KY legislature’s budget plan omits $52.4 million for retired teacher health insurance
The Kentucky legislature’s nearly $12 billion state budget plan omitted a promised $52.4 million state subsidy to help pay for health insurance for retired school teachers.
The state subsidy helps cover health insurance costs for nearly 10,000 teachers under age 65 who have retired since July 1, 2010. At age 65, the retired teachers qualify for Medicare coverage and a Medicare Advantage health plan provided by the Teachers’ Retirement System of Kentucky.
The subsidy is part of a 2010 deal between the state, teachers and school districts, in which all agreed to make certain financial contributions in order to shore up the Health Insurance Trust at TRS, which had a funding level of barely 3 percent. Since then, the Health Insurance Trust has recovered to hold $1.6 billion in assets, a 61 percent funding level.
Despite the state’s 2010 pledge, the Republican-led legislature’s Free Conference Committee Report on the budget informs TRS that no state subsidy for the under-65 retirees will be coming in Fiscal Year 2022, which begins July 1.
Instead, TRS is directed to swallow the cost by taking the $52.4 million from its Health Insurance Trust.
In the same one-year budget, lawmakers propose depositing more than $608 million in the state’s “Rainy Day” budget reserve trust fund, raising its total to $1.2 billion.
This is the same dangerous move — skipping agreed-to state contributions in order to spend elsewhere — that started the collapse of Kentucky’s pension funds for teachers and state workers, said Tim Abrams, executive director of the Kentucky Retired Teachers Association.
“It won’t put retirees’ insurance at risk tomorrow. I don’t want people panicking about that,” Abrams said.
“The fear is, it will put the TRS health insurance fund on a negative trajectory after years of it making progress,” Abrams said. “The pension system was funded at 90-something percent, and then the state started to back off on its obligation to make payments, saying, ‘You know, this is so well funded, we can spend a little of this money somewhere else.’ Once you start writing budgets that way, it’s hard to put the money back in next time.”
Democratic Gov. Andy Beshear’s state budget proposal in January contained about $70 million for the state subsidy, said Beau Barnes, general counsel for TRS. The agency told legislators that $52.4 million would be sufficient, Barnes said.
However, the teacher pension system will absorb the costs as instructed, Barnes said.
“That is a policy directive of the commonwealth,” Barnes said. “We don’t make policy.”
The chairmen of the House and Senate budget committees did not immediately respond Monday to requests for comment.
This story was originally published March 15, 2021 at 12:57 PM.
