By JIM WATERS

Guest Columnist

Unsurprisingly, the Kentucky Supreme Court upheld Franklin Circuit Judge Phillip Shepherd’s ruling that the pension reform law passed earlier this year by the General Assembly is unconstitutional.

Also unsurprising is that opponents of reform are seizing on the ruling to drive a narrative of continued fiscal insanity by advocating that Kentucky continue down the same path it did in the recent budget — diverting hundreds of millions of dollars from education, infrastructure and social services to increase pension funding to the point where it now consumes 15 cents of every General Fund dollar – without any change in the way benefits are awarded.

Attorney General-turned-gubernatorial-candidate Andy Beshear’s version of the narrative preaches all will be cotton candy and lollipops as long as we continue to dump similar huge boatloads of money into the commonwealth’s deep, dark $60 billion pension hole.

Remaining in such a cozily ensconced cocoon of denial might make it easier for Beshear to get votes from teachers’-union bosses and the constituents they’ve misled into believing that Kentucky’s pension woes can be solved without meaningful reforms.

However, recently articulated evidence suggests such a position is fiscally dangerous.

Despite record amounts of taxpayer dollars spent by Gov. Matt Bevin to shore up the commonwealth’s government-retirement plans — beginning in his first budget, which went into effect more than two years ago — the funding level for the Kentucky Employees Retirement System (KERS), the largest state workers’ pension system, has now dropped to a precipitously low 12.9 percent and, we’re being warned, could go even lower.

The funding levels being talked about to pay Kentucky’s pension debt are staggering.

Edward Koebel, an actuary with Cavanaugh Macdonald Consulting told the Public Pension Oversight Board (PPOB) recently that taxpayers need to ante up nearly $900 million each year for the next quarter-century just to address the more than $14 billion debt for the Teachers’ Retirement System (TRS).

Yet even after spending an additional $1 billion on TRS benefits alone in recent years, the system’s funding level has improved only slightly during the last five years and remains under 60-percent funded, far less than the 80-percent level which actuaries indicate is needed to keep pension funds off life support.

Teachers’-union bosses and shallow politicians have led their constituencies to believe that defined-benefit pension systems like Kentucky’s retirement plan can reload just like they fully funded them in the first place.

However, these systems were designed to keep the bathtub full or at least nearly full and prevent it from draining by providing a mechanism which connects the level of benefits to payroll contributions, investment returns and other factors, such as lifespans.

Beshear, however, holds that — despite a flood of evidence to the contrary — the tub will easily refill by staying the course.

If only that were true.

The attorney general should let Koebel school him on how Kentucky’s pension system reached crisis mode.

In his recent PPOB presentation, the actuary offered a slide showing factors that can cause unfunded pension liabilities, one of which actually “granting benefit increases for service already rendered” as his top reason among several. 

Ah! A ray of light — the light of truth — flickers in that deep, dark pension hole.

What emptied Kentucky’s pension tub was legislators, egged on by the systems’ bureaucrats, succumbing to the temptation of currying political favor to the large voting bloc of state workers, teachers and retirees by increasing public-sector benefits without paying for them.

Reforming how benefits are awarded and creating a new plan for new teachers that won’t implode but will offer a stable, secure retirement for beneficiaries while protecting future taxpayers from crippling debt is what the bill struck down by the black-robed jurists took important steps toward achieving.

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