We keep a September 27, 2013, essay by the Pew Charitable Trusts tucked away on our desk. We keep it as a reminder.
The headline reads: “Kentucky’s Successful Public Pension Reform.” This is followed by a subhead, which reads: “The Bipartisan Effort in 2013 Resulted in Fair and Effective Retirement System for Employees and Taxpayers Alike.”
The fawning report by the left-leaning Pew organization referred to changes to Kentucky’s public employee pension program adopted by lawmakers during the second term of former Democratic Gov. Steve Beshear. Beshear proclaimed at the time that he had “fixed” the troubled pension system.
Pew bought that one hook, line and sinker. It wrote that the 2013 reform “will create a new pension plan for anyone hired after Jan. 1, 2014, require that future cost-of-living adjustments be paid for before they are given (instead of occurring automatically) and include(s) a plan that commits the Legislature to full funding of pension promises in future years.”
On that last point Pew said, “Accompanying legislation was passed that would raise an additional $100 million annually to help pay the estimated $131 million a year needed to make up the gap in Kentucky’s pension contribution.”
This was less than five years ago. And as we all now recognize, it was a total fraud on the part of Beshear and the Legislature. At the time Pew estimated Kentucky’s unfunded pension liability to be $26 billion. Today it exceeds $41 billion.
Pew claimed four-plus years ago that an extra $100 million annually could save the funds. Today legislative leaders have committed $3.3 billion over the next two years just to keep the pensions afloat.
The “new” pension plan for workers hired in 2014 involved a “cash balance” program contributed to by both workers and the state. But it retained the provisions that continue to sink the funds today -- lifetime retirement stipends for current and future state workers including annual cost-of-living increases.
We recite this history because the same game has been playing out in the current foundering efforts to deal with the pension debacle. Republican lawmakers who hold supermajorities in both chambers months ago rejected the essential step. They wilted amid the uproar at Gov. Matt Bevin’s attempt to cap future exposure by converting all future teachers and state workers to 401(k) plans rather than ones that pay lifetime benefits.
Now it appears they can’t even muster the courage to pass a far-more-modest proposal to reduce cost-of-living increases by one-third for up to 12 years. That move -- they claim -- would save $3.2 billion over the next two decades. First we doubt that. Second it is wholly inadequate.
This mere wave at the problem would be on the same level of fraud as the “fix” glorified in the 2013 Pew report. In that regard the fact it is apparently being abandoned is no great loss.
But here is where it leaves Kentucky. We will now commit 15 percent of total state spending for the next biennium to keeping the pension funds afloat. We are doing that by cutting money for higher education and most other government services by more than 6 percent. And we are doing nothing to prevent future pension liabilities from continuing to spiral out of control.
This is a failure of our political system. Because of it we have now joined Illinois in a race to the bottom.
Kentucky’s future is one of financial ruin. We don’t relish the fact. But at least we are willing to tell the truth about it. That is a virtue our politicians appear unable to muster.