The Richmond Register

Local News

September 26, 2013

$400M needed for teacher retirement system

FRANKFORT — Back in the spring as Democrats and Republicans worked on a pension reform bill, the Republican Senate initially insisted the increased costs could be met through normal growth in state revenues.

Last month, the group of independent economists who forecast state revenues on which lawmakers base their two-year budgets made a preliminary forecast of about $259 million in new state revenue next year.

But it was clear Thursday at a meeting of a budget review subcommittee that $259 million will be eaten up pretty quickly.

Gary Harbin, executive secretary of the Kentucky Teachers’ Retirement System, told lawmakers the teachers retirement system will request $400 million in new money from the General Assembly next year to keep the system financially sound.

The teachers’ system wasn’t included in the pension reform cobbled together last spring, in part because it was in better, though not ideal, financial condition. And teachers, as Harbin pointed out, stepped up in 2010 by increasing their contributions to the system by 3 percent to help pay medical costs.

Harbin said that “took $5 billion of liability off of the taxpayer,” and a pension bond approved by the legislature also helped pay back transfers the system made from retirement liabilities to cover rising medical costs. But the system still has a $14 billon unfunded liability.

While the teachers’ system is still in better shape than the state employee system, the problem will grow worse if the legislature doesn’t help next year, Harbin said.

Subcommittee chairman Sen. Chris McDaniel, R-Latonia, also reminded other lawmakers that the pension reform will require an additional $122 million next year as well.

Not all of that will come from the General Fund, McDaniel said later, but maybe as much as 90 percent will. Some agencies, which receive federal grants and other funds can use a portion of those for employee retirement costs.

But that’s more than $500 million any way it’s calculated, and right now, budget forecasts are predicting only about $259 million in revenue growth.

Pension costs aren’t the only increasing demands on the budget. The current budget used reserve money for some ongoing expenses, and Gov. Steve Beshear has said he wants to restore some education cuts made over the past five years, a period in which basic school funding has held steady while enrollment has grown.

Bill Thielen, executive director of the Kentucky Retirement System, the one which was covered by the 2013 pension reform bill, also spoke to the subcommittee.

KRS has assets of $14.5 billion, pays out about $2 billion a year in benefits, and faces an unfunded liability of about $17 billion.

About 68 percent of KRS revenues come from investments, which have averaged about 9.5 percent return over the past 30 years. Actuarial forecasts assume a 7.75 percent return.

But the return rate took hits during the recession, losing money in 2011 and especially in 2008. That brought the 10-year return down to 6.65 percent. But returns have recovered along with the stock market and last year the system earned an 11 percent return.

The system also faces a challenge from some quasi-government agencies like mental health groups, which want out of the system and have gone to court seeking to be allowed to opt out.

Each of those groups, Thielen said, has a significant share of the overall unfunded liability and if they are allowed out of the system it will drive up others’ shares and required contributions.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

1
Text Only
Local News
  • 4-24 UKatWaco1.jpg Wildcats encourage Cardinals to work hard in school

    University of Kentucky student athletes Kastine Evans, a guard on the women’s basketball team, and Jon Hood, a guard on the men’s team, stopped by Waco Elementary School on Wednesday to talk about the benefits of working hard in school.

    April 23, 2014 4 Photos

  • Mayor, commissioner pay changed

    The Richmond City Commission approved 5-1 a new pay scale for the mayor and commissioners at a special-called meeting Wednesday morning.

    April 23, 2014

  • 4-24 Lorenzo McWilliams.jpg Harrodsburg to get old Richmond police mobile computers

    Richmond is donating to the city of Harrodsburg eight of 39 old computers formerly used in police cruisers.

    April 23, 2014 1 Photo

  • 4-24 HOSAblooddrive.jpg Health science students organize blood drive

    Aside from the gift cards and free snacks, 50 Madison County high school students have other reasons for donating 35 pints of blood Wednesday to the Kentucky Blood Center at Madison Central High School.

    April 23, 2014 1 Photo

  • Third student charged in dorm room robbery

    A third person, originally thought to be a robbery victim, was charged Wednesday in connection with an armed robbery that occurred March 30 on Eastern Kentucky University’s campus

    April 23, 2014

  • Bucher Family plant sale starts Friday

    The Bucher Family annual plant sale, a yearly tradition in Madison County for 15 years, will kick off Friday morning.

    April 23, 2014

  • 4-23 Gravestone.jpg In search of the last resting place

    At a popular illegal dump site off Bybee Loop in Waco, two marble grave markers were among some items found there by Pat and Ronnie Aldridge, residents who live about 250 yards from the area.

    April 22, 2014 1 Photo

  • Fiscal court awards EMA bids

    Two more bids were awarded at Tuesday’s Madison County Fiscal Court meeting for the emergency operations agency.

    April 22, 2014

  • 4-23 Peter Crowe.jpg Intoxicated man charged with wanton endangerment

    A 27-year-old Richmond man was charged Sunday with second-degree wanton endangerment after he was found intoxicated and walking with several young children in the Keystone Drive area, according to a Richmond police report.

    April 22, 2014 1 Photo

  • Absentee voting available for May 20 election

    Walk-in absentee voting for the May 20 primary has begun and will continue until May 19, County Clerk Kenny Barger announced Tuesday at the Madison Fiscal Court meeting.

    April 22, 2014

AP Video
SKorea Ferry Toll Hits 156, Search Gets Tougher Video Shows Possible Syrian Gas Attack Cubs Superfans Celebrate Wrigley's 100th Raw: Cattle Truck Overturns in Texas Admirers Flock to Dole During Kansas Homecoming Raw: Erupting Volcanoes in Guatemala and Peru Alibaba IPO Could Be Largest Ever for Tech Firm FBI Joining Probe of Suburban NY 'Swatting' Call U.S. Paratroopers in Poland, Amid Ukraine Crisis US Reviews Clemency for Certain Inmates Raw: Violence Erupts in Rio Near Olympic Venue Raw: Deadly Bombing in Egypt Raw: What's Inside a Commercial Jet Wheel Well Raw: Obama Arrives in Japan for State Visit Raw: Anti-Obama Activists Fight Manila Police Motels Near Disney Fighting Homeless Problem Michigan Man Sees Thanks to 'bionic Eye' S.C. Man Apologizes for Naked Walk in Wal-Mart Chief Mate: Crew Told to Escape After Passengers
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Poll

Should Richmond rezone the southwest corner of Main Street and Tates Creek Avenue to B-1 (Neighborhood Business) with restrictions to allow construction of a financial services office?

Yes
No
     View Results