In a meeting of the new Public Pension Working Group, Kentucky Teachers’ Retirement System (KTRS) Deputy Executive Director and General Counsel Beau Barnes again presented to legislators about the teachers’ pension plan.
The funding of the teachers’ pension system was a key area of discussion during the meeting with Barnes pointing to years during the recession where additional funding over and above their normal request was not allocated by the legislature.
Lawmakers asked questions about this figure to convey the point that regular bills of the system were paid in full throughout the years, even though extra money was not allocated by former governors and legislatures from 2008-2015.
Senate President Robert Stivers asked about the extra funds paid to the system in 2006, pointing to the fact that the system only asked for $42 million over a two-year period in 2006 but are now asking for more than $500 million in additional funds over a two-year budget.
It was noted that in the last two budget cycles, the legislature appropriated the full requests of the retirement system with extra money each year, putting billions of funding into the plan each year.
What is and is not included in teachers’ pension guaranteed benefits was also discussed as Barnes highlighted a lifetime monthly annuity, 1.5% cost of living adjustment (COLA), and access to health insurance as the items included in the inviolable contract and cannot be touched without legal challenge.
Benefits that are not guaranteed in the pension plan include the three percent multiplier to bump benefit payout based on how long a teacher has worked, averaging the benefit payout calculated with highest three years of salary, use of sick leave payout as salary credit bump toward a teachers’ pension, and the specifics of health insurance benefits offered to members of the pension plan as the system is required to offer group coverage, but the specific benefits are not in statute.
On the topic of sick leave, Public Pension Working Group Co-Chair Jerry Miller asked if money is set aside for the sick leave payout of up to 300 days during a teachers’ career to which Barnes answered it is not funded ahead of time, making it an unfunded cost to local school districts and the state at the end of a teachers’ career.
The group also covered changes that proposed pension reform legislation in the 2018 session would have meant for the system. Presenting on the bill that passed through the legislature, Senate Bill 151, Barnes said the bill would have saved over $1 billion over the next 20 years and emphasized the level-dollar funding provision in the bill that would have helped the system pay off its unfunded liability.
Discussing what might be needed moving forward if no changes are made to the system, Senate President Stivers asked if KTRS will continue to need additional funding each year under the current circumstances to which Barnes answered there would likely be continued increases in their funding requests on top of the $1.09 billion given to the system in the current budget.
The group asked Barnes to come back again to present at their next meeting on Thursday to finalize their discussion about the system.