Funding slowly but steadily improving for Kentucky’s teacher pensions, new data shows
Kentucky’s pension fund for teachers is continuing its slow but steady recovery, according to newly released data.
The Teachers’ Retirement System of Kentucky reported a funding level on June 30 of 58.1 percent, up from 57.7 percent one year earlier. That’s less than healthy — anything under 80 percent is problematic, pension experts say — but it shows improvement for a system that has been the focus of much controversy in Frankfort in recent years.
Total unfunded liability at TRS rose from $14.2 billion to $14.5 billion this year. But the actuarial value of its assets gained even more, from $19.4 billion to $20.1 billion this year.
“Our funding has gone up for the third straight year. Everything has gone up for the third straight year,” said Beau Barnes, TRS general counsel, on Monday. “We’re very much headed in the right direction.”
Citing the pension funding shortfall, Gov. Matt Bevin and the General Assembly have made several attempts to reshape teacher retirement benefits in Kentucky, including legislation hastily passed at the end of the 2018 session, known as “the sewer bill,” that would have ended pensions for newly hired teachers. Teachers called in sick at schools statewide to protest at the Capitol.
The Kentucky Supreme Court struck down that law last winter, ruling that it was passed in an improper manner. A special legislative session on pensions that Bevin ordered shortly afterward fell apart without any action by lawmakers.
In a new report released Monday, state auditor Mike Harmon, a Republican, found no significant problems with TRS’ finances. In its response to the auditor’s report, TRS management observed that the pension fund eventually should be restored to financial health with no structural changes necessary, provided the state continues to fully fund it every year.
“Assuming that contributions to the retirement trust are made by the state from year to year in the future as recommended by the actuary, TRS should have sufficient assets to provide all benefits due as defined by law to members,” TRS management wrote.
After years of neglect by elected leaders, Bevin and the General Assembly have committed themselves to full pension funding since 2017. The state paid 97 percent of the actuarial recommended contribution into TRS for fiscal year 2018 and 100 percent for fiscal year 2019.
Full funding hasn’t come cheaply. TRS gets more than $1 billion a year from the state’s roughly $11 billion General Fund, as does the other major public pension system, Kentucky Retirement Systems, which covers state and local government employees.
The pension payments will be even harder to make this winter for Governor-elect Andy Beshear, a Democrat, and the Republican-led legislature as they craft the next two-year state budget.
KRS says it will need still larger sums in coming years. Unless Beshear and lawmakers can agree on new revenue sources, such as casino gambling, everything else the state funds — schools, universities, health care, social services, prisons, roads — will be squeezed even tighter in order to find enough money for pensions at TRS and KRS.
By comparison to TRS, KRS last week reported that the primary pension fund for state employees has only 13.4 percent of the money it’s expected to need to honor its future commitments. However, it, too, is showing signs of a rebound, rising from last year’s all-time low of 12.9 percent.
There were 72,647 active teachers enrolled in TRS as of June 30 and 55,613 retirees or their beneficiaries drawing a pension.
This story was originally published November 18, 2019 at 11:09 AM.
