Bluegrass Beacon: Will there be a great pension freeze?

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon column is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

The famous Great Freeze occurred when some of the worst cold winter weather in America’s history befell the South at the end of the 19th century, destroying much of Florida’s citrus crop and the economic survival of entire communities along with it.

An interesting phenomenon occurred, however, during that winter, which stretched from late 1894 and into 1895 that may offer a hidden warning about the need to impose a freeze on benefit-accrual rates in Kentucky’s pension systems.

Florida’s Great Freeze actually was two freezes.

The first freeze in December 1894 failed to kill many mature trees and deceptively created conditions for new growth of produce during the warm months that followed, resulting in greater devastation when a harder freeze attacked months later in February 1895.

The effects were so devastating that fruit froze on trees, reducing Florida’s entire citrus production from 6 million boxes to 100,000 boxes annually.

It took five years for production to again break even the 1 million box mark.

Could it be that the $1.1 billion in additional pension funding in the current state budget – intended to stabilize Kentucky’s public-retirement plans pending an independent audit – could simply have provided a temporary warming period before the nation’s worst pension crisis deepens?

When independent consultants recently released a second report on the audit of the commonwealth’s pension plans, they claimed an additional $700 million annually – on top of the $2 billion being spent on the retirement systems this year – is needed to keep them from going belly-up.

Will such additional gobs of spending follow the frequent pattern of taxing, spending and pension-benefit increases which never come to pass but always come to stay?

For too long, Kentucky’s public-pension beneficiaries have been led to believe a higher benefit for any year of service must be applied to every year of service.

However, a defined benefit system – as Kentucky has and its government workers and retirees fight to keep – only works when there’s a direct relationship between benefits, funding and investment returns.

The current practice of keeping each of those isolated in silos has created an economic disaster in Kentucky.

Beneficiaries and their political soulmates in Frankfort must understand: healthy defined-benefit systems result in the size of accrued benefits fluctuating each year because benefits are directly connected to a host of other factors, including investment returns and payroll contributions.

It’s not realistic in such a system for benefits to always increase but never decrease, and for those increases to be applied retroactively and prospectively.

Yet this has been the scenario in Frankfort.

Benefits have been handed out arbitrarily by legislators while retirement systems’ boards are relegated to dealing with investments.

In the late 20th and early 21st century, sky-high returns on investments masked the problem. Flush with cash, politicians maintained this scheme with few consequences.

But then the economic weather turned bad, leaving taxpayers out in the cold.

The fact is, if Kentucky had abided by the rules of a defined-benefit system by funding pensions based on normal payroll costs and conservative investment assumptions, the resulting greater-than-assumed rates of return on investment funds during those fat years would have created surpluses for use in leaner times.

The only way Kentucky will survive this fiscal storm is by freezing benefit-accrual rates for all members of every system, and resetting the pension plans so that beginning January 1, benefits are awarded based on their relationship with investment returns and payroll contributions rather than the warm, but deceptive, weather of political palatability.

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

JCPS collective-bargaining agreement faces warranted scrutiny

CEI Trey KovacsKentucky’s Department of Education is trying to get a handle on problems with labor union contracts negotiated by the state’s largest school district.

Last month, the agency sent out a request for contractors to review the collective bargaining negotiations and agreements between Jefferson County Public Schools (JCPS) and its union. This is part of a sweeping audit of the school system to find out “whether the contracts were negotiated in good faith, followed best practices and focused only on areas that were permissive subjects of bargaining, among other things,” as reported by the Louisville Courier-Journal.

The planned review has ignited a turf war of sorts. The school board chairman is campaigning for the state Attorney General, Andy Beshear, to conduct the review, instead. But regardless of who does the review, there’s at least one big problem in need of public scrutiny: so-called “association leave.” It may sound benign, but it amounts to a taxpayer-funded subsidy to the Jefferson County Teachers Association.

Association leave grants teachers paid time off from the classroom to perform union business unrelated to their job duties. Instead of educating students, teachers receive a significant amount of paid leave to perform union activities on the taxpayer dime. No one knows how much is money is wasted on association time. Neither the school district nor the union publicize the cost or amount of association leave they receive.

In terms of number of days wasted, the union is supposed to get 275 full days of association leave annually. Apparently, the union has been known to blow past that limit, according to a 2010 analysis of Kentucky District collective bargaining agreements conducted by the Legislative Research Commission Office of Education Accountability. The “OEA discovered that the number of days permitted by JCPS Human Resources staff far exceeded the number of days allowed in the contract.”

