On Tuesday, Kentucky state Auditor Mike Harmon released a report showing Kentucky’s debt equates to $12,000 for every man, woman, and child in the state and revealed unfunded liability from the state’s retirement systems make up 80 percent of Kentucky’s total debt.
The report from the auditor’s office states the unfunded liability for Kentucky’s retirement systems accounts for $43.3 billion of the $54.6 billion total debt facing the state.
In addition to the $12,000 for each Kentuckian based on the debt, the auditor’s office also said the state’s $11.2 billion bonded debt is equal to an additional $2,535 per Kentuckian.
Click here to read the report released by state Auditor Mike Harmon, “An Examination of The Outstanding Debt and Debt Service of the Commonwealth.”
The new report was released on the same day that many groups associated with the Kentucky Retirement System (KRS) testified in front of lawmakers and expressed their desire to see more money placed into the pension system.
In the 7th meeting of the Public Pension Working Group on Tuesday, advocacy groups with membership in KRS, covering state and county government employees, discussed the changes made to the system in 2013 and potential reforms moving forward as the system faces a funded status of only 12 percent.
Groups representing members of the County Employee Retirement System (CERS) and quasi-governmental agencies stressed the importance of measures passed by the General Assembly in recent years that eased the financial burden on those groups as employer contribution rates continue to rise across the board due to funding issues.
The normal employer contribution for most agencies is now up to 83 percent, placing a large strain on all aspects of operations as much of their budget must go to paying for pensions.
Many agencies and groups have stated publicly they are facing bankruptcy and shutting their doors because of the pension payments.
Quasi-governmental agencies highlighted the fact that many originally got into the pension system, when they are not required, because they wanted to offer a pension benefit as a way to attract and retain people in these jobs. But now the pension payments they face are forcing them to lay off workers, cut back their services, and/or shut the doors to their health departments, rape crisis centers, mental health clinics, and other operations completely.
Sherry Currens, the executive director of the Coalition Against Domestic Violence, shared that these groups are in a situation where they can’t afford to stay in the system as it would take up 1/3 of the budget of many of their centers if they must pay the 83% employer contribution rate others are paying and it would require a $1.8 million one time payout to remove their group from the system, which they don’t have. Currens also stated private donors to groups like this are not going to want to give additional money to pay off pension debts.
The pros and cons of separation of CERS from the larger retirement system were discussed by multiple groups with legislators as many in that pension plan feel they need their own board and investment opportunities since it is funded much differently than the other plans in the system.
No potential reforms or solutions have been discussed or vetted by the Public Pension Working Group thus far. Because all legislators returned to Frankfort on Tuesday to begin the second part of the 2019 session, it is unclear when they will meet again or how often over the coming months.