The Kentucky Chamber of Commerce noted Monday on KET that examining projections for the state’s woefully underfunded retirement systems shows that funding alone will not solve the pension problems and additional reforms will have to play a role in any fix in order to shore up the systems.
Kentucky Education Television’s “Kentucky Tonight” host Bill Goodman hosted state Sen. Joe Bowen of Owensboro and state Rep. Brent Yonts of Greenville, co-chairs of the Public Pension Oversight Board, Jason Bailey, executive director of the Kentucky Center for Economic Policy and Kentucky Chamber Senior Vice President of Public Affairs Bryan Sunderland on Monday night to discuss the woes facing the state’s retirement systems.
The Kentucky Chamber has expressed the urgency needed to address the persistent problems in the Kentucky Retirement System (KRS) and the Kentucky Teachers’ Retirement System (KTRS), noting that the funding woes are the most significant financial threat to the state.
After years of underfunding KRS by governors and legislators coupled with economic downturn, less than stellar investment returns and changing landscape in retirement ages and life spans of retirees hurting both systems, the state has found itself with a dangerous shortfall in the retirement systems and a debate over how to fix the problems through funding, reforms, or a combination of both.
All members of the panel discussed the need for new money into the system and noted the need for tax reform in order to find those dollars. Sunderland stated that the Kentucky Chamber is in favor of reforms to the tax code that will grow the economy and make the state more competitive. However, in response to Bailey’s statement that the state will have to fund its way out of the pension crisis, Sunderland said that is not a solid solution on its own.
“Even if we raise taxes in some way, generate ten percent more revenue in our general fund—a billion dollars more a year—if we put a billion dollars a year into our pension systems for the next 20 years we still wouldn’t fully fund them and you wouldn’t have a single dollar left over for education, for text books, for teacher raises. All of that money would go into the pension system,” Sunderland said (at 17:00 in the video). “We are not going to be able to fund our way out of this. We are going to have to look at additional reforms and we are going to have to make sure the money and the systems are run efficiently to make sure we are squeezing every dollar out of investment.”
Sunderland noted that the Kentucky Chamber has called for audits of the systems to examine the full magnitude of the problem. The Chamber has called on state Auditor Adam Edelen to conduct a full performance audit of the Kentucky Retirement System, an examination with a deeper scope than reviews that have been done in the past.
“We want to see how well the systems are being run, why we are not meeting the benchmarks set by other states, and lets figure out what needs to be done before we infuse a lot more money into the system we need to make sure this money is going to work, not only for the taxpayers but for the people that were promised benefits who are becoming increasingly concerned they are not going to be there,” Sunderland said (from 10:20 in the video).
In an interview with the Kentucky Chamber, Edelen said he is still interested in the audit request and will be looking to find the funding from the General Assembly during the budget session in 2016 as he said he believes transparency is needed within the system.
A letter sent by the Kentucky Chamber to legislators asking the Legislative Research Commission to exercise its authority and amend the budget instructions to ask the Governor to provide what percentage of the Annual Require Contribution (ARC) and the source of funds before presenting it before the legislature and the public (discussion at 45:00 in the video).
The KET panel also discussed the creation of a new work group to examine KTRS appointed by the governor which will begin meeting in July. The group, which Kentucky Chamber President Dave Adkisson will serve on, will examine the system and possibly bring in outside experts to work to find solutions to the issues within the system.
See the full video from KET’s “Kentucky Tonight” below: