The Kentucky state workers’ pension system is by some measures the worst funded pension in the entire country with an estimated $70 billion dollars of unfunded liabilities. A recent audit of the pension system found that the plan has had $6.9 billion in negative cash flows since 2005.
At $40 billion, Kentucky teachers make up the largest portion of this unfunded liability. But even in the face of impending insolvency, many teachers in Kentucky are still protesting the slightest changes and cuts to their compensation that have been proposed in an effort to prevent catastrophe.
A minor reform bill recently signed into law that Governor Bevin admits “doesn’t come close” to solving the pension crises, and in no way changes current worker or past retiree’s pension or healthcare benefits, has been met with hysteria.
Many teachers and the Kentucky Education Association (KEA), the teacher’s union, are demanding the state raise revenue instead of cutting costs. The grand plan by the KEA and their lobby of teachers opposing pension reform is to take more money from those that are already responsible for paying teacher incomes - the Kentucky taxpayer. Instead of making concessions in an effort to fix their own underlying problem, they want a bailout. Not only would such a bailout set a very dangerous precedent, but for reasons I will explore below, it would be economically disastrous for Kentucky’s economy and private sector.
To put the $70 billion of unfunded pension liabilities in perspective, Standard & Poor's has ranked Kentucky's public pension as the worst-funded of any state in the US, with just 37.4 percent of the money it needs to pay obligations to retirees. Moody's has ranked Kentucky as having the third-highest pension debt when measured against a state's capacity to pay it off. With just over $10 Billion in total annual tax revenue for Kentucky’s General Fund, every state run institution and service in Kentucky would need to close for nearly 7 years just to fund past pension liabilities.
But despite this fact, the KEA and supporting teachers still insist that the state can somehow tax its way to solvency.
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DelMarVa's Premier Source for News, Opinion, Analysis, and Human Interest Contact Publisher Joe Albero at alberobutzo@wmconnect.com or 410-430-5349
2 comments:
Hmm... could it be that Kentucky is legally bound to fund the pensions they themselves enacted? That would be like the Orioles telling Machado that he needs to take a voluntary pay cut for the team since fan attendance is down. Sorry, a contract is a contract. Oh wait, we hate teachers so nevermind.
The taxpayers elected the officials who set up the budget. The cost of a Master's degree is 5 years and 100k plus. Those teachers paid their cost and signed a contract. They worked 30 plus years and I am sure made weekly contributions to the system much like people make contributions to there 401k. In Maryland the contributions are 7 percent of pay. Also, only teachers that work 10 or more years even get to draw a pension. On a 50k average salary that is 3500 contributed a year. I have an agressive mutual fund that I contribute 800 dollars to a year. It's estimated that I am going to have 220k in that lone account by retirement with no match. Teachers are not to blame here. If the taxpayers matched the contribution of the teacher in my same account the total estimate would be closer to 2 million at retirement. Why are we basing teachers when we know they have held up their end of a contract?
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