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Teachers Group Sues State For Underfunding Kentucky Pensions

Pile of Money
Getty Images/Ingram Publishing
Pile of Money

An organization of current and retired Kentucky public school teachers has filed a class action lawsuit against Gov. Matt Bevin and legislative leaders for underfunding the teacher pension system, which lost $1.2 billion last year.

The Teachers Retirement Legal Fund says leaders violated state law as well as the U.S. and Kentucky constitutions by not setting aside enough money for the Kentucky Teachers Retirement System, which manages the pensions of about 141,000 school system retirees.

Randy Wieck, a history teacher at DuPont Manual High School in Louisville, said teachers have dutifully contributed to the pension system from their paychecks but the state hasn’t kept its side of the bargain.

“We don’t want to retire into poverty because we don’t have Social Security. So this is all most teachers have,” said “The end result we hope will be the saving of our retirement.”

Teachers don’t pay into the Social Security system and don’t receive benefits but instead pay 12.9 percent of their payrolls into KTRS.

Legislatures and governors have for years signed off on budgets that set aside less money than the “actuarially required contributions” necessary to keep the pension systems from losing money and selling off assets.

Bevin, Senate President Robert Stivers and outgoing House Speaker Greg Stumbo are all listed as defendants in the lawsuit, which was filed in Franklin Circuit Court on Tuesday.

Wieck has filed similar lawsuits in a federal court in Louisville and in Jefferson Circuit Court, which dismissed the case and recommended that it be filed in Franklin Circuit.

The Teachers Retirement Legal Fund hired Theodore Lavit, a Lebanon attorney who successfully sued the state in the late 1980s in a case that led to the overhaul of Kentucky’s school finance system.

Lavit said he hopes the case goes to the Supreme Court of Kentucky and that the court makes the state overhaul the retirement system.

“I think they’re going to have to start all over again. We’re going to need governmental infusion to a high degree, which will require revenue,” Lavit said.

Governor, Legislators Seek Reforms

Over the past two legislative sessions, Democrats have pushed for a major infusion of cash into the teacher pension system in the form of a $3.3 billion bond.

Republicans railed against the proposal, and it was never taken up by the GOP-led Senate.

Bevin has proposed setting aside more money for the systems by cutting spending in other parts of state government. This year, Bevin cut two-year spending by about 9 percent across most of state government. He’s also considered reducing benefits to retirees but hasn’t made an official proposal yet.

On Tuesday, Bevin’s press secretary Amanda Stamper said reforming the pension systems has been the top priority of the administration.

“The historic budget Gov. Bevin signed reflected this commitment, as did the reorganization of the KRS Board of Directors and the selection of the PFM Group to conduct a thorough audit of KRS and KTRS,” Stamper said. “The Bevin administration is intent on fixing the country’s worst-funded pension system. Kentucky taxpayers, retirees and current employees deserve nothing less.”

The 54 percent-funded KTRS is joined by an even more poorly funded Kentucky Retirement Systems, the main pension fund for state employees that only has 16 percent of the money it needs to make future payouts.

Combined, Kentucky’s state pension systems are the worst funded in the country.

Chris Tobe, a former trustee on the KRS board, said legislative leaders and governors are mostly to blame for underfunding the systems over the years.

"The budget process in Kentucky is very much with the legislature and the governor’s office," Tobe said. "A lot of the broader legislature may not have fully understood what they were doing.

"The pressure was, Republicans did not want to raise taxes, Democrats did not want to cut education, so the easy answer was to underfund pensions every time they went into budget talks," Tobe said.