Although Kentucky faces a $37.9 billion shortfall in its pension systems for teachers and other public workers, putting them among the nation’s worst, the news is cheerier for the part-time lawmakers who control the state budget, including pension funding: Their separately managed, publicly subsidized pension system is 98 percent funded, according to actuarial data released this week.
Compare the numbers.
The primary pension fund for state government employees at Kentucky Retirement Systems has only 12.9 percent of the money it’s expected to need to make future payments. The pension fund for educators at Teachers’ Retirement System of Kentucky stands at 57.7 percent. Overall, the struggling KRS and TRS include roughly 500,000 people.
But then there are the pension funds managed for several hundred current and former state lawmakers at the Kentucky Judicial Form Retirement System. The traditional fund that offers defined-benefit pensions for those elected prior to 2014 stands at 97.8 percent funded. For the newer hybrid cash-balance plan that serves those elected in the last four years, funding stands at 98.1 percent.
The comparison does not sit well with some of those who protested for many years as the Kentucky legislature failed to make the recommended contributions to both the state and teacher retirement systems, helping create the current shortfall.
“Our legislators certainly know how to fund a pension system, don’t they? At least when it’s the system for them,” said Jim Carroll, spokesman for Kentucky Government Retirees, a Facebook advocacy group. “It’s unfortunate that they’ve not done as good a job for others. It’s really just another example of their self-dealing.”
The office of Senate President Robert Stivers, R-Manchester, did not immediately respond to requests for comment. In a prepared statement, House Speaker David Osborne, R-Prospect, said the 2018 General Assembly deserves credit for passing a budget that fully funds the retirement systems for state workers and teachers.
”The budget we passed in the 2018 session fully funded pensions for the first time in 10 years,” Osborne said.
“Recall that this is the first budget that the House Republican majority has written in modern history,” the speaker continued. “We committed over 14 percent of our entire state budget to pensions — over $3.3 billion, the highest amount in history. Additionally, the entire amount proposed for judicial and legislative pension funding for the next two years was moved over to the worst-funded of the public employee pension systems.”
Kentucky’s 138 lawmakers work part-time, sitting in Frankfort for 60-day sessions during even-numbered years and 30-day sessions in odd-numbered years. Most of them hold other jobs or are retired.
They awarded themselves a legislative pension plan in 1980. Then they passed a “pension sweetening” law for themselves in 2005 that dramatically boosts their monthly benefits if they can get a high-paying job in the state’s executive or judicial branches or at a regional state university, even for just a few years. In such cases, on retirement, lawmakers can multiply their length of service in the legislature against the six-figure salary they made elsewhere in state government.
The state contributed just under $5 million to the lawmakers’ $68 million defined-benefit plan over the last two years, with the lawmakers kicking in about $500,000 from their legislative salaries. For the much smaller ($190,911) and less generous hybrid cash-balance plan, the state paid about $31,000 and the lawmakers contributed $82,500.
Last year, when legislative pensions first became public record, it was revealed that some former lawmakers are drawing more than $100,000 in annual retirement income from the system because of second jobs they received in other branches of government.
Officially, legislators can’t tap their pensions until they turn 65 and complete at least five years in the General Assembly. But they can reduce that age requirement by one year for every five years of service in the legislature. The full benefit is also payable to any legislator with 27 years of service.
Last winter, having been stung by criticism of their well-funded pension plan while other retirement systems in the state floundered, lawmakers voted to withhold additional contributions in the next two-year budget. This prompted a veto from Gov. Matt Bevin, who called the gesture “good political optics” but “zero financial sense.” The funding for legislative pensions will have to be made up later, just as it is being made up now, at the cost of billions, for the other public pension funds, Bevin said.
“If the General Assembly wants to send a message that pensions for politicians are not important, they can take action to eliminate them, which I would strongly support,” Bevin wrote in his veto message.
The legislature easily overrode Bevin’s veto.