You Can’t Have Your Pension Reform Cake And Eat It, Too

If you live in Kentucky and consume any form of news media at all, you’ll be familiar with the bitter, contentious debate that’s been raging about teachers’ pensions.

The road to reform began with an actuarial report recommending deep, structural cuts to our teachers’ retirement system, then took a major bump in the form of teacher protests and walkouts earlier this spring. Finally, that road took a winding turn and thew a lot of teachers for a  loop when Senate Bill 151, an innocuous piece of wastewater legislation, became a comprehensive pension overhaul bill.

Of course, SB151 is now being examined by the Kentucky Supreme Court, leaving teachers like me wondering if they’ll ever reach the end of this long and foggy road. Let me just tell you, I’m as confused now as I’ve ever been.

Last week, AP reported that the outlook for Kentucky teachers’ pension system is improving as a result of increased funding from the past two legislative sessions. Legislators have made good on their campaign platforms these past two sessions, fully-funding teachers’ pension system at 100% of the annual required contribution. That move has translated into some major political points for those same legislators, who are now making their PR rounds to discuss how they’ve “saved” Kentucky’s pensions and “kept the promise” to public employees by fully-funding the system these past two years.

Forgive me, but how exactly do these politicians expect public employees like teachers to respond to that? By lavishing them with praise and campaign donations for doing the thing they were already legally and perhaps morally required to do?

Sarcasm aside, there’s at least one non-politician out there who’s a believer. That individual is Gary Harbin, the Executive Secretary of the Kentucky Teachers’ Retirement System (KTRS), and he just so happens to agree that this increase in funding is the game changer that Kentucky’s pension system has been needing all along. And believe it or not, his take on funding is pretty condemning for the pension hardliners that have been coming out of the woodworks these past couple years.

“This is a great turning point for us,” he said during a recent pension governance and audit committee meeting. “The legislature and the administration are to be wholeheartedly…. applauded for the financing they put toward this pension plan.”

The 2017 session marked the first time in nearly twenty years that the KTRS was funded at 100% of the annual required contribution, so in that sense, the outlook for pensions is better.

(But of course, doesn’t it seem sort of obvious that a fully-funded pension system should be on a better track for solvency than a poorly-funded one?)

Regardless, it’s what Harbin says next that really resonates. When asked about a potential court ruling on SB151, Harbin went on to add that a ruling on the controversial pension bill wouldn’t determine KTRS’ solvency after all. “The funding from the state is the primary driver,” he claimed.

Wait, what?

If state funding is truly the primary driver behind the pension system’s solvency, then was there ever a need for structural changes to the system in the first place? Am I just misinterpreting the Executive Secretary’s comments, or could we have actually avoided this debacle altogether if legislators had just been funding the pension like they were supposed to all along?

I’m leaning towards the latter, but don’t take it from me. Take it from the gentleman who’s actually in charge of the Kentucky Teachers’ Retirement System.

“The funding is there. The funding is real. That’s going to shore up the pension plan. If that funding keeps coming in the future and if future legislatures continue with that funding then there is no crisis in teachers pensions.”

I’m not a huge fan of “Sophie’s Choice” scenarios, but Harbin’s comments here reveal quite a conundrum for pension reformers. If the system didn’t actually require deep structural cuts to reach solvency, why were they on the table at all? And if the pension crisis really is as bad as it was chalked up to be, why are our leaders in Frankfort gloating about “keeping the promise” when there’s still major work to be done and only a court case to show for it?

I don’t pretend to be an actuary, but it doesn’t take a math whiz to figure out that someone’s getting played here. Come on now, Frankfort — you can’t have your cake and eat it, too.

What do you think?

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