Commentary

Kentucky’s pension conversation has reached height of absurdity

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Kentucky’s never-ending saga of pension reform has reached the height of absurdity.

 

Anyone trying to understand Senate Bill 1, sponsored by Owensboro Republican Sen. Joe Bowen, merely by listening to the rhetoric from Kentucky labor unions would walk away with zero understanding of the bill’s contents or the larger issues at hand.

 

By only listening to the rhetoric you would have no idea that Kentucky had a pension crisis at all. You would have no idea that a study by S&P last year found that Kentucky had the worst funded pension system in America at under 37.4 percent, barely above half the national average. You would have no idea that the plan with the worst funding, the Kentucky Employees Retirement System for non-hazardous employees, is only 17 percent funded and could completely run out of money by 2024.

 

You would know nothing of how recent budgets have attempted to make up ground after nearly two decades of malfeasance. You wouldn’t know that in 2014, Pew found that Kentucky was falling behind faster than any state in America at funding its pension system or that before 2016, the state had failed to fully pay its pension liability 15 out of 22 years. You wouldn’t know that since Matt Bevin took over as governor, the percentage of funding dedicated the Kentucky Teacher Retirement System in the budget has more than doubled, from only 45.6 percent of the request funded in fiscal year 2015, to 93 percent in fiscal year 2017. You wouldn’t know that this year’s budget will provide for 100 percent of the annual contribution required.

 

You certainly wouldn’t know that even if there was proper funding over the previous 20 years, there would still be a crisis. If you only listened to the rhetoric, you would know nothing of the disastrous structural issues that have left taxpayers footing the bill for a broken system.

 

Just two short decades ago almost every one of Kentucky’s pension categories were fully funded. Some elected officials saw it as an opportunity to hand out political favors adding on benefits that had never been paid for, that took valuable money out of the system, and compounded the negative cash flow draining the systems.

 

Even aside from these questionable handouts, this alone fails to illustrate how broken the structure is. Nothing illustrates it better than the system for non-hazardous county employees. Their system is required, by law, to pay its full funding contribution every year. In 2005, it was 94 percent funded. Today, it is 59 percent funded. You may have heard “find funding first,” but you probably didn’t know that underfunding only accounted for 15 percent of Kentucky’s pension liability and that even for categories that were fully funded in the first place, the system failed. 

 

If you only listened to the rhetoric, you undoubtedly wouldn’t know that Kentucky provides some of the best pay and benefits in our region for teachers. According to the National Education Association, average teacher pay in Kentucky in 2016 was $52,134, ranking higher than neighboring Virginia, Indiana, Tennessee, Missouri and West Virginia. You wouldn't know that the average salary of a teacher in Kentucky is nearly 10 percent higher than the state’s average income for a household, or that the average pay increase for a Kentucky teacher from 2015 to 2016 was 1.9 percent, the 13th-highest increase in the country. You wouldn’t know that Kentucky is the only state where a teacher can retire and begin drawing retirement income in their 40s and that many of our neighboring states don’t allow a teacher to draw from retirement finds until they are at least 62 years old.

 

Once a person does retire, if you only listened to the rhetoric, you probably wouldn’t know that a retiree doesn’t pay state income taxes on up to $41,000 of pension income. You probably wouldn’t know that the widely discussed cost-of-living adjustments (COLAs) are not guaranteed in many states but would continue to be guaranteed in Kentucky with Senate Bill 1.



With Kentucky’s COLAs, a retiree with a $40,000 a year pension currently gets an additional $1.64 a day. Senate Bill 1, which still provides a guaranteed daily increase of $1.10 only cuts this rate of increase by 54 cents, the equivalence of two cups of coffee a week. The change is measly for retirees, major savings for the state, which will save over $3 billion, and only a minor part of the overall unfunded liability which will still largely be shouldered by state taxpayers.

 

So, why wouldn’t you know all of this? Why have the facts of pension reform been lost?

 

We should be honest enough to call a spade a spade. Labor unions have taken a position of absolutist opposition to pension reform and focused instead on a concerted effort to misinform the public and intimidate legislators.

