The Kentucky Chamber of Commerce sent a letter to Gov. Steve Beshear, members of the General Assembly and all 2012 candidates for the General Assembly encouraging them to start working toward consensus and meaningful reforms to Kentucky’s public employee pension system. The General Assembly passed legislation in the 2012 Session that calls for a task force to study the issue during the interim. That task force started their work this week by hearing updates from the Kentucky Retirement System and an overview on public employee pension trends nationwide from the Pew Center for the States and the Arnold Foundation.
With Kentucky businesses generating an estimated 40% of state revenue through the payment of various taxes, the business community shoulders a significant share of the cost of funding state pensions. Many of these businesses are having problems offering their own benefit plans, much less one as generous as Kentucky offers to public employees. Of particular concern are some of the findings that suggest our pension systems are not on a sustainable path:
- Kentucky’s public pension systems currently face more than $30 billion in unfunded liabilities. This has caused a downgrading in our bond rating by two internationally respected financial firms.
- Since 2008, the reported unfunded liability of the Kentucky Employees Retirement System has increased by more than 17%.
- The Pew Center on the States reported last year that Kentucky’s pension system is funded at only 58% of liabilities, compared to a national average of 78%.
- Kentucky state employees receive a defined benefit pension plan, a benefit that only 20% of Americans age 50 and over currently receive.
Another key consideration Chamber urged lawmakers to consider is the fiduciary responsibility of Kentucky’s pension boards. These boards generally view their responsibilities from the primary vantage point of fiduciary responsibility for administering benefits and to a lesser degree for controlling costs (e.g. health care costs). The next meeting of the Pension Task force will be July 24, 2012. They are expected to meet bi-monthly through November.