Kentucky teacher and activist Randy Wieck writes on Fred Klonsky’s blog about the renewal of the Republican legislators’ efforts to raid teachers’ pension funds in Kentucky.
He begins:
At a time when the Republican super majorities in the Kentucky Legislature would seem to have more pressing issues to face – Covid-shuttered schools and businesses, unemployment supplements, eviction waivers, universal Covid testing and tracing – they nonetheless carry on with a new drive-by attempt at teacher pension “reform” which, once again, is a thinly veiled attempt to dismantle (let us be honest and use the proper term – gut) the Kentucky teacher defined benefit pension plan; kill it once and for all.
The idea of properly funding the plan, according to relevant GASB accounting standards, and repairing the damage inflicted over several decades of underfunding – is one legislators choose to duck. Better to chisel Kentucky’s way out of the debt it has run up through using funds that should have gone to the teacher pension (known as the actuarially required contribution), and which were instead used for other purposes. Perhaps they are following the lead of Kentucky Senator Mitch McConnell who refuses to allow federal aid to states beset with heavy, unforeseen expenses during a worldwide pandemic.
Rather than supply much-needed and adequate funding to TRS, (some $2 Billion per year for the foreseeable future) legislators instead prefer to “reform” the plan, placing new-hires into the old “beating-a-dead-horse” hybrid pension system.
Why not simply begin to pay back the missing funding and repair the damage inflicted by the legislature, and not by teachers who have dependably paid one of the highest pension contribution rates in the country (13%)?
Diane Ravitch's blog 
This appears to be Mitch McConnell’s plan for every state: withhold funding so that they each have to declare bankruptcy, then dump state pension obligations. One more reason to never vote for a Republican, especially in Kentucky.
it feels like a national sickness that so many people KNOW McConnell’s character and know all about his long-term public-service-devastating plans but somehow cannot stop him
There are suggestions on the Twitterverse that the voting machines in Kentucky were rigged for McConnell. He won districts that usually vote Democratic.
Yes, and apparently he didn’t just squeak by in those Democratic strongholds. He “won” by significant margins not even close to being supported by historical data and polling. I wrote somewhere I didn’t understand why the results weren’t being challenged but if he controls the apparatus it may be a futile exercise.
I’ve suspected that Stop the Steal is, as usual, Trumpian projection. Trump’s anger may stem from the knowledge that the vote was rigged in his favor and he still lost.
When politicians use the word “reform”, take your earrings off. Put your wallet in your front pocket. Tell your children to get in the basement. Hide everything. They’re on a raiding and looting spree, and there is no one to stop them.
When public pension activist talk fund our pension folks in the private sector need to hide everything that ain’t nailed or bolted down as tax increases are inevitable.
I think the best way to avoid these problems is with a defined contribution plan. Teachers should be fully compensated for a year of teaching in the year that they teach. This would prevent politicians from raiding or looting.
These teachers were already contributing 13% to their pension funds. If teachers entirely pay for their retirement, they would have to pay them a lot more money. The deal most teachers make during their careers is that the accept lower pay compared to similar professions, but the defined pension benefit takes care of them when they retire. In many states teachers cannot even participate in Social Security.
FYI-States where teachers are ineligible for Social Security: Alaska, California, Colorado, Connecticut, Georgia (some areas), Illinois, Kentucky (some areas), Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island (some areas) and Texas.
Retired,
Defined contribution programs typically have the employer paying into a retirement account controlled by the employee with each paycheck. Employees make their own contribution as well. For example, a teacher might devote 13% of their salary to their retirement account and the school system might contribute 13% of the teachers salary (or whatever percentage the union negotiates) to the retirement account with each paycheck.
Left Coast Teacher’s concern is that the defined benefit pension will not take care of teachers when they retire because politicians will raid and loot the system. A defined contribution system prevents that from happening.
Social Security was originally intended as a retirement system for people who worked in the private sector. When it was passed it was not clear that the Federal government could force state governments to pay taxes to the Federal government, so state government employees were left out. See https://www.fool.com/retirement/2018/10/07/why-does-social-security-leave-out-teachers-in-the.aspx for more details.
Kentucky has a defined benefit pension plan and politicians have raided the pension funds for their pet projects for years.
During their teaching career they also do not pay into social security, so why would they get it? On the other hand, from my first day of paying any form of taxes in Kentucky, about 50 years now, a percentage of those tax dollars have been used to finance the states public pension system. For my contributions I receive nit one penny of public pension.
The comment about not getting to participate in social security was probably intended to point out that teachers in many states are not allowed to contribute to social security, not that they did not receive it. However, the fact that my social security benefits are cut by 2/3 for work I did while paying into social security. Spousal benefits are also cut by 2/3. Tell me how that is fair.