 

When Senate Bill 1 was introduced, Bowen gave an excellent floor speech that detailed how the bill had been crafted. He explained how he had given consideration to all parties, from retirees to taxpayers, and how everyone had given up some of their ambitions to find solutions. His speech was spot on. Taxpayers will shoulder significant risks and cuts to other government services to make up for Kentucky’s broken pension system.

 

Rather than share the burden and put the interest of our commonwealth first, one side has decided that they would rather deceive the public and force the entire burden on the taxpayer.

 

It is truly the height of absurdity.


Jordan Harris is executive director of the Pegasus Institute.

Kentucky Today’s Perspectives section provides a public forum for our readers to express their views on issues of importance. The opinions expressed are those of the writer and should not be construed as an official position taken by this newspaper. We encourage you to join in the conversation by sending your essays to editor@kentuckytoday.com. We reserve the right to reject submissions deemed inappropriate.

Comments

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Norman Stillwell

Is it possible to be explicit of the quote from your article, below?

"Some elected officials saw it as an opportunity to hand out political favors adding on benefits that had never been paid for, that took valuable money out of the system, and compounded the negative cash flow draining the systems."

Monday, March 12
Harry

Well I am a bit relieved ... when I logged in and saw this under Perspectives. I was puzzled at why a Baptist news email would contain such a clear attempt at advocacy. I shall read the by-lines with greater care in the future.

Monday, March 12
Vladzred

Thoughtful article. I am always suspicious when facts and figures are thrown about, so did a quick check of the NEA info regarding average salaries. The average salaries reported by the NEA do confirm that the average teachers salary in Kentucky is higher than most adjoining states (Virginia, West Virginia, Tennessee, Indiana, Missouri). Will be looking at the rest of the number crunching. I'm not in favor of changing retirement plans for those already down the career road, but I do understand need for changes to the system for those entering any of the pension systems that are in dire straits.

Monday, March 12
Pacrichards

Jordan Harris...I am very glad to call a spade a spade. I am not a member of any labor union or association. I am a KY retiree. And, yes, the pension crisis has risen to the highest levels of absurdity...even in your own article. While you point out quite a number of things some people may not know about the pension crisis, those of us who have and are still living through the absurdity of the stated malfeasance were and are the first VICTIMS of those who chose to misuse and abuse KY’s pension system. Next in line are the taxpayers of which RETIREES and current working members are as well!! It is as if everyone supporting SB1 are trying very hard to promote the propaganda that those of us in the KRS/KTRS pension systems have brought this all on ourselves and that we are expecting the taxpayers to bail us out!! WE ARE THE TAXPAYERS!! Retirees and current working members pay our share of taxes in this state and have all along. WE ALSO PAID INTO OUR PENSIONS with every paycheck. The funds used and misused by our own elected state officials were OUR FUNDS, paid in by both state/county employees and our respective state/county employers!! And now, individuals such as yourself represent this absurd situation by pitting pensioners and taxpayers against one another. PENSIONERS are the VICTIMS AS WELL AS TAXPAYERS and whatever solution is agreed upon will make PENSIONERS the VICTIMS ALL OVER AGAIN...why, you may ask....because we will have to bear the burden TWICE for having been victimized in the first place!! And we will be forced to live with the fact that those who victimized us and our futures will never be held accountable for their misdeeds, malfeasance or lack of following the law, as we merrily roll along into this absurd reality called Kentucky politics.

Monday, March 12
Kara Ford

I agree that this situation is certainly absurd. This is not a conversation that lawmakers should be having due to two words:

Involitable Contract

Money that we paid in was STOLEN by lawmakers, the pensions are not just a promise - they are a contractual obligation. Additionally, Kentucky teachers are required to hold a masters degree in order to maintain their certification. Many hold 2 masters in order to become leaders/administrators. I would hope the average salary of people with advanced degrees would be higher than that of people not required to hold those degrees.

As a member of a church that supports KBC I am offended that KBC is associated with this piece.

