Whatever happened to KY’s state pension crisis? It’s slowly improving, at great cost
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Kentucky’s primary pension fund for state workers continued its slow, steady recovery in 2025, although it’s still in worse shape than nearly any public pension fund other than the city of Chicago’s.
The $4.8 billion Kentucky Employees Retirement System (Non-Hazardous) ended fiscal year 2025 with 28.6% of the money it’s expected to need to pay benefits to future retirees. That’s up from 24.8% in 2024.
As scary as 28.6% might look — and it isn’t great; the average funding ratio for U.S. public pension systems was around 80% last year — a little historical context is useful. Kentucky’s fund fell as low as 12.9% in 2018. That was one stock market crash away from potential insolvency.
For two decades, Kentucky governors and legislators under-funded the state worker’s pension system (although not the legislators’ smaller and separately managed state pension plan, which is fully funded).
But starting in 2017 under Republican Gov. Matt Bevin, state leaders began shoveling billions of dollars into full annual pension funding as well as extra taxpayer money to address the massive unfunded pension liability that has accumulated.
The muscular commitment reduces how much money is available for other spending in the state’s $16 billion General Fund. But it’s knocking down the pension debt. The accumulated liabilities of the primary state pension plan dropped this year to $12 billion, down from $12.5 billion in 2024, with a scheduled payoff date of 2049.
The current two-year state budget provided full pension funding and $650 million in additional money for the several state pension funds managed by the Kentucky Public Pensions Authority. It also provided full funding and $80 million extra for the Teachers’ Retirement System of the State of Kentucky, which manages educators’ pensions.
The state pension funds benefitted from the extra money and a lucrative year on Wall Street. Investment returns in 2025 were around 11%, or twice what the systems assumed they would get, said Ryan Barrow, executive director of the Kentucky Public Pensions Authority.
“It’s been one of the best funding ratios in recent history,” Barrow said.
“We are still anticipated to be fully funded in 2049,” he said. “That’s the message we’ve put out there to our members. We’ve made some progress, but you know, 2049 is still a ways away.”
There were 48,594 state retirees or their beneficiaries drawing pensions from the Kentucky Employees Retirement System (Non-Hazardous) in 2025 and 33,356 active state workers contributing through their paychecks.
Overall, KPPA manages $6.5 billion in assets for state workers. The two much smaller state pension funds include the Kentucky Employees Retirement System (Hazardous), which had a 2025 funding level of 72.3%, and the State Police Retirement System, which has a 2025 funding level of 61.9%.
The other significant state pension fund, the $27.3 billion fund managed for educators by the Teachers’ Retirement System, had a 2025 funding level of 61%, up from 59.1% in 2024.
The teachers’ pension system had 77,024 active members contributing in 2025 and 61,222 retirees or their beneficiaries drawing pensions.
This story was originally published December 29, 2025 at 5:00 AM.
