Public Pension Oversight Board makes recommendations
FRANKFORT — The Public Pension Oversight Board made recommendations to the General Assembly during its final meeting before the 2018 legislative session.
Staff members, led by Committee Staff Administrator Brad Gross, went over a 17-year history of Kentucky’s eight public pension plans, including the largest one, the Kentucky Employee Retirement System Non-Hazardous fund, which went from a funding level of 139.6 percent in 2000 to 13.6 percent funding in 2017. That led to a $1.9 billion surplus in 2000, to a $13.5 billion deficit in 2017.
Board co-chairman, Sen. Joe Bowen (R-Owensboro) said although many recommendations from the oversight board were adopted by lawmakers this year, there are others that need to be made to fully fund the systems over the long term and implement sustainable benefit plans for teachers, public employees and retirees.
“There are philosophical differences regarding how this should be accomplished,” he said. “And those philosophical differences find representation among the members of the Public Pension Oversight Board. Thus, the difficulty of making detailed pension legislation recommendations on the cusp of what is anticipated to be a 2018 regular session which will consider major pension reform proposals.”
The board adopted seven recommendations for draft legislation.
· A Teachers Retirement System “housekeeping bill,” similar to one that failed during the 2017 session, should be enacted.
· Eliminate the option for Legislators’ Retirement Plan participants to “spike” lawmakers’ pension from salary earned through other public employment.
· Measures that would provide additional funding to improve the financial health and cash flow facing the KERS non-hazardous and State Police Retirement System pension funds.
· Evaluate the findings and recommendations of the PFM Group, the state’s pension consulting firm, and adopt a sound financial approach to the systems, and evaluate the best way to allocate funds from the Kentucky Permanent Pension Fund among the eight systems.
· Provide full funding to the Teachers Retirement System, including a long-term method to pay the actuarially required contributions.
· The PPOB should continue to examine the fiduciary responsibilities and liabilities of pension board members and actuaries, to see if they are following federal requirements of private pension plans.
· The PPOB should examine effectiveness of the 2017 pension transparency legislation, to see if additional measures should be recommended.
Near the end of the meeting, the board heard from Glenn Riggs, a retired Frankfort firefighter who told the panel, “I don’t know how you can fix pensions, without addressing tax reform. There’s got to be a revenue stream, there’s got to be money to take care of retirements. If you don’t have a revenue stream, you can’t fix anything.”
Sen. Jimmy Higdon (R-Lebanon) told him the reason they aren’t tackling the two issues together is simple: “We simply don’t have the bandwidth. This pension reform has totally consumed us.”
Bowen told reporters after the meeting the Senate is ready to tackle the issue. “We think we have good, comprehensive language, that considers most of the requests made by those people who are going to be most impacted by the legislation.”
He said the draft bill has gone through several iterations since the PFM report. “And that’s because we have listened to the stakeholders and made the modifications. This process has been inclusive, contrary to what a lot of people say.”
Bowen said the Senate has been ready to go, but for the turmoil surrounding sexual harassment allegations involving members of the House. “There’s no question. That threw a monkey wrench in all of it. There’s no doubt about that.”
Kentucky ranks 50th of all the states in terms of unfunded liability to the eight public pension systems. The amount ranges from $33 billion to $84 billion, depending on whose figures are used.