Monday, March 12
BrettB

I am both a teacher and bi-vocational music minister. I work on Church Street and Main Street. I have been in education for 22 years and in ministry for 15. I have done my part by having a percentage taken out of my school paycheck. The school district that I have worked for has done their part my paying their percentage towards my retirement. ALSO, as a minister, I have had a percentage taken out of my church paycheck towards Social Security, and to avoid the "self-employed" tax, I also had all my other taxes taken out of my church check as well.

As a Kentucky teacher, I knew going into this calling that I would not be paid as well as other teachers in other states, but I was given a promise that Kentucky would retire you well when you have reached 27 years. I was also told that I could teach as long as I felt God was giving me the strength and health to carry out this calling. But now in this situation there is a very good chance that man may have numbered my days. I also care so much about my calling that I have a HUGE number of sick days because I felt it was important to be there for my kids, plus you never know when a life-changing event may happen to me or my family. Now since that may change as well, I will expect a lot of older teachers taking a lot of days off if we are capped by our number of days.

With this pension situation, man may have made my choice for me to retire in Kentucky sooner than I would want, and because I am a Kentucky teacher, I will not get one penny of my Social Security from my many years of ministry. If my wife dies before I do, I may not even get a penny of her SS as well. My kids will probably not get my death benefit when I die and will have to depend on my life insurance that is above what my district and state has provided for me, unless that is the next thing to get taken away.

PLUS, If I have to retire at 27 years, which would have me at 52 years, I will have to find a way to insure myself and my family for another 13 years until I turn 65, when state retirement takes over.

Consider those facts....a pension is a promise.

I feel that if this bill comes through and pensions get affected, expect a mass exodus of older teachers retiring, middle of the career teachers to leave the job or the state, and very very VERY few new teachers.

Monday, March 12
KYTeacher

You didn’t mention that some of those neighboring States are the lowest paid in the US and that KY teachers are forced to get Master degrees in order to continue teacher. These leads KY teachers to get higher pay, but larger debt in student loans.

Monday, March 12
Jonathan Campbell

Is this what a 21st century Kentucky looks like to you? A Kentucky with no one wanting to work in public sector jobs because the only real benefit is gone? Maybe you would like your kids to get a subpar education from a public school loaded with teachers that are just to stubborn to move to another state? Of course you could probably send your kid to some elite Louisville private school and not have to worry. Your Pegasus Institute is the kind of asinine foolishness that will sink this state. Just remember that the ones your are writing against in your article are the ones that taught you how to write. They are not stupid and know when they are being handed a raw deal. We don't need you to come save us from ourselves.

Monday, March 12
Josh Underwood

While I appreciate that Governor Bevin has put funding back into the retirement system after years of it being ignored, this article also leaves out a lot of pertinent information. From this article, you wouldn't realize that we prepay into retirement to get that COLA. From this article, you wouldn't realize that teachers are required in KY to get a master's degree with their own funding while many other states do not. From this article, you wouldn't know that many retire on pensions of less than $40,000 and so that 33% reduction of the COLA is significant. Please do not blame the victims of this for trying to stand up for themselves.

Monday, March 12
PMcCrary

I am a teacher with 30 years of teaching experience (25 of those years in KY) As a matter of fact, I am a former Kentucky Teacher of the Year. Add to that, I am a southern Baptist. I read your article with great interest. There are multiple inaccuracies. I began teaching after I worked as a preschool minister in a church. Because I am a KY teacher I will not receive the Social Security I paid in during those years. Only one other state salary comparison you made is in that same situation. I was required to get a master level of education or lose my certification. (Many of the states in your comparison do not have that added expense of thousands of additional out of pocket expense). The 1.9% salary increase came after a few years of decreased salary due to insurance increases. I WAS promised a pension. I have paid in over 13% of my salary for decades. I have 1.74% of my check taken out (as do all KY teachers) to pay for my COLA post retirement. I am prepaying. For years now I have prepaid. What the legislators are proposing basically results in taxing teachers at a higher rate. (Especially when you also roll in the additional 3% I pay for a “shared sacrifice” insurance plan for post retirement. That fund is being used for outside projects as well). That .54 a day you mentioned is yet another “sacrifice” asked of teachers. People celebrate Social Security cost of living increases and yet according to your summation a portion of our prepaid amount should be shared with you...fellow taxpayers. (Keep in mind I pay hefty taxes too). Your simplified COLA explanation is inadequate. The COLA is annual. It would cost me thousands of dollars throughout my retirement lifetime. (By the way...I will be 60 in November and I am still teaching. I personally do not know any teachers who retired in their 40s).

