(Frankfort, Ky.) – A pathway to pension reform released today by the Bluegrass Institute, Kentucky’s free market think tank, highlights critical steps state lawmakers need to take to rescue the state workers’ retirement plans from future insolvency and put it on the road to recovery.
“Future Shock Solutions: 16 steps to treat Kentucky’s public pension ailment” stands in stark contrast to the few, and minor, steps taken during the just-completed session of the Kentucky General Assembly to address the public retirement systems’ $34 billion unfunded liability.
The recently-passed Senate Bill 2, hailed by leaders of both parties as a great compromise that will significantly address Kentucky’s pension challenges, raises taxes, raids road funding and greatly decreases the amount of money the state pays retailers to serve as its tax collectors.
The Bluegrass Institute’s report, meanwhile, contains 16 steps largely ignored by lawmakers, including making the pension system transparent, moving state workers toward a defined contribution retirement plan that is more indicative of private-sector benefit packages and ridding Kentucky of the scourge of the corrupt part-time politicians’ pension system.
“What was not done is as significant as what legislators did do during this year’s legislative session,” said report author Lowell Reese, owner of Kentucky Roll Call, a public affairs publishing company in Frankfort, and a former state chamber of commerce executive. “Political leaders from both parties are putting a spin on Senate Bill 2, claiming it cured and saved the state retirement system. It did no such thing; it didn’t even slow down the hemorrhaging.”
The short report notes that any effective strategy toward pension reform should include:
- A diagnosis confronting the truth that Kentucky’s public pension system is unsustainable in its current form and that its state workers’ fund now faces insolvency. This places the retirements of all state workers, as well as the standard of living for all Kentuckians, at risk.
- An understanding that state politicians have allowed the health of the pension system to deteriorate by passing legislation that continually pads pension benefits even as pension funding is dwindling.
- A specific set of free-market actions that can be taken to effectively address theoverpromising of benefits that resulted in the overspending of taxpayer dollars.
By not addressing the system’s structural problems, even the positive step taken by Senate Bill 2 to place future state workers in a hybrid cash plan will likely not create any significant savings. The legislature did nothing to limit benefits or keep future legislators from using the pension plan to curry political favor with public employees.
“Kentucky’s public pension liability is a societal issue that threatens our way of life and jeopardizing funding for all other essential government services,” Reese said. “Unfortunately, this bill was never even meant to address the pension system’s serious problems. Instead, it gives politicians the political cover to claim they seriously addressed what is arguably the greatest threat to the commonwealth’s future economic well-being.”