STUMP » Articles » Kentucky Pension Brou-Ha-Ha: Updating Current State of Play » 27 November 2017, 03:05

It’s been almost two weeks since my last Kentucky pensions post.

There have been stupid developments. This is a lot less fun than the Cook County soda tax.

I am disappointed in all the squawky players.

via GIPHY

GOVERNOR BEVIN: GET YOUR CRAP TOGETHER

The main disappointment has been the governor of Kentucky himself. That said, given his prior activities, like trying to appoint somebody who wasn’t qualified to be the chair of the Kentucky Retirement Systems board, I can’t say I’m surprised.

So I’m annoyed by stories like the following: Bevin administration refuses to release report on pension bill’s cost to taxpayers:

FRANKFORT, Ky. — Gov. Matt Bevin’s administration refused to release a report Monday on how much its proposed pension reform bill would cost taxpayers and how it would impact pension plans within the Kentucky Retirement Systems.

The report performed by a consultant for Kentucky Retirement Systems was scheduled to be discussed by the system’‘s board at its meeting Monday morning.

But John Chilton, Bevin’s budget director and a member of the retirement systems’ board, told reporters after Monday’s meeting that the analysis is preliminary because the proposed 505-page reform bill is still a “draft” and is certain to be changed before the General Assembly votes on it.

And this: Bevin wants redo of predicted $4.4 billion cost of his pension plan for teachers

Gov. Matt Bevin’s administration wants a redo on a report estimating the cost of his proposed plan to overhaul the Teachers’ Retirement System of Kentucky — an eye-popping $4.4 billion that startled some of the lawmakers Bevin is trying to win over.

The Bevin administration — which has blocked the release of a similar analysis of how much his bill would cost the Kentucky Retirement Systems — on Tuesday called on actuarial consultants Cavanaugh Macdonald to try again on a report for the TRS, which provides pensions for more than 50,000 retired educators.

“Cavanaugh Macdonald’s initial analysis of the current pension proposal uses assumptions that are very different from those in its annual valuation reports, including significant changes in retirement patterns and an investment return assumption very different from the rate recently approved by the TRS Board,” the governor’s office said in a prepared statement.

…..
State budget director John Chilton sent a letter to Cavanaugh Macdonald on Tuesday challenging a list of factual assumptions that he says the actuarial consultants used to support their analysis, including:

▪ That all of the teachers eligible to retire would do so on June 30, 2021, when the proposed pension bill would end its one-time opportunity for longtime teachers to enhance their pension benefits beyond the 27-year mark. Currently, 20 percent of Kentucky’s 42,020 teachers are eligible to retire today, an exodus that Bevin hopes to avoid by offering them that window.

▪ That every teacher after 2021 would retire on a pension at the 27-year mark and not continue to work any longer while continuing with a newly opened defined-contribution account, as the pension bill would allow. Many Kentucky teachers presently work for 30 or more years, but nobody knows how that would change under a new retirement system.

▪ That investment returns enjoyed by the TRS pension fund would average 6 percent a year, while the TRS board of trustees has adopted a 7.5 percent assumed rate of return. Chilton raised similar concerns with the assumptions used about the payroll growth rates at school districts and regional universities that belong to TRS.

Chilton also requested that instead of using a 20-year projection, Cavanaugh Macdonald provide a 30-year or 35-year projection that could show how Bevin’s proposed pension bill “contemplates full funding” by the end of that longer period.

There are so many things I find annoying about this, but here is the main problem.

Bevin knew, for over a year, he wanted to make huge changes to Kentucky pensions.

To get this done, one really needs to build up trust that:
1. These changes are necessary
2. The changes will fix the problem (however one defines the problem)

Waiting to get analyses done and then hiding analyses because you don’t like the results… doesn’t make one feel good about either item.

I am extremely skeptical on #2.

Changes are very necessary for the Kentucky pensions. I’ve known this before Bevin came into office.

But if he can’t get someone like me to buy that the proposed changes will fix the problem… then, you’ve got a serious credibility problem.

I do not have any skin in the Kentucky game. I’m not the person who needs to be convinced. It’s not my benefits that would be affected. It’s not my taxes that go to fund Kentucky pensions.

But I look at these proposals (and not just Bevin’s) and I don’t see how any of these fix the ginormous unfunded liability that has built up.

ALTERNATIVES OFFERED AND OTHER COMMENTARY

Here are other people’s comments/proposals:

• Going to 401(k)-style retirement for teachers will reduce costs
• OPINION: Support Kentucky pension reform, and teach students investment basics
• Increased choice solves pension crisis
• Actuaries update size of Kentucky’s public pension hole; analysis of pension reform bill is kept secret
• Column: Why Ky. teachers aren’t ‘jumping for joy’
• Pension analysis kept secret, for now
• Bevin seeks redo of teacher pension analysis
• Pension counterproposal needs to be considered
• KY Chamber President focuses on pension crisis, legislative priorities during Corbin visit
• GOP leader still believes in marijuana as pension solution
• County school board tracks elementary school progress, pension reform
• Kentucky Calls for Redo of TRS Pension Bill Analysis
• Kentucky Needs Pension Reform
• Analysis of proposed pension reform at KTRS shouldn’t “be surprising to anybody that understands how these proposals work,” head of KCEP says
• Kentucky pension reform would get huge boost simply by speeding up tax payments | Opinion
• OPINION: Support Kentucky pension reform, and teach students investment basics
• “Preliminary” pension reports and perennial problems with public access
• KENTUCKY NEEDS PENSION REFORM

Blah.

CAN’T ANYBODY HERE PLAY THIS GAME?

The thing is, it seems that it’s likely to end up like so many legislative proposals this year, in the country as a whole. As in: a bunch of hot air will be blown, kerfuffles will fluff up, and ultimately nothing substantive will pass.

This is not unique to Kentucky, but Kentucky’s awful underfunding is matched by only a handful of states (like New Jersey, Illinois, and Connecticut).

I do not fault the Kentucky legislator who proclaims that the votes aren’t there for Bevin’s proposals. Bevin has done an awful job of putting his proposals together or doing the necessary work to get support.

Bevin may still go for a special session to deal with the pension problem, but really?

This disaster has been decades in the making. Yes, the money is running out, but if you want a long-term fix, you don’t need to do a quarter-ass effort to fix the problem.

Bevin, I highly recommend punting on a special session this year and actually putting in the necessary work before putting out a proposal. Because it’s obvious the homework wasn’t done for this set of proposals.