A leader of the Kentucky Teachers’ Retirement System said he believes the ship has been righted, provided state funding and return on investments continue an upward trend.
KTRS Executive Secretary Gary Harbin spoke at a meeting of the Calloway Retired Teachers Association held Monday at the Murray Woman’s Club. This was part of a statewide informational workshop series Harbin was coordinating.
“The good news of this session (the last Kentucky legislative session) is full funding,” Harbin said to a large crowd of retired educators and community members. “What we’ve got now is a place in the budget. That $500 million a year we need is there. We’re getting that money in and that money’s doing really good for you. Last year, at this time, we had $18 billion. This year at this time, we have $21 billion.”
Harbin added that the pension investment has returned about 2.5 percent, which comes out to $500 million.
“We’re in really good shape right now,” he said. “The money has to keep coming in through the budget and our investment returns have to stay up, but things are ... better than they have been since I was first associated with the system back in 1975.”
He said there were several groups to thank for efforts made to turn around what has been called the most underfunded pension system in the country, from the KTRS board of trustees to legislators who voted for funding and the local groups of retired teachers that made their voices heard both at home and in Frankfort.
At the same time, Harbin acknowledged discontent among educators.
“I think the mixed emotions come about because there’s a perceived lack of respect for teachers,” Harbin said. “The funding is there. The funding is real, so that’s going to shore up the pension plan. If that funding keeps coming in the future and future legislators continue on with that funding, there is no crisis in teachers’ pensions.”
He said there are future hurdles that will have to be dealt with for the pension’s long-term viability, including an anticipated Kentucky Supreme Court decision on whether a pension overhaul passed by the state legislature earlier this spring will hold.
That plan would, in essence, move new teachers into a hybrid cash-balance plan rather than a traditional pension. It would mean less risk for the state but less of a guarantee for those investing in it.
In June, Franklin Circuit Judge Phillip Shepherd ruled the bill unconstitutional.
“The thing is, we have to keep working as if the bill did pass,” Harbin said, “because we have to have our systems up and going Jan. 1. If the Supreme Court upholds this legislation, we can work through this. We can get the changes needed to make this an even better piece of legislation than when it was passed.”
Harbin also said another issue could be what he described as a multimillion-dollar shortfall in health benefits. That includes the newest state budget not subsidizing family health care costs for those under 65.
“The other shortfall is the second year of the biennium,” he said. “We were so far ahead of projections that $70 million for under-65 coverage – that was the state’s portion of shared responsibility – was now going to have to be paid out of the 65-and-over pool.
“The next budget definitely has to include funding for the over-65 population. It has to not take money out of the over-65 trust funds and pay for under-65 health care coverage like it did in this budget. That will devastate the plan that was struck between the state, teachers and school districts in 2010 … the $70 million funding issue in the next budget is the biggest issue that we have left, as far as being able to provide benefits for teachers.”