The state pension plan crisis
Published 11:50 am Thursday, June 8, 2017
The KRS Pension Plan gained some notoriety last year when Gov. Matt Bevin came under fire because of budget cuts to state universities.
Unfortunately, the exposure it received was negative, but hopefully, it opened some eyes in the general public.
To summarize, the administrations over the past two decades made some poor decisions that led to a huge gap in the funds our pension plan has in comparison to what it will be required to pay out.
In fact, over this period, the pension plan for state employees alone has gone 85 percent to 14 percent funded.
As stated in the Lexington Herald-Leader, Kentucky’s pension problem resulted from two decades of inadequate contributions from the state, a shortfall the legislature has only addressed in the last few years; weak investment returns and unrealistic assumptions about how many public employees there would be (fewer than predicted), how much they would earn (less than predicted) and how long they would live (longer than predicted).
These improper decisions came from the Paul Patton, Ernie Fletcher and Steve Beshear administrations. If this doesn’t cause concern for you, it should.
Luckily, the Bevin administration is addressing this problem. I spoke with Rep. Donna Mayfield and Sen. Ralph Alvarado over the weekend, and they both expressed how focus will be placed on the situation.
We will begin seeing work on the budget that will appropriate more funding into the plan. As a lot of the members of this administration have stated, it is not going to be easy nor be fixed overnight.
The most important thing is to not ignore the concern but to continue to address it. I appreciate Bevin, Mayfield, Alvarado and many others for making this a top priority.
Now, to put this into a straight thinking approach, we as citizens must understand that cuts will be made in other areas; areas we may not like. If money grew on trees or could just appear out of nowhere like many think, well, the pension problem could be fixed over night. But it doesn’t — and it can’t.
In fact, such thinking is what led to the crisis.
What I hope doesn’t happen is people standing against the Bevin administration for the things that must be done. We will see cuts in areas, we may even see tax increases, although most want to limit these. Adjustments in the future budgets will attempt to close the gap. It is important to understand something has to be done.
In short, I suppose I’m trying to sway everyone to take this problem seriously.
Our past administrations led us to the shortfall; our current lawmakers are taking the proper initiative to get us on track. It has been written in many publications, Kentucky’s state pension plan is one of the worst in the nation in terms of being able to cover the cost of retirees.
I admire Bevin for taking a stand to protect the workers of our state as well as their future. I personally have worked for a company in which salary increases were withheld in place of stock options and other pie in the sky promises. When the company folded, we lost it all.
As a state, we are better than that. No one can look out for us better than ourselves.
In years past, legislators were increasing benefits, yet had no idea how the increased costs would be made up and especially how it would affect us, the taxpayer.
Our current administration has seen this problem and is now getting the right people involved along with meaningful analysis. It is always better to act than react, but now we are at least acting on a past reaction.
As Kentucky Retirement Systems Board of Trustees Chairman John Farriss said, “We have been aggressive in our assumptions for many, many years. Aggressively wrong. This is our opportunity to be conservative, to try to get our retirees paid.”
Political enthusiast Will Collins is a lifelong resident of Kentucky and has called Winchester home for the past 20 years. He can be reached at email@example.com