“Kentucky has a defined benefit pension plan and politicians have raided the pension funds for their pet projects for years.” That is a talking point used to curry sympathy for their demands. In the past legislators have failed to make the full ARC payment, not physically taken from the fund. Contact past members of the Public pension Oversight Committee. If they are honest they will explain it to you . Kentucky educators did not earn this ARC. The ARC is is tax dollars taken straight out of the annual budget. It belongs to all Kentuckians. Not the 5% in the TRS system.
Defined contribution plans are horrible. If the states would make the pension payments on time, there would be no problem. The politicians create the problem then blame the teachers for the deficits and the shortfall in the pensions. The teachers contribute to the pension fund with each and every paycheck for decades throughout their whole careers. The teachers uphold their part of the bargain, it’s the politicians (of both parties in NJ) who have dropped the ball.
Defined contribution plans are standard in higher education. TIAA was founded in 1918 and is still going strong. I think you would find that most faculty like the freedom that a defined contribution retirement plan offers by lowering the cost of changing universities or leaving the academy.
I agree. It is a ploy that could leave thousands of teachers eating cat food in retirement. State retirement systems can hire consultants to invest pension funds collectively. Most teachers have neither the time, energy knowledge to do it for themselves. It is not the fault of teachers if states fail to make payments into the fund or mishandle the money. When states keep their end of the bargain, the system works well.
From the NEA: Educators overwhelmingly favor defined benefit plans like pensions over their defined contribution counterparts. Maintaining a sound and predictable pension plan for educators and education support professionals enables them to have retirement security after a career in public service.
From the NJEA: NJEA believes that the mainstay of a secure retirement is the defined benefit pension plan. In New Jersey, teachers and educational support professionals contribute a percentage of their salary and receive credit for the time they serve public school students in a pension plan that provides a guaranteed income in retirement. This is deferred compensation that members earn as part of their compensation package.
From Dean Baker, 1-12-18, at labor notes: While many current retirees are reasonably comfortable because they have pensions, the future does not look bright for those yet to retire.
Traditional defined-benefit pensions are rapidly disappearing in the private sector—less than 15 percent of workers have them. Most public sector workers still have them—more than 20 million are either now receiving or looking forward to a pension. However, public sector pensions are coming under attack from the American Legislative Exchange Council (ALEC) and other right-wing groups.
Over the last four decades employers have been anxious to convert the traditional defined-benefit pensions into defined-contribution 401(k) plans.
The difference is that with a defined benefit, the worker is secure while the employer does not know exactly how much it will have to pay in. Workers are guaranteed a lifetime benefit based on their salary and years of service; the employer’s bill depends on the worker’s longevity and on stock market performance.
With a defined-contribution plan, the employer knows just how much it will pay each year, and the worker shoulders all the uncertainty. This means that workers face the risk that the market will plunge just after they retire—and they may quite possibly outlive their savings.
By getting rid of defined-benefit plans, employers are transferring risk to workers. In addition, they often contribute less to a defined-contribution plan than to the defined-benefit plans they replaced, in effect cutting workers’ pay. end quote
“Defined contribution plans are horrible. If the states would make the pension payments on time, there would be no problem.” You are only repeating talking point. I know for a fact that some of my co-workers have, and are on track to retire at or near millionaire status using a defined contribution plan. I did not due to the short time I worked at this factory along with the short amount O time I had to work with my 401K plan. If one chooses to remain ignorant on how to manage a 401K plan, yes, you will likely fail.
That is not going to fly in Kentucky. If a defined contribution plan is instituted that would mean Kentucky teachers would have to assume the risk related to the stock markets. Under the defined benefit plan they run no risk. They are compensated regardless. That’s why the state awards the system 2 billion dollars every year, to cover the shortfall. Without raising new taxes every year the system would go insolvent.
Thirteen percent i not true in Kentucky. 9.855% goes to the pension with the remainder goes to health insurance.
Agree 100%. But that would require public service workers taking on risk related to stock market performance. As it is they take on no risk in Kentucky. If I lose 100% of my retirement invest due to market performance I have no bailout. If the public pension portfolio loses 100% of it’s investment the taxpayer have to cover the shortfall. How is that fair?
“dianeravitch
December 30, 2020 at 3:03 pm
Kentucky has a defined benefit pension plan and politicians have raided the pension funds for their pet projects for years.” In over four years of asking no one has offered any evidence of legislators physically removing funds from the TRS portfolio but with one exception. I ask then Co-chair of the public pension oversight committee related to the claim. His response was that he knows of no instance where funds were removed or the portfolio “raided” but with one exception. Mr. Bowen stated that one occasion funds were taken from the pension side to shore up a shortfall on the health care side. He also stated the the transfer of funds had the blessings of the TRS. Here is your chance to show me evidence that the fund has been “raided.” I agree that until Governor Bevin made the full ARC that the ARC went underfunded. I have no problem with that as it is/was funds that belonged to all Kentucky taxpayers and was needed elsewhere. If not for the enhanced benefits which in some instances have caused some teacher retirees to be receiving 42% more in benefits than they earned we would not be in this crisis even without the full ARC.
