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.