Kentucky public pension funds are dangerously underfunded with no clearing in sight. The state’s public pension funds are said to be anywhere from $42 – $84 billion underfunded, depending on the discount rate that is used. This is in light of several other states like Illinois who seem to be facing the same budgetary crisis, so says the state’s pension oversight board.
Nevertheless, this has not stopped government employees from attempting to still receive their retirement package from underfunded pensions. According to Lexington Herald Leader, Kentucky’s 365,000 teachers and other public employees have demanded that taxpayers contribute $5.4 billion to the public pension system in the next two years.. This would mean that each Kentucky household would need to contribute $3,200 each.
“Kentucky’s General Assembly will need to find an estimated $5.4 billion to fund the pension systems for state workers and school teachers in the next two-year state budget, officials told the Public Pension Oversight Board on Monday.
That amount would be a hefty funding increase and a painful squeeze for a state General Fund that — at about $20 billion over two years — also is expected to pay for education, prisons, social services and other state programs.
“We realize this challenge is in front of us. That’s obviously part of the need for us to address pension reform,” said state Sen. Joe Bowen, R-Owensboro, co-chairman of the oversight board.
“In the short-term, yeah, we’re obligated to find this money,” Bowen said. “And everybody is committed to do that. We have revealed this great challenge. We have embraced this great challenge, as opposed to previous members of the legislature, perhaps.”
In presentations on Monday, the pension oversight board was told that total employer contributions for KRS in Fiscal Years 2019 and 2020 would be an estimated $2.47 billion each year, up from $1.52 billion in the current fiscal year. Nearly $995 million of that would be owed by local governments. The remaining $1.48 billion is what the state would owe.
The Teachers’ Retirement System estimated that it would need a total of $1.22 billion in Fiscal Year 2019 and $1.22 billion in Fiscal Year 2020. That would include not only an additional $1 billion to pay down the system’s unfunded liabilities but also $139 million to continue paying the debt service on a pension bond that won’t be paid off until the year 2024”
Sadly, there is little indication that such measures by the pension oversight board will stem the tide of the State's Pension’s insolvency. Many of these state pensions operate in a ponzi scheme like faction where taxpayers are made to pay into a system that will never recover. It has resulted in a creation of system that is simply “too big to bail”.