Chamber puts forth responsible approach to deal with teacher pensions
During the October meeting of the Governor’s Kentucky Teachers Retirement System (KTRS) Work Group, Chamber President Dave Adkisson suggested a shared responsibility approach to dealing with KTRS, describing it as an approach where various groups could work together to support a solution that responsibly protects teacher pensions, while being mindful of long-term costs to all Kentuckians. Modest structural changes, paired with appropriate funding increases would steadily bring the current system from 53 percent funded to fully-funded over a 30-year time frame.
Until this meeting, the majority of the focus has been on understanding the challenges, with some arguing for the issuance of a $3.3 billion pension obligation bond to infuse cash into the system and prevent any significant structural reforms. Others have noted the financial risk and political volatility of bonding and continue to question the overall sustainability of a defined benefit system in modern times where years of expected work have not increased as life expectancy has. As a result, most private employers have transitioned to 401K retirement plans.
William B. “Flick” Fornia, a pension expert consulting with the group, presented several different scenarios to reach full funding over a 30-year timeframe. During his presentation, a fairly clear view emerged that a combination of several options will be required to solve the issue. Structural changes to benefits will not be enough to solve the issue. Conversely, the state budget will not be able to absorb the funding levels needed without changes.
Chamber President Dave Adkisson noted, “The only way the legislature is going to resolve this deep hole is for folks on both sides of the ideological divide to come together and support a solution that recognizes demographic changes will require some benefit changes and increased funding. Without a consensus that can garner support, the problem will worsen, will probably become more politicized and solutions will become more painful for all involved.”
Despite the push to find consensus, it will be a challenge. Teacher groups continue to push to preserve benefit levels and the debate surrounding bonding is politically volatile. The next meeting of the KTRS workgroup will be November 6, 2015, when members will hear more about the costs of various options, attempt to reconcile some of their differences and will begin the process of writing a final report to be delivered to the legislature.
Click here for detailed information about the Governor’s KTRS Work Group, download the presentations and watch the meetings online.