Kentucky Launches Pension Reform Website in Preparation for Special Session
The Kentucky Office of the State Budget Director on Thursday launched a comprehensive new website aimed at keeping Kentuckians informed on the state’s pension crisis, as the Bevin Administration works with state legislators in preparation for a major legislative push to overhaul all three public pension systems.
Visitors to www.KentuckyPensions.com can view detailed reports, obtain answers to frequently asked questions, see a glossary of key terms, follow the latest developments, and offer feedback to the Administration.
This new website is being launched in advance of a major report by a consulting firm to be released on August 28 that will outline best practices and actions needed to shore up the beleaguered pension system. The report by PFM Group of Philadelphia will be presented to the legislature’s Public Pension Oversight Board and will set the parameters for systemic changes to Kentucky’s $64 billion unfunded pension liability.
Immediately after the report is unveiled, the Governor and legislative leaders in the House and Senate are expected to begin deliberations on what systemic changes they want to adopt. It will take weeks to draft legislation and the Governor is expected to call a special session of the General Assembly sometime in October to pass the public pension reforms. Lawmakers want to tackle the pension reforms in a special session so they know how much structural reforms will save the system when they develop the state’s next two-year budget beginning in January.
The state’s Fiscal Year 2018-19 budget cycle is expected to be very difficult to balance with so much revenue needed to fix the ailing pension system. If the pension reforms are successfully dealt with in a special session, lawmakers will be able to consider some form of tax reform provisions in the 2018 budget session to create growth in Kentucky’s economy that would theoretically balance the budget. What level of tax reform will be addressed in the 2018 legislative session has yet to be determined.
The state hired the PFM Group in September 2016 to provide an in-depth analysis of the Teacher’s Retirement System, Judicial Form Retirement System and the Kentucky Retirement Systems. Governor Bevin requested the study to advise lawmakers on the current and projected future of the systems, providing a comprehensive study that would assess the overall health of Kentucky’s pension systems, reasons for the current financial state of the plans, and recommend best practices and future actions needed to shore up the plans.
The launch of the website is the first step by decision makers to develop an information, communication and public relations strategy to garner public support for the pension reforms. The recommendations are expected to sweeping, dramatic and controversial.
“We hope that retirees, current state employees, and all Kentuckians will find this website to be a helpful, easy-to-navigate tool,” State Budget Director John Chilton said in a press release launching the new site. “As we address this vital and complex issue, we want to educate the public, dispel myths, and set the stage for constructive dialogue. We will continue to update the website as things progress.”
Credit rating agency Standard & Poor’s has ranked Kentucky’s pensions as the worst underfunded in the nation—with just 37.4 percent of the state’s total current obligations funded, compared to a national median of 74.6 percent. With $7 billion in negative cash flow over the past decade, Kentucky's pension spending has been increasing nearly five times as fast as revenues. This effectively reduces money available for other important budgetary priorities such as K-12 education, Medicaid, and infrastructure. Using prior funding patterns, experts conclude that Kentucky Employees Retirement System, Non-Hazardous (KERS-NH), will run completely out of money by the year 2022.