A coalition of Kentucky education groups has offered its pension reform plan as an alternative to Gov. Matt Bevin’s proposed shift to defined-contribution accounts for future teachers and other school district employees.
The groups — representing the state’s teachers, school superintendents, school boards and others — recommend a less generous defined-benefits pension for people hired at school districts after July 1, 2018. This new tier of teachers and employees would have to work longer, and they would not be allowed to enhance their pension benefits through unused sick leave.
Most significant, given the tens of billions of dollars in pension debt facing the state of Kentucky, any unfunded liabilities created by these new workers would be the responsibility of them and their school districts, not the state government. Once the state gave its annual contributions for their pension accounts, its obligations would be finished.
If the pension funding level for these new workers fell below 95 percent in the future, cost-of-living adjustments for retirees could be reduced or suspended; employees and school districts could be required to contribute at greater levels; and retirement eligibility rules could be made stricter so that people would have to work for longer.
However, unlike the draft pension bill being promoted by Bevin, the education groups said their plan would guarantee workers the retirement security of a traditional pension with certain minimum benefits that they could not outlive.
“The governor’s plan does many things that, by our estimation, will destroy public service as we know it,” said Stephanie Winkler, president of the Kentucky Education Association, speaking at a news conference at Woodford County High School on Monday.
“The elimination of our inviolable contract,” Winkler added. “The removal of language that affords school employees paid sick days. The suspension of cost-of-living adjustments for retired teachers. The removal of disability and life insurance. And most of all, the switch from a dependable, reliable pension to an unreliable and very expensive defined-contribution plan.”
Tom Shelton, executive director of the Kentucky Association of School Superintendents, said the groups repeatedly tried to present their plan to Bevin’s office in recent months. But the governor’s office refused to consider any suggestions that did not involve switching teachers and public employees to defined-contribution accounts, Shelton said.
By contrast, leaders in the Kentucky Senate and House met with the education groups last Wednesday and “told us that they would take what we said under advisement,” Shelton said. “We would hope the General Assembly would pick up this plan and make it their plan.”
Shelton also said that he hopes any effort by the legislature to resolve the pension shortfall includes an overhaul of the state’s tax code that provides enough new revenue for pensions and for the state’s education needs. Kentucky forfeits $13 billion a year in tax breaks and tax incentives, which seems like a good place for lawmakers to start looking, he said.
In a prepared statement later Monday, Bevin spokeswoman Amanda Stamper challenged Shelton’s version of events.
“The Bevin Administration met with Tom Shelton and (the Kentucky School Boards Association) several times over the last two months,” Stamper said. “Even though they had several opportunities, neither ever presented an alternate plan, contrary to claims made today. Governor Bevin remains fully committed to reforming Kentucky’s failing pension systems, and ‘Keeping the Promise’ does just that, meeting the legal and moral obligations owed to retired teachers and public servants.”
The education groups’ plan would affect teachers in the Teachers Retirement Systems of Kentucky and non-teaching classified workers in the County Employees System (Non-Hazardous) at the Kentucky Retirement Systems, which are the state’s two largest pension agencies.
Future teachers would contribute 10 percent of their pay, with a 6 percent match by the state government. Retirement eligibility would be based on the “rule of 85,” which means the teacher’s age plus her years of service would have to equal 85. For example, a 55-year-old teacher with 30 years in the classroom could retire on a full pension. (Currently, teachers can retire after 27 years.) Retirees would get a pre-funded cost-of-living adjustment of 1.5 percent.
Future classified workers would contribute 6 percent of their pay, with a 19.18 percent match from their employers. Like the teachers, they also would have a “rule of 85” retirement eligibility, which is slightly more generous than the current “rule of 87” that applies to recent public employees hired and enrolled in KRS.
Unlike Bevin’s draft pension bill, the education groups call for the County Employees Retirement System to be removed from the rest of KRS and run separately with its own elected representatives, leaving behind the much worse-funded state pension systems.
It long has been a sore point to teachers and local government employees that their own retirement systems are so closely tied in the public’s consciousness to the primary state pension fund at KRS that has only 14 percent of the assets its expected to need to meet future liabilities.
“We appreciate the recognition that the governor and the General Assembly have around the pension situation and that it requires immediate attention,” Scott Hawkins, Woodford County school superintendent, said at Monday’s news conference. “But we do have eight pension systems in Kentucky, and we do not believe that a one-size-fits-all proposal is the solution for all of those systems.”