Monday, March 12
Vickie

You should never publish under your name when your "facts" are so biased and/or just plain incorrect. You don't understand the issue, therefore, you shouldn't comment on it. I am not a member of a "union," and I don't blame just the Republicans for this mess (there is plenty of blame to go around on past governors and legislators from both parties). I was thrilled when I thought the governor was going to actually fix the problem, but I never thought it would be funded by taking away so much from the people it was supposed to help. As a retired educator I personally will lose tens of thousands of dollars over my remaining years, and within that I am losing my health insurance. How many people would be willing to give up so much to fix a problem they didn't cause? I doubt this pension fix will cost you personally anything---except perhaps your reputation which has been tarnished by such a rant as you made here.

Tuesday, March 13
Sandy Duncan

According to a quote of your article,

“Even aside from these questionable handouts, this alone fails to illustrate how broken the structure is. Nothing illustrates it better than the system for non-hazardous county employees. Their system is required, by law, to pay its full funding contribution every year. In 2005, it was 94 percent funded. Today, it is 59 percent funded. You may have heard “find funding first,” but you probably didn’t know that underfunding only accounted for 15 percent of Kentucky’s pension liability and that even for categories that were fully funded in the first place, the system failed.”

I am a non-hazardous county employee. I have worked in the school system for 20 plus years. I have county retirement taken out of my gross wages on every check I receive. When I was hired, I was told that the state would match the retirement that I was paying in, which I would say, is a PROMISE. Now, as your article states, the state has not been matching my retirement, as PROMISED, by not fully funding my retirement, as the system, by LAW, was suppose to do. I could have went other places to work, but the school system appealed to me, as it offered retirement and insurance.

I just can not understand how politicians feel they can just keep taking from the working people, lie about things promised, but yet, they have fantastic health care and a most generous retirement!

We elect the politicians to represent us, the people of this Commonwealth of Kentucky, and we will remember “their” names when they are up for re-election.

Seems to me the politicians are acting as a “Robin Hood” stealing from the poor working people and giving it to the rich!

Thank you, Senator Robin Webb for standing with us in this fight against Senate Bill1, and also, Rocky Adkins, House of Representatives, we appreciate your support, as well!

UNITED WE STAND

Tuesday, March 13
C Fegan

Your suggestion that the reduction to the COLA would be .54 per day overlooks the fact that the cut would be compounded every year that it is in effect. I retired at the end of the 2013-14 school year after teaching for 30 years. I am currently 59. Since the bill specifies that the COLA reduction will be in effect until the pension is 90% funded, we don't know how long it will be in effect, so I calculated what the impact would be if it took 10 years,15 years, and 20 years to reach the 90% funding level. If I live to be 85 and it takes 10 years to reach 90% funding, it would cost me over $53,000. If it takes 15 years, it would cost me almost $71,000, and if it takes 20 years, it would cost me over $82,000.

Should I make it to 90 and it takes 10 years to reach 90% funding, it would cost me over $68,000. If it takes 15 years, it would cost me over $93,000, and if it takes 20 years, it would cost me almost $112,000.

That's a lot more than a couple of cups of coffee per week!

Tuesday, March 13
Justin W

Thanks for this story. There are a number of things which are responsible for the pension crisis. You have hit several of them. We also need to remember that interest rates have fallen, life expectancy has increased and on average the length of time someone is drawing a pension has increased.

Fixing the pension problem is going to require sacrifice from all. I would rather to make some sacrifice now than to have the pension system run out of money once I get too old to work.

Tuesday, April 3

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