Politics & Government

Senior judges costs analyzed

FRANKFORT - In response to growing skepticism about the cost of the senior status judge program, the agency that oversees the retirement fund for judges has released an actuarial analysis estimating that the program will need additional funding in 2014.

The analysis conceded that the cost exceeded earlier estimates because more judges than expected joined the program, which gives retired judges an enhanced retirement benefit in exchange for working part-time to clear clogged caseloads. Supporters of the senior judge program are quoting the study to dispute a recent Herald-Leader analysis that estimated the program's cost to be $1.57 million this year, nearly four times higher than the original estimate, $420,000.

Meanwhile, a bill to extend the senior judge program to 2012 has stalled in the Senate. Senate President David Williams, R-Burkesville, says legislators need time to scrutinize exactly how much the plan costs.

"Some very fine judges want that benefit, but they haven't made a compelling case to many members of the General Assembly," Williams said.

The retirement system's recent analysis estimates that the program will cost the fund, which pays traditional pensions and the senior judge pension, $575,000 a year. But the analysis relied on assumptions from a July 2005 study, when only 26 retirees were in the program.

Since then, 26 more have retired.

Donna Stockton-Early, director of the retirement system, conceded that the $575,000 figure did not incorporate all the current retirees.

"We don't have any '07 (expenses) yet," Early said.

A University of Kentucky mathematics professor said the new analysis is unreliable because it is not factoring in half the retirees in the program.

"Their whole report here doesn't make any sense," said Dr. Robert Molzon, who heads UK's mathematical economics program.

In some respects, the analysis substantiates the Herald-Leader's analysis, Molzon said. The fund estimated the per-judge annual cost at $25,000; the paper estimated it at $30,000.

The senior judge program was created by the General Assembly in 2000 to set up a pool of retired judges who could temporarily fill vacancies and clear growing caseloads. To pay for the program, legislators increased the state's subsidy to the retirement fund by $420,000.

Early said yesterday that legislators were told that the program would eventually cost more. But the transcript of Chief Justice Joseph Lambert's testimony to the House Judiciary Committee in March 2000 showed just the opposite.

"We have very carefully examined the cost questions and actuarially determined that the cost will be a level term ... no back end load, no unfunded liability -- a level term of $420,000 a year," Lambert said.

Early said yesterday, "In 2000, that's what we thought."

Jefferson Commonwealth's Attorney R. David Stengel, a prominent critic of the program, said yesterday that the retirement system is trying to deceive the public by releasing a flawed analysis.

"I think they've cooked the books on that one," he said.

Lambert and the retirement system had clung to the $420,000 estimate, generated in 1999, until the Herald-Leader began questioning it in January. Early conceded the program's liabilities exceed that figure. But she said that the program is ultimately revenue neutral to the fund because investment income from the legislature's annual $420,000 subsidy will pay for it.

The Herald-Leader analysis was not an actuarial study that forecasts long-term costs. Rather, it estimated how much the plan will cost the fund this year if none of the 52 retirees dies. It arrived at its estimate by looking at publicly available numbers and determining the minimum pension senior judges are now drawing and comparing that with what they otherwise would have made in the traditional pension plan.

Early noted that the state's overall subsidy to the fund has decreased to $3.2 million from $4.2 million since 2000. She said the fund is sound, and showed a clean bill of health in an audit last year and an actuarial analysis the year before. She also said a one-year analysis is not enough to gauge the program's cost; it must be examined over a 30-year period.

Taxpayers foot only 25 percent of a judge's pension, