The Richmond Register

State 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
State News
  • 7-1 Warren-Grimes 1.jpg Warren blasts McConnell on economic issues

    Elizabeth Warren said here Sunday that Kentucky voters have a simple choice this fall in the nation’s most important election.
    They can re-elect Republican U.S. Sen. Mitch McConnell, who the Massachusetts Democratic U.S. Senator said represents the interests of the wealthy and says “no, no, no” to measures to assist the middle class.

    June 30, 2014 2 Photos

  • Healthcare signup in state extended

    While the national health exchange established by the Affordable Care Act — known to some as Obamacare — suffered glitches, crashes and delays, the Kentucky-run exchange, Kynect, often was cited as a national model.
    Nevertheless, those in Kentucky who didn’t sign up before the March 31 deadline will have a second chance to enroll.

    April 3, 2014

  • House sends $20.3 million budget to Senate

    It took four hours and it won’t last long in its present form when it reaches the Republican-controlled state Senate, but the House passed a $20.3 billion, two-year budget late Thursday on largely, but not entirely, party lines.

    March 13, 2014

  • Right-to-work bill dies in House panel

    The sponsor of a right-to-work law in Kentucky knew it had no chance of passing a House committee Thursday.

    March 13, 2014

  • Feds deny giving OK to selenium standards

    When lawmakers wrestled last year with new standards for releasing selenium into streams by coal mines and industry, they were assured by state officials the proposals were based on sound science and approved by U.S. Fish and Wildlife Service officials.

    March 7, 2014

  • Senate panel OKs trial use of cannabis oil

    Rita Wooten and her husband Ricky face an excruciating choice: watch their 4-year-old son suffer from repeated seizures — or violate the law in order to help him.

    February 26, 2014

  • Two honored for work with sexually abused

    It’s Erica Brown Myers’ job to help those who have been victimized by sexual abuse. But helping others can take a toll on the helper as well as the victim.

    February 26, 2014

  • Paul asks Senate for help in 2016 quandary

    Republican U.S. Sen. Rand Paul last week asked Republican state senators to try to repeal a Kentucky law that bars anyone from appearing on the same ballot for more than one office.

    February 24, 2014

  • Republican party split on display in Cave City

    Splits in the Kentucky Republican Party were subtly on display here Saturday evening – if you knew what to watch.

    Around 400 gathered at the Cave City Convention Center for the annual Barren County Lincoln Day Dinner but this one was different from past dinners.

    February 24, 2014

  • Comer positioning with gubernatorial politicking

    The roughly 400 Republicans at Saturday night’s Barren County Lincoln Day Dinner here were primarily focused on the U.S. Senate race and Republican hopes to take over the state House of Representatives this fall.

    February 24, 2014

AP Video
Raw: Families Travel to Taiwan Plane Crash Site Arizona Execution Takes Almost Two Hours Gen. Odierno Discusses Ukraine, NATO at Forum Gaza Fighting Rages Amid Cease-Fire Efforts Mint Gives JFK Coin a Face-lift Creative Makeovers for Ugly Cellphone Towers Ariz. Inmate Dies 2 Hours After Execution Began Crash Kills Teen Pilot Seeking World Record LeBron James Sends Apology Treat to Neighbors Raw: Funeral for Man Who Died in NYPD Custody Migrants Back in Honduras After US Deports Israeli American Reservist Torn Over Return Raw: ISS Cargo Ship Launches in Kazakhstan Six Indicted in StubHub Hacking Scheme Former NTSB Official: FAA Ban 'prudent' EPA Gets Hip With Kardashian Tweet Bodies of MH17 Victims Arrive in the Netherlands Biden Decries Voting Restrictions in NAACP Talk Broncos Owner Steps Down Due to Alzheimer's US, UN Push Shuttle Diplomacy in Mideast
Hyperlocal Search
Premier Guide
Find a business

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

What county fair attraction do you like most?

Amusement rides
Beauty pageants
Flora Hall craft exhibits
Horse shows
Livestock, poultry shows
Truck, tractor pulls
Mud, dirt races
Gospel sing
I like them all
     View Results