Pew Report Cites $23B Shortfall In Public Pensions
FRANKFORT, Ky. -- Kentucky has a shortfall of more than $23 billion in pension funds for retired public employees in the state, two independent groups said in a report released Thursday.
The Pew Center for the States and the Laura and John Arnold Foundation said the shortfall is more than twice the amount of all revenue generated from all state taxes in Kentucky last year.
Republican Sen. Damon Thayer and Democratic Rep. Mike Cherry, co-chairmen of the Kentucky Public Pensions Task Force, said in a joint statement that the report makes the case for comprehensive pension reforms in Kentucky.
They also said achieving that will require "hard choices, good information and thoughtful analysis."
The Public Pensions Task Force faces a Dec. 7 deadline for recommending ways to shore up all the state's pension plans that cover state government workers, teachers and local government employees.
Kentucky lawmakers have been wrestling with the public pension issue for years, and have made minor changes intended to whittle down the shortfall.
The Public Pensions Task Force has been trying to find a way that lawmakers can agree on to resolve the issue.
"Debates over retirement benefits can easily turn contentious and unproductive," the authors of the Pew report said. "However, it is important to remember that pension problems, such as those in Kentucky, are rooted in simple math rather than in political ideology. Solving these problems requires recognition by all parties that the state must fix them through sound policy, and that the state cannot rely on the stock market to wipe away its pension debt."
The Pew report said the pension funding gap has continued to grow despite efforts over the past six years. Between 2006 and 2011, the unfunded liability in the Kentucky Retirement Systems-Non Hazardous Plan grew by $5.5 billion.
Several factors have added to the problem, including stock market losses in recent years that added another$1 billion to the shortfall because expected returns on investments didn't materialize, according to the Pew report.
The report also said the state's failure to fulfill recommended annual contributions added another $948 million to the shortfall, and providing cost-of-living adjustments without adequate funding pushed the shortfall up by $995 million.
"While several of the factors that influence pension cost are beyond policy makers' control, the single factor that is most firmly in the hands of state leaders is the amount the state contributes to the fund each year," the report said. "Since 2004, the state has a poor record on this front, and has not paid a sufficient amount into the fund to ensure its ability to fully pay benefits in the future."