Another question is: what exactly are public employees doing while they’re on association leave? The union’s contract states association leave is “for attendance at regional, state or national meetings for the conduct of necessary Association business.” Already, some evidence suggests those limitations don’t garner much respect.

My organization, the Competitive Enterprise Institute, sent public records requests to the school district asking for the activity performed by JCTA members on association leave during fiscal year 2013. Here are some of the activities union members performed instead of serving the students of Jefferson County: attended JCTA board meetings, as well as organizing committee meetings; union staff interviews; National Education Association conferences; and board meetings of Jobs with Justice (a union front group that conducts campaigns against employers).

Clearly, association leave isn’t serving any public purpose or helping to educate children. Tax dollars need to go to the classroom, a sentiment expressed by Andrew Bailey, a JCPS high school teacher and board member during contract negotiations in 2014. Meanwhile, Bailey himself had spent days away from the classroom to perform union activity, according to CEI’s public records request.

Unfortunately, the scope of the problem is bigger than one school district. Numerous city governments and schools districts, like the City of Louisville, needlessly pay public employees to perform union business unrelated to their public duties while paid by the taxpayer.

It’s a good start that the Department of Education is scrutinizing one school district’s union contracts, but now they need to take action to root out the waste in it. Kentucky taxpayers deserve an explanation for how giving away their tax dollars to unions count as a proper use of their money.

Guest columnist Trey Kovacs is a labor policy analyst with the Competitive Enterprise Institute, a free-market public policy organization based in Washington, D.C.

BIPPS op-ed in Herald-Leader: Sunshine laws ‘showing their age’

COG2Kentuckians are justifiably proud of their nationally recognized open meetings and records laws, popularly referred to as sunshine laws.

Since the mid-1970s, these laws have enabled the public to hold their officials and agencies accountable through meetings and records access. The policies that support the laws have, as Kentucky’s Supreme Court once noted, “revealed whether public servants are indeed serving the public” and provided “impetus for agencies steadfastly to pursue the public good.”

They are, as U.S. Supreme Court Justice Louis Brandeis presciently observed, “the best of disinfectants.”

But Kentucky’s sunshine laws, which have not been substantially amended in 23 years, are showing their age.

Successive legal challenges, coupled with a revolution in the dynamics of communication, have exposed deficiencies in the laws that warrant legislative action.

In a newly released report, “Shining the Light on Kentucky’s Sunshine Laws,” the Bluegrass Institute Center for Open Government identifies the deficiencies which impede effective implementation and enforcement, focusing on the need for clarification, reconciliation and modernization of the current laws.
Read the entire op-ed here. 

Thursday night in Bowling Green: Will major changes promised regarding Kentucky’s education standards really happen?

Bluegrass Institute Staff Education Analyst Richard Innes will discuss the Common Core State Standards and Next Generation Science Standards that are currently in use in Kentucky at a special meeting of the Southern Kentucky Tea Party on Thursday @ 6:30 pm (central) @ the Holiday Inn Express, 165 Three Springs Road in Bowling Green.

Innes will provide insight into whether these standards will really change after passage of new legislation that says the intent of the Kentucky Legislature is to repeal those standards.

The event is free and open to the public.

Please contact Bluegrass Institute president and CEO Jim Waters @ jwaters@freedomkentucky.com or (859) 444-5630.

Bluegrass Institute News Release – Hear, hear: Congressional conservatives must oppose FDA’s unhealthy proposal

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For Immediate Release:  Tuesday, June 6, 2017                                                    

(LEXINGTON, Ky.) – Kentuckians know to be nervous when it comes to large and stealth power grabs by the federal government and its out-of-control regulatory regime, particularly that of the Food and Drug Administration (FDA).

Such is the case with the Over the Counter Hearing Aid Act of 2016 co-sponsored by Sens. Elizabeth Warren, D-Mass., and Charles Grassley, R-Iowa, the House version of which likely will be considered in Washington this week.

Fortunately, U.S. Rep. Brett Guthrie, R-Bowling Green, who serves on the House Energy and Commerce Committee, which will hear the bill, must push back against yet another federal takeover of an important health-care sector: hearing loss.

The FDA seeks the power to slap new regulations on over-the-counter hearing aids and pre-empt state hearing-aid laws, leaving Kentucky powerless to create hearing policies that benefit its own citizens and instead turning over more of our healthcare decisions to the federal government.

Supporters of the measure incorrectly claim the bill will increase consumer access to hearing aids, ignoring the fact that over-the-counter devices known as personal sound amplification products (PSAPs) already are available for purchase simply by logging on to Amazon or going to your local Best Buy – all without the federal government’s meddling.

