on more conservative investments to assure they have cash on hand to pay benefits.
Short version: the state will be on the hook for billions in pension payments in years to come no matter what.
At the same time, if this forthcoming legislation becomes law, the state will have to pay the costs of making the transitions to the new funds and, of course, it will have to ante up for the employer’s match for the individual savings accounts.
Anyone selling the story that passing this legislation, whatever it is, equals “problem solved” is either lying or deeply confused.
To divert attention from that sad fact, Republicans have developed a narrative that paints teachers and other public employees as greedy, unwilling to take a hit for the common good.
They are also ignoring the real possibility that court challenges to the changes could drag on for years and, if successful as they have been elsewhere, leave Kentucky much worse off than it is now. In his own head-buried-in-the-sand moment Miller declared, “we need to control our destiny, not worry about what a court might do.”
Easy for him to say but Standard & Poor’s, one of the agencies that rates Kentucky’s credit worthiness, was more concerned about the fallout if the state walks away from the “inviolable contract” that courts have ruled elsewhere prevent cutting pension benefits. If that happens, S& P wrote, “this may have negative implications as the state would need to make up those costs.”
More fear mongering?
Lexington Herald Leader