Kentucky’s pension crisis is among the worst in the nation, but the legislative trickery in Frankfort that racked up our $34 billion unfunded retirement liability is only part of the story. The other chapters were written in neighboring states like Indiana and Tennessee where legislators engaged in similar political maneuvering to increase their paydays in a politically savvy manner.
So just how do legislators push their pensions into the hundreds of thousands when their salaries are normally less than $30,000? The short answer: they wrote the laws that way, while the general public is none the wiser.
Pensions for common folk are generally based on one’s salary, a multiplier, and number of years on the job. But for state legislators, it’s not so simple. The lawmakers of our land have a variety of tricks to keep their retirement benefits increasing while staying under the radar.
In Indiana, for example, legislators’ pensions are not based on their salary, but on a combination of daily pay and any per diem payments or expenses the legislators claim. Although Indiana legislators work only three months out of the year, their pensions are calculated based on a 365 day work calendar. And let’s not forget about the 401(k) plans reserved for Indiana legislators only – no other state workers allowed!
It’s even worse to the south. In Tennessee, legislators have jacked up their benefits by voting to increase the multiplier on which their pensions are based above that of the standard state worker. They’re also allowed to “double dip” by receiving pension checks before they ever leave office – while still collecting their normal salaries! And let’s not forget about their early retirement standards.
The gimmicks our elected officials employ in Kentucky to increase their pensions may be the most outrageous of all. Instead of basing their retirement on legislative salary, HB 299 allows Kentucky legislators to base their benefits on their highest-paid position as an employee of the state. Once their legislative pension is “maxed out,” Kentucky legislators get their own version of “double dipping” by automatically being enrolled in a second pension.
Oh the wonders you may see when one determines his own compensation! Seeing as how HB 299 was passed in the middle of the last decade, it’s no wonder Kentucky’s pension liability has gone from over 100% funded to less than 30% funded in the past ten years.