“This isn’t the first exposure Kentuckians have had to unhealthy FDA policy,” said Jim Waters, president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s first and only free-market think tank. “Amish farmer Sam Girod right now sits in a Lexington jail cell facing the possibility of a 48-year prison sentence, courtesy of FDA thugs who bullied their way to a felony conviction against the father of 12 simply for producing skin salves made from chickweed and bloodroot, which the government agency accused him of using to turn wild and edible weeds into a potent drug.”

“The FDA has become deaf to its mission of informing and protecting citizens and increasingly opposes our freedoms,” Waters added. “This ill-advised legislation seeks to regulate PSAPs as hearing aids, eliminating the important role doctors play in diagnosing and treating hearing loss along with driving up the costs of current over-the-counter products.”

PSAPs are used for recreational purposes like hunting or birdwatching. They simply amplify noise.

Hearing aids, on the other hand, which are available after a screening, diagnosis and prescription from an audiologist, are highly customized to treat a patient’s unique and complex hearing-loss situation.

Not only will this bill’s regulations fail to improve health outcomes, they likely will have unintended consequences, including regulating PSPAPs used for hunting – all of which raises unnecessary questions about whether the FDA will be open to the availability of hunting aids, a fact which resulted in the Gun Owners of America coming out in opposition to this bill last week.

When Guthrie voted along with his fellow conservatives to repeal the Obamacare monstrosity, the congressman described his vote this way: “We have a historic opportunity to reverse Obamacare’s dangerous course and give power back to the states, patients, and doctors.”

Hear, hear.

It’s time yet again for Guthrie and others who believe in the principles of limited government and individual liberty to rise to the occasion and provide the backstop to this foolhardy regulatory legislation.

For more information or comment, please contact Jim Waters at jwaters@freedomkentucky.com, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell).

 

 

 

 

News Release: Bluegrass Institute report stresses the need to modernize Kentucky’s sunshine laws

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For Immediate Release: Monday, June 5, 2017                                                                                         

COG LOGO(FRANKFORT, Ky.) – A report released today by the Bluegrass Institute for Public Policy Solutions, Kentucky’s first and only free-market think tank, urges policymakers to revise and update the commonwealth’s open meetings and open records laws considering “rapid changes in the dynamics of communication and information transmission” and an increasing number of legal challenges.

“Shining the Light on Kentucky’s Sunshine Laws” is written by Amye Bensenhaver, who retired in 2016 after a 25-year career in the commonwealth’s Office of Attorney General in which she authored around 2,000 legal opinions related to the open meetings and open records laws and recently agreed to join the Bluegrass Institute team as the director of its Center for Open Government.

An online copy of the full report, including its executive summary, is available here.

Bensenhaver was a recipient of a 2017 Bluegrass Institute Liberty Award.

“We are committed to preserving what is best in the open meetings and open records law while at the same time eliminating their ambiguities, conflicts and outdated elements,” Bensenhaver said. “We offer recommendations that will ease the burden on public agencies while also reducing the likelihood of legal challenges, preserving valuable administrative and judicial resources and, most importantly, promoting the goal of open, transparent and accountable government at all levels and in all places across the commonwealth.”

Along with highlighting conflicts between open meetings and open records exemptions, which frequently cause confusion and inconsistencies related to government bodies meeting in closed session, the report also calls for more meaningful penalties as a deterrence for not complying with these laws.

“This report offers thoughtful recommendations for updating the commonwealth’s sunshine laws to reflect rapid advances in communication technology while carefully protecting against diluting the entrenched principles of transparency and accountability,” Bluegrass Institute President and CEO Jim Waters said. “We consider events in the evolution of the open records and meetings laws and make the case for closing loopholes exploited by agencies who receive a significant amount of taxpayer funding while firmly defending citizens’ access to their government’s records.

Please contact the Bluegrass Institute at 859.444.5630 or info@freedomkentucky.com to obtain a hard copy of the report.  

For more information or comment, please contact Amye Bensenhaver at abensenhaver@freedomkentucky.com or 502.330.1816 (cell), or Jim Waters at jwaters@freedomkentucky.com, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell).

 

More from #kyga17: Pension transparency bills book-ended busy session

Back-pledge-iconto-back pension transparency bills – Senate Bills 2 and 3 – provided strong bookends for a busy 2017 session of the Kentucky General Assembly.

Along with passage during the session’s historic first week of Sen. Chris McDaniel’s SB 3, which makes legislators’ pension benefits subject to open-records requests – an issue pushed by the Bluegrass Institute’s Legislative Pension Transparency Pledge during last year’s election – Sen. Joe Bowen’s SB 2 reorganizes the Kentucky Retirement Systems Board and imposes stricter guidelines for financial disclosures and requires greater investment experience to serve on the retirement systems’ boards.

