STUMP » Articles » The Kentucky Pension Mess: Ain't Getting Cleaned Up Now » 14 March 2018, 20:17

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The Kentucky Pension Mess: Ain't Getting Cleaned Up Now  

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14 March 2018, 20:17

I saw this tweet a couple days ago:


I’ve not been blogging much about the Kentucky pension mess going on right now, other than my Friday roundups.

This is partly because my assumption nothing useful is going to get passed, and even if it did… it would go nowhere.

I already saw this happen in Illinois, years ago. And they still have the crap hanging over their heads.

QUICK HISTORY

I have written about the Kentucky pension mess before.

Here are some key posts:

Kentucky has some of the worst-funded pensions in the U.S. There are many reasons for it, but the primary reason is they’ve never put enough money in the pension funds, and that includes the “good” fund of CERS: Kentucky County Pensions: 60 Percent Fundedness and Decreasing is Awful

How did [CERS] get that way? Well, for one, those “full” payments you were making weren’t as full as you thought. The high fundedness early on may also have been an illusion, due to valuation assumptions. Lowballing the ARC & undervaluing the accrued liability tend to go hand-in-hand.

To be sure, they’ve also underperformed investment-wise for ERS and CERS — so there are things that do need to get fixed there. But it still wouldn’t be enough to get them out of their extremely deep hole.

Given how big the problem is, it will likely take some extreme efforts to fix — that can be amending the state constitution in order to allow diminution of pension benefits; raising taxes drastically; requiring much higher contributions from public employees; changing the nature of the benefit structure; etc.

One would need careful actuarial analysis – if you can’t even fill the hole with extremely optimistic assumptions, then this is all bullshit.

One would need careful legal analysis – some changes may need more than legislation, but actual amending of the state constitution.

More important than anything else is one would need political buy-in — from the voters, from the taxpayers [not the same thing], from the public employees, and from the politicians who will get blamed if everything screws up.

So let’s see what sort of crap is going on, and why I’m angry at the lot of them.

UGLY POLITICS OVER UNWORKABLE PROPOSAL

Item 1: Not releasing an actuarial analysis of earlier proposal… and then suing over it

Kentucky Sues to Block Pension Reform Analysis Release

Kentucky Gov. Matt Bevin is suing the Kentucky Public Pension Coalition (KPPC) to reverse the release of an analysis of his pension reform plan by the state’s attorney general.

The lawsuit was filed against KPPC Coordinator Ellen Suetholz, who had filed an open record request in 2017 for the release of the actuarial analysis of Bevin’s proposed pension reform plan. In February, Kentucky Attorney General Andy Beshear ruled that the office of the state budget director violated the Kentucky Open Records Act by refusing to turn over an actuarial analysis of a draft pension bill that had not been filed in the state’s general assembly.

In court filings, the governor’s office is asking the court to reverse Beshear’s decision, arguing that the analysis was “preliminary” and thus not subject to disclosure. It is also asking the court to conclude that the state’s budget director complied with the state’s Open Records Act, and offer any other relief to which the budget director is entitled.

I cannot comment on the legal issues here, but the point is that Bevin asked for some very large changes, didn’t ask for an actuarial analysis til later, and then hid the analysis.

The current proposal also doesn’t have an actuarial analysis, as far as I know.

Item 2: Twisting arms over votes

Louisville cop’s widow, FOP say death benefits bill being obstructed over pension reform

FRANKFORT, Ky. – The widow of a Louisville Metro Police officer killed in the line of duty last year and an FOP lobbyist claimed Tuesday that pension politics is holding up a bill that they say will assure fair benefits to families of officers killed in the line of duty.

“I know that my husband would be livid if he knew this was happening,” said Ashley Rodman, widow of Nick Rodman, the Louisville Metro Police officer killed in the line of duty a year ago. Rodman spoke to reporters after the bill to fill gaps in current death benefits was not heard by the House budget committee.

She said she believes some legislators are obstructing the bill because the FOP opposes the Republican majority’s priority bills on pension reform and workers’ compensation.

