The head of Kentucky’s troubled pension system says there’s light at the end of the tunnel, but the light is a long way off.
"For the past two years, we've been seeing increases in funding levels and investment returns. That's the light," said David Eager, executive director of the Kentucky Retirement Systems. "The distance is that it will take perhaps 35 years before we get out of this severely under-funded position."
Kentucky's pension plans for public employees face a combined $40 billion in unfunded liabilities.
In an interview with WKU Public Radio, Eager credited Governor Bevin and this year’s General Assembly for increasing pension funding.
"It's difficult," said Eager. "I commend them because, to the extent that we get an dollar, or million dollars, or a hundred million dollars, it has to come from someplace else, some other agency that also has needs."
In a briefing this week to lawmakers on the Public Pension Oversight Board, Eager said while both the KRS and KTRS plans have negative cash flows, they are much smaller than in previous years. Eager said part of the imbalance is blamed on the number of retirees versus active workers.
"In particular, the KERS non-hazardous, we have 43,000 retirees and 38,000 active employees," explained Eager.
Another issue facing the state pension systems is a spike in retirements. Eager says KRS retirements are up 1,100 this year over 2017. Some lawmakers say the spike is related to fears over cuts to future benefits. Kentucky’s new pension reform law is being challenged in court, in part, for making changes to benefits for new teachers.
Attorney General Andy Beshear's lawsuit claims the state has reneged on promised retirement benefits spelled out in the inviolable contract with public employees. Lawmakers approved pension reform this year that left benefits in place for retired and current teachers. New teachers, however, would be placed in a hybrid cash balance plan rather than a defined benefit plan.
Beshear also argues that the new pension law is unconstitutional because there was no public testimony or actuarial analysis before the bill was passed.