Here’s some food for thought.
A recent New York Times article by Mary Williams Walsh discusses how the Government Accounting Standards Board (GASB) has revamped the rules for reporting the health of public pension systems. It boils down to this: the new rules require more disclosure and as more information about these pension systems is brought to light, we will find that they are in even worse shape than we already thought.
No piece about poorly funded pension systems would be complete without mentioning Kentucky and so the article does with reference to Robert Attmore, chairman of the GASB, being asked about which municipalities will be impacted the most:
Mr. Attmore declined to predict which states and cities would bear the brunt of the board’s rule changes, but said that, in general, it would be those that had failed, year after year, to set aside as much money as their actuaries instructed. Such plans include those operated by Illinois, New Jersey and Kentucky.
That is bad news.
Kentucky’s public pension debt is almost four times the size of the state’s General Fund budget. FOUR TIMES! There is also no question that the Commonwealth qualifies as an entity that has not set aside enough money. Ten years ago the Kentucky Employee Retirement System was almost fully funded and today is closer to 30%. That is a huge difference in a very short amount of time.
The Bluegrass Institute’s recent series of reports on Kentucky’s pension crisis certainly presents the severity of the state’s situation but with these new accounting standards in place, will we find that the situation is even more grave than we thought? I certainly hope not. As author Lowell Reese points out in Future Shock: Kentucky Politicians’ Opulent Pensions Have Become A Modern Day Gold Rush:
Public employee pension are now a societal issue: the standard of living of all Kentuckians is at stake. The state’s public servants and retirees are increasingly concerned about the security of their retirement accounts, and rightfully so.
Taxes. Tax commissions. A hard look at tax-reform. Much needed tax revenue? Taxes, taxes and more taxes.
It seems like “tax” is the first word on the tongues of Frankfort politicians when state budget and debt solution ideas are up for discussion.
What if we changed “tax” in all the phrases above to “spending”. A spending commission, spending reform, etc…
The Kentucky Club for Growth recently put together some great information (via the Kaiser Family Foundation statistics) about the Commonwealth’s spending versus its neighbors. The short version is this: Kentucky spends, on average, about $1,000 per capita more than all but one of its bordering states.
From Kentucky Club for Growth:
As you can see, Kentucky spends $1000 more per person than any of our neighbors (save West Virginia, which must funnel a greater portion of education funding through the state treasury). In fact, Kentucky is 8% higher than the average of our neighboring states ($5,523) and 14% higher than the national average ($5,251).
If anything, Kentucky’s spending is too high. Other states are able to provide services at significantly less cost per capita.
Just another example of Kentucky’s spending problem.
One solution to our state’s debt problem is to stop the obsession with taxes and start obsessing about where and how taxpayer money is spent.
It is clear that Kentucky has a spending problem, not a revenue problem. Rather than look for ways to increase revenue, why not look to the best practices of our six border states who spend taxpayer money more efficiently than we do?
Bluegrass Institute president Jim Waters will make his debut appearance on Bulldog Nation with Eric Deters at 8:30 a.m. on Tuesday on Cincinnati’s Real Talk 1160.
Join Eric and Jim as they discuss Kentucky’s pension crisis and who knows what else?
Perhaps the best source of credible, “apples to apples” state education funding data is the US Census Bureau’s annual report called Public Education Finances. “Public Education Finances: 2010” just came out, and I’ve been looking over Table 12. This table ranks the states on a number of educational revenue and spending items for the 2009-2010 school year in relationship to the wealth of the state’s taxpayers. Table 12 levels the playing field for poor states like Kentucky.
I think the rankings from this Census Bureau document are revealing.
Consider teachers’ pay.
Once the Kentucky taxpayer’s ability to pay is considered, the average for salaries for instruction in our school system ranks 13th best in the nation. Despite all the noise we are hearing currently about funding for education, Kentucky’s taxpayers already are providing for teachers well above what the taxpayers’ incomes would indicate they might be expected to provide.
Kentucky’s taxpayers also hit a bit above the national norm for their funding for teacher benefits, with the state ranking 24th out of the 50 states plus the District of Columbia on that measure.
After considering the taxpayers’ income, Kentucky ranked 23rd overall for the amount of revenue from all sources, local, state and federal, that support education here. And, when only state sources of revenue for education are considered, the state ranks 12th in the nation.
Clearly, once you consider the obvious fact that Kentucky is not a wealthy state, the funding for education is higher than you would expect.
Especially with major areas of the state’s economy – such as coal and energy in general – now under active attack from Washington, those who want to hit the Kentucky taxpayer for still more funding need to keep this in mind.