The Herald-Leader’s Misguided Effort to Criticize Pension Reform
In a recent diatribe, the “nattering nabobs” of the Herald-Leader’s editorial board determined Governor Bevin to be “scaremongering” and declared him “all wet.” Just what was the Governor’s transgression warranting such a screed? Governor Bevin told a group of local elected officials something they already knew: unless Kentucky’s public pension mess is addressed, we’re all “screwed.” In this instance, I find Governor Bevin plainly speaking about the most important financial issue facing our Commonwealth both necessary and refreshing.
It’s not scaremongering to acknowledge the reality that pension checks for some retired state employees will stop coming if the reforms passed by the 2018 General Assembly are blocked by the Supreme Court.
In a misguided effort to criticize the 2018 pension reforms, the H-L editors have compared them to reforms passed in 2013. As the sponsor of the 2013 reforms I find it confusing for the editors to praise reforms to state and local government employees’ retirement plans while condemning those same reforms when extended to teachers.
The core tenets of the 2013 reforms were two-fold: fully funding the actuarially required contribution (ARC) and creating a new sustainable retirement plan for employees hired after 2014, which became the cash balance plan. While there were many possible changes discussed leading up to and during the 2018 Session, the reforms finally passed this year retained the same goals: fully funding all retirement systems and creating a sustainable retirement plan for new teachers.
The 2018 reforms invest even more money into the retirement systems by mandating a level dollar funding formula which is the Actuarially Recommended Contribution (ARC) plus the amount necessary to eliminate the unfunded liability in 30 years. If the editors truly believe fully funding the retirement systems are the only way to save them they should enthusiastically endorse this ARC++ plan. The 2018 reforms also place new teachers into a cash balance retirement plan administered by the Kentucky Teachers Retirement Systems (KTRS). This retirement plan differs in one significant way from the cash balance plan for other public employees: teachers in the cash balance plan receive a significantly higher monetary contribution from state government which is invested by the KTRS towards their retirement.
Ensuring that Kentucky’s public pension plans are on a path to financial stability should be a priority for everyone. Every tax dollar required to fully fund public pensions is a dollar not available for another important public purposes. The 2018 reforms are a clear road map for success that maintains the retirement benefits of current public employees and teachers, ensures future teachers have a secure retirement and protects the taxpayers of the Commonwealth.