The following is an op-ed from Kentucky Chamber of Commerce President and CEO Dave Adkisson.
Everyone has an opinion on pension reform. The Kentucky Chamber has long advocated for serious pension reform—publishing reports, writing newspaper columns, urging legislative action, even putting our message on billboards. We have been sounding the alarm for years. And now it appears that Kentucky is getting close to taking meaningful action to address the pension crisis that threatens the economic future of our state. With billions in unfunded promises to public workers, it isn’t a matter of being “for” or “against” pension reform. We must act.
This crisis has put Kentucky under water financially and threatens the retirement security of state and local government employees and teachers. But it also has a critical, and negative, effect on all Kentucky taxpayers. With the current pension liabilities, it would cost every man, woman and child in the Commonwealth more than $10,000 to dig ourselves out of this hole. Without reform, we will soon see drastic cuts to education, transportation, public safety – all of which are critical to the business community and to all Kentuckians.
With such dire consequences, we simply cannot keep patching the hole or try to fund our way out of this problem. The time has come for structural reform of the state retirement systems.
There have been many points raised in the recent debate on the merits of moving new state employees to a defined contribution (DC) 401K type plan, instead of the traditional defined pension benefit plan. The Kentucky Chamber has been a vocal supporter of this, as it mirrors what the business community has done for years. And it is important to remember that reforms enacted in 2013 created a modified 401K-type plan for state employees hired after January 1, 2014. So this approach is nothing new to the state and thousands of state employees are already in such a plan.
The primary objective of offering a DC retirement plan is to provide more public-sector employees with a retirement benefit they can retain if they switch to a private-sector job while also reducing taxpayer risks created by the reliance on unrealistic assumptions for the current plans.
It took decades for Kentucky to get so far under water in pension debt. But the business community, through meaningful structural pension reform spearheaded by the Governor, Speaker of the House, Senate President, and legislative leaders, is optimistic that the commonwealth will start working its way back to the surface while honoring its obligations to public employees and retirees.