FRANKFORT – For well over a decade now, no issue has dominated the General Assembly’s time quite like our public retirement systems – and that trend isn’t expected to change as this year’s legislative session re-starts this week following a short break.
Because this matter is as complicated as it is important, now is a good time for a quick refresher course while we wait to see what, if anything, the House and Senate will do during the next two months.
When you hear discussion about public pensions, it’s mainly focused on the Kentucky Teachers Retirement System (KTRS) and Kentucky Retirement Systems (KRS). KTRS, which was created in 1938, covers educators from local school districts, regional universities and school-oriented organizations. KRS, meanwhile, began in the 1950s and is comprised of five separate systems that cover state and local government employees, non-certified school staff (such as janitors and bus drivers) and those who work at quasi-government agencies like public health departments.
Altogether, these two systems have nearly 560,000 members, and most are still working in public service or are retired.
In the early 2000s, when the stock market was booming, both retirement systems had enough money, or more than enough in some cases, to pay every future pension benefit they owed at the time.
Just like our own finances, however, unforeseen events can change projections, and that’s exactly what we saw happen in the aftermath of a recession in the mid-2000s and the Great Recession that began in 2008. Investment returns and government budgets alike went into steep decline.
The General Assembly began addressing this problem in 2003 and implemented more significant retirement reforms in 2008, 2010 and especially 2013. Beginning in 2014, legislators also began setting aside much more money to begin restoring these systems’ financial health.
Taken together, this twin approach of bipartisan reforms and more funding is giving us the roadmap to bring down the long-term liabilities.
Those 2013 reforms did not affect teachers, but that was by design, since they are not eligible for Social Security due to a decision made back in the 1950s. There is uncertainty whether new teachers would even be allowed to enroll in the federal program, and if they could, it would be especially difficult for cash-strapped school districts since they would have to pay six percent more for each new teacher as the local employers.
Given that KTRS already has more than half of the funding it needs for the next several decades, I don’t believe moving in that direction makes financial sense, and while the future is tough to predict, the system appears well-positioned for it. Another consideration is that reducing retirement benefits for new teachers would also make it harder to lure younger people to the field.
There have been secret and rushed attempts over the last year to push through new retirement reforms, but those have ultimately gotten nowhere. Legislative leaders are at least showing greater willingness to listen this year, since they formed a bipartisan public pensions working group a month ago that has already met for a half-dozen times. Its goal is to see if any consensus can be reached, either this year or in time for next year’s legislative session.
As I mentioned, I believe we are already on the right track, but if anything should pass in the weeks and months ahead, it must have input from those affected; it must not cost taxpayers more than current projections; it must not undermine already-promised benefits; and it must not make it more difficult to retain and hire the public-service employees we need and deserve.
I hope this review has helped to shed light on why this issue has often been at the top of the General Assembly’s agenda for so long. I will of course keep you updated on what may happen next.
At the same time, I need to hear from you as well this legislative session. You can write to me at Rick.Rand@lrc.ky.gov, and the toll-free message line is 1-800-372-7181. If you have a hearing impairment, please call 1-800-896-0305.
The legislature’s website also has a lot of information online and can be found at www.lrc.ky.gov.