Novel solution for pension crisis
Published 11:05 am Tuesday, May 1, 2018
Local governments learned this past week they got some relief on their obligations to pay for the state’s unfunded pension obligation.
This is viewed by most in the short-term as good news, but it is only good news when accepting this is all a fruitless exercise in delaying misery. Truth be told, Kentuckians on both sides of the political spectrum should have a very sour outlook for theCommonwealth’s future until this critically important issue of the unfunded pension liability is actually addressed in a meaningful, bipartisan way. The governor and General Assembly botched this issue, letting an important moment get past them when they had a chance to do something truly consequential. What was done by the General Assembly was a Band-Aid. There was no long-term, concrete plan put in place that defines exactly how this ominous, devastating pension obligation will be resolved in exact terms and over what time frame. Instead, what we got was avoidance, anger and ideology.
To be clear there were some steps taken. The state faces roughly $40-something billion in unfunded obligations and a sizable chunk, but certainly not all of it — roughly half — is for education-related pension plans. With teacher protests consuming the Capitol almost all of the public debate focused on this part of the liability, and one of the most controversial moves was the General Assembly’s approval to give itself the ability to amend retirement plans for future teachers. This is in our view opening the door for getting out of “inviolable” contract, which basically states these benefits are set in stone under the law. Translation — when the crisis gets worse we have the ability to go back on what we promised. Hardly reassuring. Other changes were made for teachers including putting new hires into a hybrid cash balance plan and limiting the number of sick days that can be allocated to retirement. By most accounts the steps taken address $300 million of a $45 billion problem.
One of the greatest challenges to overcoming this pension crisis is its mind-boggling, absurd complexity. There are multiple plans, with multiple layers, and multiple, for lack of a better term, tricks embedded in the systems that enhance benefits. The folks who designed this system over time should throw a party with the same people who designed the state’s ridiculously complex tax code. They would get along well.
Meanwhile, we challenge you, the everyday taxpayer, to try and sort through this mess on your own. See if you can understand it. See if you can begin to understand what the legislators just did. The fact of the matter is only those immersed in this issue and who are experts in pensions, retirement, advanced accounting, etc. can decipher it, leaving the rest of us with facts and tidbits presented by people, certain media organizations and interested parties to convey information through their own ideology-driven prisms.
Call us simpletons, but we would like to offer some novel suggestions for a solution: Through bipartisan leadership bring everyone to the table. Come up with a hard number that will cover all promised obligations for our current public employees. Then come up with a new, simple compensation system for the future that looks out for our public employees and which offers defined benefits for retirement.
Identify in specific terms the total amount it will cost for all of it. Then raise taxes and cut government expenditures to make the number.
Call us crazy, but we think this is the way to handle it, and we think the taxpayer would accept it.
The Daily Independent of Ashland