The bill also requires Senate confirmation for board appointments to the commonwealth’s three retirement systems – the Kentucky Retirement System (KRS), Kentucky Teachers’ Retirement System (KTRS) and the Judicial Retirement System (which includes legislators’ pensions) – as well mandating uniform methods of reporting and disclosing investment fees and requiring the chair or vice chair of the House budget committee to join the Public Pension Oversight Board.

Bowen indicated in comments to reporters that an outgrowth of SB 2 will be rejecting “this notion that a fiscal impact of any board action is undefinable” while emphasizing “there are fiscal impacts on every decision made.”

The fact that both Senate Bills 2 and 3 received overwhelming support in the Kentucky House of Representative by votes of 95-1 and 99-0, respectively, indicates that lawmakers and their constituents have an appetite to know – and do – more about what’s happening with taxpayer dollars that previously disappeared into the deep dark hole of the state’s secretive and costly public-pension system.

News Release: Government transparency and accountability the theme of the Bluegrass Institute’s 2017 Liberty Awards event @ Keeneland

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For Immediate Release: Tuesday, May 30, 2017

(LEXINGTON, Ky.) — Making government more transparent, accountable and accessible to citizens was the theme of the Bluegrass Institute’s 2017 Legislative Breakfast and Liberty Awards event at the Keeneland Racecourse.

The late Lowell Reese was honored posthumously with a Liberty Award presented to his widow, Carol, and praised by Laura Cullen Glasscock, Reese’s successor as publisher of The Kentucky Gazette.

Noting his considerable achievements as a political advisor and strategist, including having been the state director for Gerald Ford’s 1976 presidential campaign and the architect of Rep. Hal Rogers’ successful campaign for Congress in 1980, Glasscock also lauded Reese’s work as a “meticulous reporter and researcher,” calling him “one who listened to what other people told him with healthy skepticism, but also with fairness.”

Reese’s greatest impact to Kentucky’s public policy arguably was his contribution to the ideas laying the groundwork for reforming the commonwealth’s retirement systems,

“Years before almost anyone started paying attention, Lowell sounded an alarm on the state’s pension crisis,” Glasscock said.

Much of his research and recommendations for pension reform, including bringing transparency to the legislative retirement system and exposing what he named “The Greed Bill” – House Bill 299 passed in 2005, which allowed lawmakers to calculate the size of their legislative retirement checks based on their full-time salaries as other government positions rather than their earnings as legislators – were published in “Future Shock,” a Bluegrass Institute report released in 2012.

Reese also wrote extensively about the issue on his Kentucky Roll Call site and in The Kentucky Gazette.

“Liberty awards are given to those who have made a significant difference in pushing Kentucky in the right direction,” Bluegrass Institute president and CEO Jim Waters said. “Few, if any, have done more than Lowell Reese to advance sound policy and principled leadership in our state.”

Other 2017 Liberty Award winners include Sen. Christian McDaniel, R-Taylor Mill, for his tireless effort in advancing legislation to bring greater transparency and accountability to the commonwealth’s public pension system, and Amye Bensenhaver, who spent 25 years as an assistant attorney general in Frankfort, where she wrote around 2,000 legal opinions related to the state’s open records and open meetings laws.

In 2015, Bensenhaver, who recently was named director of the Bluegrass Institute Center for Open Government, helped the institute makes its case that a Kentucky Board of Education (KBE) committee formed to hire a search firm for a new commissioner operated improperly.

Although the board denied the complaint, Bensenhaver helped guide the institute through the appeals process, which ultimately resulted in a favorable ruling by then-Attorney General Jack Conway and a much greater emphasis regarding open meetings and open records by the KBE, including a briefing for new board members on their first day in office regarding their responsibilities toward these transparency policies.

“With its theme of open, transparent and accountable government, this edition of the Liberty Awards would be incomplete without recognizing a consummate professional who – because of her great competence and commitment to the law – has helped her fellow Kentuckians gain access to their government when they were denied,” Waters said in announcing Bensenhaver’s award.

Thanks to McDaniel’s leadership and persistence, Senate Bill 3, which makes legislators’ pension benefits subject to open-records requests, was one of seven bills passed with a near-unanimous vote during this year’s historic opening week of the 2017 session of the Kentucky General Assembly.

“Sen. McDaniel has become one of the most productive, yet respected, state senators,” Waters said. “It would have been much easier for him to go to Frankfort, play it safe and have a career in state government. Instead, he has come and he has pushed to bring transparency to the spending of taxpayer dollars, including those spent on pension benefits for legislators.”

