For Immediate Release: Tuesday, May 23, 2017
(FRANKFORT, Ky.) – The Bluegrass Institute Pension Reform Team (BIPRT) attended the Public Pension Oversight Board (PPOB) meeting on Monday to hear comments from PFM, the consultant evaluating the state’s retirement systems, regarding its latest report on the audit of Kentucky’s public benefits plans.
It is the belief of the BIPRT that the primary cause of Kentucky’s pension crisis is the benefit structure for employees and retirees. Specifically, retroactive benefit enhancements and unfunded benefits were granted to employees without the use of an actuarial analysis to determine the costs.
For this reason, we were disappointed to learn that PFM was asked to only analyze pension data back to 2005. This limited view of the data precluded PFM from incorporating the impact of large unfunded benefit enhancements granted to employees in the 1980s and 1990s, as we have well documented.
Sen. Jimmy Higdon, R- Lebanon, a member of the PPOB, correctly asked the actuarial representative from PFM about the work of the Bluegrass Institute and the absence of the impact of the benefit enhancements in their report. The response from PFM was that at least 20 years of data would have been needed to fully account for those costs.
If the commonwealth is going to enact real reform, we need to correctly identify the causes of our current dilemma. If we blame lack of portfolio performance, fees paid to external asset managers and lack of funding from Frankfort, we will be missing the true cause of the crisis.
We did find interesting the data presented by PFM comparing the benefits received by Kentucky teachers and public employees to comparable public and private sector employees in surrounding states. As one might expect, Kentucky employees receive, on average, much higher benefits.
The BIPRT is not against defined benefit retirement plans. If a defined benefit plan is to be implemented, however, certain rules must be followed. For decades, Kentucky broke these rules repeatedly leading to our crises today.
Download this detailed list of recommendations offered by the Bluegrass Institute to address this crisis and return our state to economic health and vitality.
For more information, please contact the Bluegrass Institute Pension Reform Team at BIPRTKentucky@gmail.com or Jim Waters at firstname.lastname@example.org, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell).