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House Committee OKs $3.3 Billion Bond For Kentucky Teacher Pensions

A House committee on Tuesday approved borrowing $3.3 billion to shore up the state’s ailing retirement fund for teachers.

The Kentucky Teachers Retirement System, which serves 141,000 people, is currently facing a $14 billion unfunded liability.

House Speaker Greg Stumbo, a Democrat from Prestonsburg, said the window is closing to take advantage of low interest rates in the bond market. Currently the state would be able to sell bonds at 4.5 percent interest, a 50-year low.

"Barring the most catastrophic economic circumstance that might happen in the future, by doing this you have guaranteed the solvency of the Kentucky Teachers Retirement System well-past 2025 and beyond," he said.

KTRS only has 42 percent of the money it needs to pay its retirees by 2035. KTRS general counsel Beau Barnes said the funding level would go up to 72 percent if the legislature approves the bonding measure.

“We are not always wild advocates about bonding in all cases for funding for the pension fund—we’d rather have a direct appropriation out of the general fund out of each budget—but we must acknowledge reality,” Barnes said."It's a 100 percent certainty that if we don't do something very soon, this problem continues to get much much worse very quickly.”

The state stopped making its full contribution to the system in 2008, according to KTRS.

In the past, Senate President Robert Stivers, a Republican from Manchester, has questioned spending money on bond interest when the state could put the money directly into the pension fund.

Stumbo said the bill could be heard in the House early next week.

The committee also approved a bill that would authorize $132.5 million in bonding to pay for part of a new cancer research building at the University of Kentucky.

Ryland Barton is the Managing Editor for Collaboratives. Email Ryland at rbarton@lpm.org.