December 26, 2013
Senate Bill 2, which brought pension reform, was hailed as one of the top achievements of the 2013 Kentucky General Assembly.
But as lawmakers prepare for the 2014 session that will involve the tedious task of passing a new two-year budget, there is concern about whether or not the state will be able to meet the demands of SB 2.
William Thielen, executive director of the Kentucky Retirement System, is afraid lawmakers won’t honor their pension promise that covers 90,600 current and former state employees.
“It’s in writing, but I know the budget is still tight. The economy has not improved as we hoped it would,” Thielen said.
Under this year’s SB 2, the legislature committed to fully funding the KRS’ budget requests. The KRS contends it will require $2.3 billion in the next two-year budget cycle to meet pension obligations.
That would mean directing more than 10 percent of the state budget for the retirement benefits of state workers and schoolteachers.
Currently, Kentucky’s pension system is only 23 percent funded, according to the latest actuarial advisory report that was presented to the KRS board of trustees. That’s a significant drop from 52 percent in 2008.
Kentucky placed itself in this pension crisis through decades of lawmakers starving the pension system of funds in favor of feeding them to pet projects and other programs.
And because it’s a budget year, funding requests for projects and programs will again come pouring in, forcing legislators to choose between the needs of their constituents and the overall financial health of this state.
With the passage of SB 2, lawmakers made it sound as if the pension problem was solved. But in reality, it was more of a stopgap.
The major overhaul that came from SB 2 was implementing the hybrid contribution system for state employees hired after Jan. 1, 2014.
Those already in the pension system will remain on the defined contribution plan.
The new hybrid plan is supposed to provide relief to the state’s financially hurting retirement system.
But it won’t help the state climb out of its pension hole that has gone from deep to seemingly bottomless.
And to fill the hole, lawmakers are going to be required to meet financial commitments they made to the KRS.
Otherwise, the General Assembly shouldn’t be passing bills it can’t live up to.
— Owensboro Messenger-Inquirer