Independent consultants say Kentucky taxpayers need to spend an extra $700 million each year to keep their troubled public pension systems afloat.
That's on top of the nearly $2 billion taxpayers are scheduled to spend on all of the state's retirement systems in the fiscal year that begins July 1.
State lawmakers were briefed on the report Monday. It's the second of three commissioned studies of the state's pension system. The final report will detail recommendations about how the state can raise the necessary funds.
Kentucky has one of the worst-funded public pension systems in the country. Last week, the governing board of the Kentucky Retirement Systems lowered long-held investment assumptions, which added an extra $2 billion to the state's debt.
Overall, the state's unfunded liability is more than $30 billion.
"Whatever we do is not going to be fun. It's not going to be easy. People all over are going to be mad," said Republican Sen. Chris McDaniel, the chairman of the state Senate's budget-writing committee.
The report from PFM Group Consulting said that since 2006, all of the state's retirement systems combined spent $6.9 billion more than they took in. The reasons included lawmakers not spending as much on the system as they should have, bad assumptions from the retirement systems governing boards and a crippling economic recession in 2008.
The result: The retirement system that covers most state workers has just 13 percent of the money it needs to pay out benefits over the next 30 years, making it among the worst-funded systems in the country. Several lawmakers wanted to know how another unforeseen recession would impact the system.
"A significant downturn actually wouldn't make that much of a difference because there's hardly anything there to lose," said Michael Nadol, a managing director for PFM Group Consulting.
Most of the information presented Monday has been known to state officials for years. But State Budget Director John Chilton called it the "most comprehensive and detailed look" at what caused the state's pension problems.
The consultants will present another report by the end of the year recommending what the state can do to fix the problem. Republican Gov. Matt Bevin has said state lawmakers need to come back for a special session to overhaul the state's tax code to generate more revenue to pay off the pension debt. But Republican legislative leaders say little progress has been made on that effort.
"I think it's time now we move beyond the blame game. Today was our day to vent, in some measure," said Republican state Sen. Joe Bowen, co-chairman of the Public Pension Oversight Board. "Now we need to move into the next stage, which is a resolution to this great challenge that we face."