I am a retired Kentucky state government retiree, and I live in constant fear of losing my pension. Without my pension, which I earned by working 30+ years in a terribly abusive job, I will be out on the street. I am 68 years old, and cannot go back to work. Is this how I have to live my last remaining years, in perpetual fear of poverty?
Your reward for all your years of hard work, low pay and suffering indignities of red state politicians is supposed to be a retirement you can count on. It should be that you can retire with dignity. If politicians abused the agreement that was made, they should have to make it right instead of trying to change the nature of the deal now that you are eligible to collect.
Are you not concerned with the fact that this public pension unfunded liability will be inherited by our kids and grandkids? Do you care nothing for their financial future?
If you are in one of Kentucky’s public pension plans other than the TRS plan you should be concerned. Their is the one that gets bailed out every year. They (TRS) are not concerned with the other public pension plans.
The defined benefit plan is superior to the defined contribution plan, assuming States properly fund them and Courts – for the most part – continue to protect beneficiaries.
(Keep an eye on Illinois, California, R.I. as well as Kentucky.)
In Kentucky it’s “superior” due to the taxpayers are forced to bail it out and cover the shortfall every year.
I don’t know about Kentucky but the teachers’ pension in Illinois was sold as deferred compensation. Teachers accepted less in salary than comparable private sector workers for a defined benefit plan which guaranteed retirement income. Investment losses have never driven the problems in the fund. Rather the states’ decision to not meet its promises to teachers by using the state required contribution to fund other programs. Teachers have consistently met their obligations. The state has created the problem. The state needs to take responsibility for their promises. Not interested in a dedicated teaching staff? Don’t think the profession requires any special training or expertise? Then make the profession so unattractive that you won’t have to worry about paying for more than you are willing to fund. Just see the quality of graduates you get. I can hear the screams from politicians now. Only there won’t be anybody to blame but themselves. You get what you pay for.
speduktr
February 19, 2021 at 11:54 am
I don’t know about Kentucky but the teachers’ pension in Illinois was sold as deferred compensation.
Kentucky educators are offer a supplemental retirement through the Kentucky Deferred Compensation program similar to a 401K program. It has some excellent mutual and bond funds available through the program. I wrote a model using similar contribution percentages as that of social security. Using their own rates and the funds available the the Deferred comp a Kentucky educator could retire at millionaire status, live off of the monthly dividends at a higher income level than through the current failing public pension system. Kentucky educators just do not accept the fact that there is a better way.
If your pension funds are run by a bunch of corrupt hacks, than maybe they would be better off investing on their own, but there is one reason and one reason only that business has run away from defined benefit plans. ALL THE RISK WAS THEIRS! I don’t need deferred compensation if I am going to assume the risk. Why should I believe the people recommending investments who couldn’t manage it when they assumed the risk?
2004 was the LAST time KY contributed the full ARC, (actuarially required contribution). Since that time, except for bonds in 2011, the legislature has repeatedly shorted the pension by 20-25%. (See Tobe, KY FRIED PENSIONS). The local teacher union, JCTA, has gone along with this – under the same president for 20 years (who engineered elimination of term limits), and who has BLOCKED calls for open accounting books by the members of the union. We are not allowed to know how our money is charged for fees, and what the performance is of the private money investments in KTRS. It is called “proprietary information”.
So you are telling us that Governor Bevin did not fully fund the ARC while Kentucky Governor?
I have copied and pasted some of your comments on my Face Book account with my rebuttals if you would like to come out of your safe space and have this discussion in open forum. Your talking point only work when you are preaching to the choir.
PBS “Frontline” produced a documentary about Kentucky’s pension crisis.
Read about it here:
https://www.courier-journal.com/story/news/politics/2018/10/24/kentucky-pension-crisis-frontline-report-blames-underfunding-hedge-funds/1743292002/
The story in the Louisville Courier-Journal begins:
FRANKFORT, Ky. – Years of underfunding by politicians who resisted tax increases and risky investments by Kentucky Retirement Systems created a multibillion-dollar pension crisis that threatens the retirement security of Kentucky teachers, police, firefighters and other public employees.
That’s the conclusion of an hour-long report called “The Pension Gamble” by the PBS investigative documentary series “Frontline” that aired Tuesday night on KET.
