Opinion Pieces


Clearing the Air on State Pensions April 20, 2018 by Richard Nelson

The 2018 General Assembly took a positive step to shoring up the state pension system but based on regular news reports of angry protestors opposed to pension reform, you'd never have guessed it. Some media outlets have unfortunately fanned the flames by inaccurate reporting.

The latest example comes from the Cadiz Record. An April 18 headline story insisted that state workers had a "difficult week" due to HB 151 "significantly cutting health care and pensions." This couldn't be further from the truth.

Since the smoke has cleared, we see that teachers and other state workers won't be required to contribute additional salary to health insurance as originally proposed. There are no changes to the retirement age for current teachers; no reduction in pension checks for retirees; and no decrease in the cost of living adjustments which will remain at 1.5 percent per year. In other words, there were no cuts.

The only change affecting current teachers' retirements is that they won't be able to count accumulated sick days toward retirement. This was something the Kentucky Teacher Retirement System (KTRS) representative and general counsel Beau Barnes acknowledged back in 2015 wasn't part of the inviolable contract—a point Attorney General Beshear will challenge in court.  Already accumulated sick days will count toward retirement but those incurred after December 31, 2018 will not count toward retirement.

In order to shore up the the worst funded state pension system in the nation ($40 billion in unfunded future obligations) the legislature allocated $1 billion to the fund this year.  Yet, according to KTRS actuary Flick Fornia, funding accounts for only 20 percent of the problem while 80 percent is structural.

HB 151 tackles part of the structural deficit by moving new hires away from a straight pension to join a hybrid cash/balance plan. Recipients of the hybrid plan are guaranteed the money they put into it, possibly more based on investment performance.

Benefits include full portability if a state employee changes jobs and it can also be passed on to their spouse or children. (Existing state pension benefits cease upon the death of the recipient).

The intent is to save the system, not stick it to teachers as some allege.  So to recap, there are no changes for retired teachers. There is only one change for current teachers. And future hires will enter a new hybrid type system. It's a good start but much more needs to be done to fix the system.  What may prove more difficult to fix is civility and public trust.

Several legislators have had their businesses picketed. One had their home broken into. Another's car was egged. A local legislator arrived to work early the last week of the session only to find protesters in the Capitol parking garage. Upon entering the annex they asked "Are you Republican or Democrat?" When he identified as a Republican they heckled and followed him to the entrance and chanted "You vote now, we vote later."

The pressure cooker of politics often results in unfortunate words and actions from both sides, including Gov. Bevin's comments about children being sexually abused or assaulted while schools were closed and teachers were striking in Frankfort. Those incendiary words added fuel to the fire and likely contributed to Gov. Bevin's approval numbers sinking to a low of 32 percent according to Western Kentucky University's Big Red Poll.

The irony is that he's the first governor in over a decade willing to fix the system. Strained rhetoric and ill-advised words have led to a rocky relationship between the governor and teachers but the state pension system looks brighter now than when Gov. Bevin first took office.
 



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