KY pension fund kept gains in 2023 but faces 22% funding and $12.3 billion deficit
Kentucky’s primary pension fund for nearly 125,000 past and present state government workers continued to see small but steady gains in Fiscal Year 2023, ending with a funding level of 22.2 percent, up from 18.5 percent in 2022, state pension officials told lawmakers on Wednesday.
The Kentucky Employees Retirement System (Non-Hazardous) fund remains one of the most impoverished public pension funds in the country, due to two decades of neglect by governors and legislators from both political parties. As of June 30, it faced an unfunded liability of $12.3 billion, down from $13.5 billion last year.
“The news is good. I mean, we are headed in the right direction. It’s just going to take a long time,” David Eager, executive director of the Kentucky Public Pensions Authority, told the legislature’s interim joint budget committee at the Capitol in Frankfort.
Just five years ago, in 2018, the fund was considered on the brink of insolvency at only 12.9 percent funded.
But in recent years, starting under former Republican Gov. Matt Bevin, state leaders have committed billions of dollars in every state budget to full annual funding of the pension systems for state workers and teachers, with a long-term plan to pay off their huge accumulated deficits — currently, about $40 billion — by the late 2040s.
Between the massive amounts of cash shoveled into the pension systems in the current two-year state budget and good investment returns in 2023, that long-term plan is well underway, pension officials told lawmakers
The Teachers’ Retirement System of Kentucky — which covers about 135,000 active and retired educators — held steady at a projected 58.8 percent funded in FY 2023, the same as 2022, with an unfunded pension liability of $16.9 billion. That’s not necessarily the final set of numbers for 2023 because TRS’ actuarial consultants are still working, Beau Barnes, TRS deputy executive secretary, told lawmakers.
In Kentucky, teachers are particularly dependent on their pensions because they do not receive retirement income from Social Security.
State legislators keep their own public pensions in a separate account at the Kentucky Judicial Form Retirement System that was fully funded as of the most recent actuarial reports.
Eager, at the KPPA, credited lawmakers with providing additional lump sums of hundreds of millions of dollars to help reduce deficits in different public worker funds at his pension agency, apart from allocating billions of dollars in full annual funding in recent years.
“That moves the needle,” Eager said. He added later, “Thank you all for the additional appropriations.”
The KPPA oversees several other pension funds that also did relatively well in 2023, including:
▪ KERS (Hazardous), which covers most state workers who hold hazardous jobs. It ended FY 2023 at 65.8 percent funded, up from 63.2 percent in 2022.
▪ State Police Retirement System, which covers the Kentucky State Police. It ended FY 2023 at 55 percent funded, up from from 52.5 percent funded in 2022.
▪ County Employees Retirement System (Non-Hazardous), which covers most local government workers. It ended FY 2023 at 56.2 percent funded, up from 52 percent in 2022.
▪ CERS (Hazardous), which covers most local government workers who hold hazardous jobs. It ended FY 2023 at 51.5 percent funded, up from 47.6 percent in 2022.
