The final phase of an audit being conducted on the state’s pension systems will be released at the in the coming months, allowing for serious conversation to begin on pension reforms expected in the near future, according to the chair of the Public Pension Oversight Board who discussed the audit Monday.
Ahead of those results, KET’s Kentucky Tonight hosted a show Monday evening to discuss what Kentuckians can potentially expect from pension reforms featuring Kentucky Chamber President and CEO Dave Adkisson, state Sen. and chair of the Public Pension Oversight Board Joe Bowen, state Rep. James Kay of Versailles, and Kentucky Center of Economic Policy Executive Director Jason Bailey.
Many of the panelists agreed that the huge unfunded liabilities faced by the pension systems pose the biggest threat to Kentucky in decades. As a special session to deal with reforms to the retirement systems and tackle tax reform later this year is still a priority of Kentucky Gov. Matt Bevin, many are looking for solutions in order to keep the promises made to the state’s public employees while also being financially responsible to the taxpayers.
Kentucky Chamber President Dave Adkisson said 2017 is the year to deal with the pension crisis because the longer lawmakers wait to address persistent problems within the systems, the more taxpayers are on the hook for the bill and the less secure the benefits of workers become.
KET Tonight host Renee Shaw asked Adkisson about the Chamber’s efforts to sound the alarms on the issue and a campaign about the pension crisis from the Chamber in 2016 describing the debt faced by the state and the calculation that it would take more than $8,000 from every man, woman and child in the Commonwealth to pay for the debts.
Adkisson noted that with the new, lower assumptions recently adopted by the Kentucky Retirement System (KRS), that figure is now closer to more than $10,000 from each of the more than 4.4 million people in Kentucky. The Chamber president also noted that the state’s largest business organization has been talking about this issue for ten years because the business community recognizes the financial threat the pension crisis poses to all other areas of state government as it will take billions to fix and continues to cause Kentucky’s credit to be downgraded.
In discussing how the state will address the severe underfunding of the state system and shore them up for the future, Rep. Kay said funding is key component, and stated that the state has to make the “mortgage payment” owed to the system.
Sen. Joe Bowen agreed that the money has to be found to make the Actuarially Required Contribution (ARC), but also said structural changes will likely have to be made to fix the problem long term.
Bailey argued that this is not quite a crisis situation and the systems don’t have to be fixed overnight.
Bowen countered the argument by pointing to the very low funded numbers faced by the system and stated if there was a market downturn, the systems would be facing an extremely dire situation.
Adkisson also cautioned the danger of the argument presented by Bailey, noting that the “things will get better” attitude has been prevalent in Frankfort for years and this is what has put Kentucky in the current situation.
Discussing the inviolable contract, panelists talked about many items that are outside the contract that will likely be looked at in reform talks including the retirement age, a spike in benefits because of sick time accumulated over a career, and more.
Adkisson stated that changes will have to be made because of factors including people living more than 16 years longer on average today than when the system was created. He also noted that the legislature will have to be careful in making those changes as to not cause an issue within the systems and force retirements which could cause more strain on the systems.
Sen. Bowen stated during the program that he has been told that the final phase of the audits on the pension systems will be presented to the Public Pension Oversight Board at its July meeting.
The third part of the audit is expected to contain recommendations on how to fix the systems in order to pay down the debt and make the systems more sustainable for the future.
Once that is released, more serious conversations with concrete concepts and changes will begin ahead of a potential special session expected this fall.