Claims of paltry pension funding ring hollow

Published 8:42 am Tuesday, November 7, 2017


Guest columnist

The day the Houston Astros won this year’s seventh and final World Series game, several hundred progressives gathered at the Capitol in Frankfort to protest Gov. Matt Bevin’s pension-reform plan, claiming inadequate funding and lack of appreciation.

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Neither event was unexpected.

The Houston Astros claimed their first championship after winning a study 101 games during the regular season.

The anti-pension reform groups, meanwhile, showed up in Frankfort with “Bevin is a bully” signs, shouting prefabricated, simplistic mantras like “don’t cut it, fund it.”

This “fund it” claim is most puzzling, considering Bevin proposed and the legislature agreed to spend $1.2 billion more on public pensions during the current biennial budget before the reform plan was even a glint in its creator’s eye.  

About $2 billion — more than a sizeable 18 percent — of the commonwealth’s $11 billion General Fund this year goes toward public pensions.

This additional funding occurs even as the commonwealth faces a $200 million budget deficit and Bevin is asking most state agencies to slash budgets by 17 percent.

It seems appropriate to remind these malcontents that the commonwealth’s budget consists of more than funding for any one item or group, including state workers.  

Simply raising this issue brings charges of not appreciating public workers.

“I can assure you that no one values them as much as someone who has seven children, so we value our teachers,” Bluegrass Institute Pension Reform Team director Bill Smith said on “Kentucky Tonight,” KET’s public-affairs program. “We also have a state that’s in (a) dire financial situation, so we have to make changes; we’re going to have to change the system.”

Whether you live in Pikeville or Paducah and your primary concern is the state’s credit rating or the availability of adequate dollars for education, transportation, Medicaid and public safety, Kentucky’s $48 billion-plus pension liability threatens to harm the state’s economy and crowd out funding for other government services and programs.

Bevin’s proposal in some ways doesn’t go far enough.

Instead of implementing a hard freeze for current beneficiaries, immediately ending the existing unsustainable plan and resetting benefit factors and accrual rates to affordable levels, which would ensure the plans’ solvency and decent benefits for workers, while better protecting taxpayers, Bevin’s proposal opts for a soft freeze, allowing current employees to continue accruing benefits at existing rates until they reach 27 years of service, placing new hires in a 401(k)-style plan and protecting existing retirees from any changes.

The plan continues to deepen the state’s unfunded-liability hole, which will take 30 years to completely fill.

Still, government workers are dissatisfied.

They bemoan most meaningful reforms, including cost-saving recommendations recently released by the PFM Consulting Group.

Raising to 65 the age workers could retire to receive full pension benefits?

“No,” they shout.

Ending the costly practice of teachers using accumulated sick days to enhance their lifetime pension benefits?

Are you kidding?

Contribute a little more for health insurance?


Yet these same protestors get strangely quiet about PFM’s proposal to add $700 million in spending annually in addition to the $2 billion Kentucky will spend this year for retirement benefits.

Such an increase would drive up total pension costs to a whopping 25 percent of the entire budget.

Of course, no individual likely has as much invested in Kentucky’s pension system as the mysterious eastern European, who Sports Illustrated reports correctly picked the winner in each of the first six games of this year’s World Series and collected $14 million in winnings, before going home and refusing to bet on the seventh game.

I’ll wager that no matter how much this legislature funds public pensions, the naysayers will never admit: Spending, not revenue, is the problem.

Jim Waters is president and CEO of the Bluegrass Institute for Public PolicySolutions, Kentucky’s free-market think tank. He can be reached at and @bipps on Twitter.