Here is another piece, from the AP: Kentucky lawmaker punished for pension opposition, she says

FRANKFORT, Ky. (AP) – A Republican state senator in Kentucky says GOP leaders are punishing her for her opposition to a proposal that would overhaul the state’s woefully underfunded pension system.

Sen. Alice Forgy Kerr sponsored a bill that would require pharmacists to tell patients the importance of destroying unused prescription opioids. The bill was headed for a vote Tuesday, but GOP leaders pulled it from the schedule. Kerr wrote on Facebook it was in retaliation for her opposition to a bill that would temporarily cut benefits for retired teachers while pumping hundreds of millions of dollars into the system.

Senate Republican leadership spokesman John Cox said the bill had a technical issue and was sent back to committee. He said it could be voted on next week.

Now, these claims could be lies. I don’t know.

But the claims are believable.

The politicians may claim for a need to rush the pension reform — after all, my own projections show Kentucky ERS running out of money in less than a decade under a variety of reasonable conditions.

However, very little of the requisite work has been done to show that:

1. The particular proposal will fix the problem
2. That other alternatives are either unworkable or worse than the proposed fix

I assume that this is being rushed because neither 1 nor 2 can be shown. That is my base assumption.

Because I haven’t seen any proof of either. And this unseemly rush does not build trust.

LEGAL ROADBLOCK

I’ve linked various stories about this – but the original proposal AND the replacement have similar legal problems.

A.G. Beshear Declares KY Pension Substitute Still Illegal

Although the Kentucky Senate modified its pension reform bill after Attorney General Andy Beshear cited 21 legal violations with the original measure, Beshear’s office says that the substitute, Senate Bill 1 (SB 1), is still illegal.

“We’ve gone through and looked at that committee substitute and unfortunately, it has failed to fix one issue with the original Senate Bill 1,” Beshear said in a Tuesday video via his social media accounts. “Once again the General Assembly has a version of the bill out there that is both illegal and breaks a solemn promise with our hardworking public employees.”

In response, Beshear announced his office will again send a letter to the general assembly identifying at least 21 violations of the “inviolable contract” and the law in SB 1.

….
In the Tuesday letter, Beshear’s one gripe with SB 1 was the reductions to teacher’s cost of living increases (COLA) from 1.5% to 1%. This was one of many changes to the original bill, which split COLAs down to .75%.

The revised version of the bill was voted in favor by the Senate State and Local Government Committee on Wednesday. The bill now moves to the full Senate, which may consider SB 1 as early as today.

The tone in this AI-CIO piece is weird to me. “Gripe”?!

Look, I think the current pensions – yes, including to current retirees – are going to have to be cut. But if the Kentucky state constitution does not allow this, then you actually have to change the constitution appropriately. This is not a difficult concept.

The same thing happened in Illinois — after what I considered a particularly stupid ruling from the Illinois supreme court, I said that Illinois pension reform was dead unless they actually got off their asses and amended the Illinois consititution. Yes, it’s difficult. That’s the point. This is a tough problem, and if you want to solve a tough problem it’s going to involve a lot of work. SO GET TO IT.

via GIPHY

KENTUCKY PENSION NEWS

Here are all the Kentucky pension stories I grabbed since my Friday post. I may be repeating some of the links seen above.

This is where things stand: trying to ram the bill through the legislature, possibly through political arm-twisting, where almost all the cost-saving items will be almost immediately struck down as unconstitutional.

The teachers aren’t sitting around passively, and they are rallying against the bill. Note: this does not require the teachers having a union to do this sort of thing, you know. They know their interests.

Kentucky TRS is still screwed, by the way. But the bill ain’t going to fix that.

People, don’t expect something magic to come and make all this easy.

SPEAKING OF MAGIC

Hey, Magic 8 Ball, how likely is it that the Kentucky legislature and governor will actually get this fixed this year?

via GIPHY

I’m not sanguine, obviously. There has not been any indication that any of these official people – whether the public employee unions, the legislators of any party, or the governor – have actually sat down and tried to figure out different options and determined the trade-offs.

There are some small things that can be done, but one thing that’s not going to work is just assuming the pension promises will be fulfilled without changing anything.

via GIPHY

Yeah, like that.


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