McDaniel, who’s pushed for the legislative transparency bill for several years, said the difficult decisions facing the commonwealth regarding the state’s pension system must be done with all taxpayers and citizens in mind.

“You will hear a lot about the inviolable contract with state workers and retirees,” he said. “We not only have an inviolable contract with them, but there are 4.2 million other Kentuckians and taxpayers that we have a contract with,” he said.

Bensenhaver laid out her vision for the new Bluegrass Institute Center for Open Government, including the need to persuade lawmakers regarding the need for a “substantial revision” of the commonwealth’s open meetings and open records laws.

“These revisions must be driven by a recognition of the changes in the dynamics of communication and informed by the clearly expressed statements of legislative policy favoring public access,” she said.

Waters praised Bensenhaver’s work, saying it will help advance the Bluegrass Institute’s influence not just our commonwealth but the entire nation.

“Not only is Kentucky on its way to becoming one of the fastest-growing and most innovate states in America, but we also want it to be known as a state with the highest regard for open meetings and open records laws,” he said.

To reach Bluegrass Institute Pension Reform Team members for comment, contact Bluegrass Institute president Jim Waters at  jwaters@freedomkentucky.com, 859.444.5630 (office) or 270.320.4376 (cell).

Quote of the day: Tax hikes? Not likely

“We’re not for tax increases.” –Senate Majority Leader Damon Thayer, R-Georgetown

Bluegrass Beacon: ‘Smart outsourcing’ could keep students in Kentucky

BluegrassBeaconLogoPrivatization, like money, is neither good or bad in and of itself.

It’s how it’s used, or in the case of outsourcing – how the contract’s written – that matters most.

Who anticipated the day when a Kentucky university freshman could go his school’s dining facility, swipe a meal card and sit right there and enjoy sushi for lunch?

While such red-carpet treatment wasn’t out of the question for a five-star basketball recruit in the past, it would have been unheard of for, say, a potential engineering major.

But thorns of economic downturns and less state funding coupled with demand for greater returns on higher-education investments are producing flowers of fiscal finery, such as the University of Kentucky’s decision to turn to the private sector for new housing in 2011.

UK via privatization undertook a $450 million building boom that produced 14 new residence halls and more than 2 million square feet of learning and living space.

Education Realty Trust (EdR), which knows how to build, operate and maintain campus housing, fulfilled its commitment to provide 6,500 new, but affordable, state-of-the-art dorm rooms.

In fact, students paid the same rate for a new room in 2013 that was charged for one of the 686 new beds at four residence halls built in 2005.

Now, it turns out that what works in building student bedrooms also succeeds in constructing new dining rooms.

UK contracted with Aramark to upgrade its dining halls so that not only can students find every desired menu selection, but the company’s approach is impacting the commonwealth’s entire agricultural economy through a commitment to purchase Kentucky-made food products and actively recruit farmers statewide to grow vegetables, raise meat and provide dairy products for use in its new facilities.

Throw in a worry-free eating station – where gluten and allergy-causing foods are exempt – a sustainability coordinator and composting system, and you have a truly innovative program run by a private company.

It’s all happening with no additional tax dollars, bonding or borrowing by the university, which signed a $250 million deal with Aramark in 2014 and for the first couple of years actually charged students lower prices for their meal plans than they previously paid.

It’s a worthy example of how effective privatization of what had previously been considered the exclusive purview of a government entity – in this case, a university and its dining facility – can work to the advantage of students and their taxpaying families.

UK free-market economist and Bluegrass Institute scholar John Garen calls it “smart outsourcing.”

“It’s just like private organizations have to do,” he said. “They often must decide whether expending the resources and bringing in the people to do it themselves is the best way, or ask ‘Should we go outside and look for companies that are wholly focused on the particular need?’”

Other schools have begun following a similar outsourcing path.

Aramark’s new dining facility at Eastern Kentucky University in Richmond should be completed by the end of this year.

The company also entered into a 20-year, $20 million contract with Western Kentucky University to renovate current dining facilities and provide new options at the Bowling Green school, including a 24-hour restaurant in a new residence hall currently under construction.

Unlike convoluted P3 projects, such as the corrupt, costly and cronyistic Kentucky Wired boondoggle and its tortuous contract with Macquarie Capital, which has produced a track record of abysmal failure on similar projects in other states, these university deals offer tried-and-tested approaches toward true privatization.

By providing new residence halls with all the amenities and dining rooms with myriad choices, in-state students looking to enroll elsewhere have real reasons to remain in their old Kentucky home.

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