State Leaders Talk Kentucky Teachers' Pension Solutions, To No Avail
If state leaders are closer to solving the crisis in the Kentucky teachers' pension system, they’re not showing it.
The system has 54 percent of the money it needs to make future payouts, a situation that has been a keen point of focus for state leaders in recent years.
On Tuesday, a bipartisan task force of legislators and advocacy group leaders was supposed to present a menu of ideas for addressing the teachers' pension problem.
But few concrete solutions came out of the meeting, with a familiar line being drawn over whether to borrow money to shore up the system.
House Speaker Greg Stumbo, a Prestonsburg Democrat, said bonds should have a role in fixing the system.
“I haven’t heard any alternatives, if anybody else has got any other suggestions,” Stumbo said.
He said any solution has to come up with money to add to the system.
“The old saying is if you want to have rabbit stew, the first ingredient is the rabbit," he said.
"Well, there’s no rabbit in this report. The first ingredient has got to be addressing the unfunded liability.”
Led by Stumbo, the state House passed a bill earlier this year that would have authorized a $3.3 billion bond for the pension system. That bill failed in the state Senate, with Republicans saying that bonding amounted to passing the problem to future generations, who would ultimately be responsible for paying the debt.
The task force has been meeting since this summer.
Owensboro Republican Sen. Joe Bowen still opposes bonding as a solution for the pension crisis.
“My position on bonding has not changed,” Bowen said on Tuesday. “I’ve not wavered one iota on the value or the validity of bonding. I absolutely do not think that should be any part of resolving this issue.”
Teachers' pension system leaders say the state will need to pay $520 million — about 5 percent of the state's total annual resources — to maintain current funding levels. That’s up from $380 million that the state paid this year.
Incoming Gov. Matt Bevin has proposed moving all future pension holders — both teachers and state employees, who fall under an even retirement system — onto a 401(k)-style plan that wouldn’t provide them with guaranteed rates of returns.
Jason Bailey, executive director of the think tank Kentucky Center for Economic Policy, criticized that plan.
“The big part of the solution to this is to find more money and put it into the system," he said. "That big question is sort of the elephant in the room and it still hasn’t been answered as to how that’s going to be done.”
Negotiations over how to fix the pension systems went down to the wire during this year’s legislative session, ultimately failing in the final hours.
Dave Adkisson, president of the Kentucky Chamber of Commerce, strongly urged legislators on Tuesday to come up with a solution early in the session to help take the politics out of the issue.
“I think this is more important than that kind of give-and-take in a late-session negotiation,” Adkisson said.
Senate Majority Leader Damon Thayer, a Republican from Georgetown, threw water on that idea.
“Everybody knows that every session takes on a life of its own, and to wish or encourage that something’s going to happen by the end of January, I just think it’s a little utopian, frankly,” Thayer said.