“The teachers are afraid of what the future holds. The pensions of some other Kentucky state workers are facing insolvency in around three years,” “Frontline” reported. “Teachers worry that when the time comes for them to retire, the state won’t have the money to pay their pensions.”
The report recaps how Kentucky’s public pension plans that were fully funded in 2000 devolved to become among the very worst-funded plans in the country, officially carrying more than $37 billion in unfunded liabilities – a figure Gov. Matt Bevin says in reality is worse.
I get my information in part from the 2012 task force report. You can read it here. https://legislature.ky.gov/LRC/Publications/Research%20Memoranda/RM512.pdf
I also get my information from The Bluegrass Institute for Legislative action. I prefer information from reports and studies over left wing media editorials. You can hear their finding here. https://www.youtube.com/watch?v=t8xylrgaClw&t=102s
The Bluegrass Institute is a rightwing propaganda mill. Why not quote the Heritage Foundation or CATO, or get a direct quote from Charles Koch?
As opposed to your left wing biased news outlets you offer as support? So to you everyone is wrong but Jason Baily? As I thought. When presented with evidence that you are wrong you panic and start with the rhetoric.
It’s really pathetic to quote a rightwing propaganda mill funded by billionaires to make your point.
Your point being that school teachers should not get a decent pension to retire with dignity.
You, sir, are the problem.
“The report recaps how Kentucky’s public pension plans that were fully funded in 2000 devolved to become among the very worst-funded plans in the country, officially carrying more than $37 billion in unfunded liabilities” In the late 80’s and early 90’s then Democratic legislators in an attempt to curry voting favors with Kentucky educators enhanced benefits which in some instances increased benefits by 42% in UN-earned benefits. That was during the Information technology stock market bull run. I guess legislators forgot that the stock markets correct on artificial market run ups. When the tech bubble burst the portfolio lost 40% of it value. To add to the damage between 2002 and 2012 the portfolio only averages 5.99%. A full 1.51% under the 7.5% needed to make this system calculations work. From these two occurrences, along with using the ARC to benefits all Kentuckians at times instead of the 5% that represent Kentucky educators, the system could not recover. I have offered you all of this information in the links that I have provided. If you choose to discount those findings, choosing instead to adhere to left wing talking points and media opinion, there is nothing more that I can say or do. My concern is for the future of Kentucky’s youth whereas you are concerned about your present day bank account. I am urging Kentucky’s youth to move from Kentucky to escape a lifetime of funding someone else’s retirement years. I am suggesting that they move to Tennessee where the system is managed in a fiscally responsible manner the the public pension system is like 95% funded whereas Kentucky is on average at about 34%, with the KERS system at a troubling 13% funded.
Fortunately, my bank account is not tied to Kentucky’s finances. The PBS documentary says that politicians of both parties raided the pension fund. You call that “left wing propaganda.” Kentucky won’t have a teaching profession if teachers are not paid a living wage with a decent pension. You are looking at your bank account, not the future of the children of Kentucky.
“You are looking at your bank account, not the future of the children of Kentucky.” I retired on social security and a 401K defined contribution plan. I retired at what most Kentuckians would consider wealthy. My concern for my bank account and 401K is keeping the legislature from stealing it to fund the failing pension system. I will be leaving my daughter a financial legacy whereas public service workers will be leaving their offspring with public pension debt.
So the people who educated your children should retire to be paupers?
Sound thinking—not.
The OSBD. You can read it here. https://osbd.ky.gov/Documents/Pension%20Reform/2017%2008%2028%20-%20FINAL%20PPOB%20pension%20presentation%20Chilton.pdf
ARC funding is but 15% of the problem. You can read it here on page 16. https://osbd.ky.gov/Documents/Pension%20Reform/2017%2008%2028%20-%20FINAL%20PPOB%20pension%20presentation%20Chilton.pdf
Do you reject the findings from the 2012 Task force report as false on the state of Kentucky’s public pension system? Do you reject the 2017 PPOB and PFM reports related to the state of Kentucky’s public pension system? Do you reject and claim false the audits starting with 1958 financial reports done by Dr. William Smith that found that enhanced benefits are why the system is in crisis. Why do you insist on putting the financial future of Kentucky’s youth in jeopardy by continuing to demand tax dollars to fund this failing system?
The system would not be failing had the legislature honored its commitment to fund the ARC: after all, the legislature commissioned the PPOB and PFM reports, and then ignored the results. DB plans work, much to the dismay of the greedy – except when they are not honorably funded. Teachers do not have the choice whether or not to fund their pension: 13% is taken out of every paycheck from Day 1. Taxes would not ever need be raised if the yearly audit contributions are made, which they have not been since 2004. The audits you refer to beginning around 2013 have been done minus full transparency of the secret investments, and are only window dressing of the problem.