Amid issues of underfunding within the state’s public pension systems, lawmakers got a preview of the budget requests that will come from the retirement systems during the crafting of the two-year budget in the 2016 session.
Kentucky Teachers’ Retirement System (KTRS) officials explained to legislators Monday they will be requesting an additional $1 billion of new money in the next two-year budget, which would be in addition to the current $688 million contributions per year by the state. On the same day, a Jefferson county teacher filed a federal court suit against the system claiming illegal contribution increases were required of teachers.
Harbin explained that the money would cover past short falls and go to full pension contributions for the next two fiscal years.
KTRS, which is currently just above 50 percent funded, will have to sell over $3.5 billion in assets to pay benefits in next four years if no additional funding found, according to Harbin.
Also on Monday, DuPont Manual High School history teacher Randolph Wieck filed a federal court suit against KTRS, as first reported on by Louisville Public Radio.
Wieck’s lawsuit cites a 2007 U.S. General Accounting Office report saying that “a funded ratio of 80 percent or more is within the range that many public sector experts, union officials and advocates view as a healthy pension system.”
The lawsuit claims that KTRS’ board of trustees overstepped their authority in 2010 by docking teachers at a rate of 13 percent of their pay for pension contributions, higher than the historical 9 percent rate. It accuses the board of violating its fiduciary duty by investing pension money in “high-risk alternative investments” while refusing to disclose “secret” contracts with investment firms for teachers to see.
Also at the meeting of the Public Pension Oversight Board, the Kentucky Retirement System (KRS) leadership explained that the system will request $60 million in additional general fund dollar to pay the full ARC in the next budget. That money would be in addition to the money the system is already getting from the state.
The above chart prepared by the state budget office shows what is spent by the state on the system in one fiscal year. With the additional $60 million from the general fund requested by KRS and the additional $520 million requested by KTRS for the first year of the next budget, the state would be paying $1.57 billion in general fund dollars in 2017 alone.