Gov. Steve Beshear signed an executive order today creating a 23-member work group tasked with making recommendations to stabilize the finances of the underfunded Kentucky Teachers’ Retirement System, the public pension plan that serves over 120,000 active and retired teachers.
“Our teachers are the foundation of our educational system for the future of our children and grandchildren,” said Beshear in a press release. “We must assure that the Kentucky Teachers’ Retirement System is able to fully honor our commitments to our teachers and those who retired from teaching. Today I’m asking a group of experts to find ways to ensure the future of the KTRS.”
Though the press release said KTRS had a $14 billion unfunded liability and was only 53.6 percent funded in 2014, due to new federal accounting standards, those figures are currently $21.6 billion and 45.6 percent — making it one of the worst-funded teachers’ pension plans in the country. A Democratic effort to infuse KTRS with a $3.3 billion bond passed the state House in this year’s session of the General Assembly, but Senate Republicans did not go along, saying bonds were too risky and the plan needed to be studied further.
The 23-member panel is heavy on Beshear administration officials, school administrators, teachers’ union representatives, as well as two designees of House Speaker Greg Stumbo and statewide Democratic elected officials Auditor Adam Edelen and Treasurer Todd Hollenbach. The work group also includes the CEO of the Kentucky Chamber of Commerce and two designees of Republican Senate Leader Robert Stivers.
“I am pleased with the new working group to address issues with KTRS,” Sen. Stivers said in the release from Beshear. “I appreciate the Governor’s willingness to take action on a very serious issue that is definitely a priority for all legislators. This will not be a quick fix, but rest assured that the Senate Republicans are committed to finding long-term solutions to make this system viable in perpetuity for teachers and all Kentuckians.”
However, Stivers’ Republican colleague on the other side of the Capitol Building, House Floor Leader Jeff Hoover, criticized Beshear for acting unilaterally and stacking the deck against conservatives in the makeup of the work group.
“Governor Beshear had a real opportunity to create an independent, non-partisan panel to give a thorough review of KTRS in an effort to make substantive recommendations to solidify the system,” said Hoover in a dueling press release. “Instead the Governor chose to fill this task force with self-serving special interest groups that have been part of the problem, not part of the solution … I once again call for an independent panel with the foremost experts in areas like investments and actuarial audits to be appointed so we can deliver on our promise to teachers that they will have a stable retirement system for years to come.”
Though the separate Kentucky Employee Retirement System for state workers has seen its funding ratio decline further to become the worst-funded public pension plan in the country, Stumbo touted their 2013 pension reform bill, saying in a statement that it proved “we can take on a project of this size, as we did with state retirees, and I’m confident we can do it again in 2016 for our teachers — they deserve no less.”
Beshear’s release says the work group will submit its recommendations to improve the fiscal solvency of KTRS in a report on or before Dec. 1 of this year, after reviewing best practices in other states on pension benefits and reviewing funding options.
Kentucky’s public pension crisis is continuing to draw the concern of credit rating agencies, as its current grade is among the lowest in the country and recently caused one investment firm to “remain highly selective when purchasing bonds issued in the state.” The fiscal solvency of KTRS is especially concerning for teachers, who are not eligible for Social Security benefits in the case of their pension plan not being able to make payments.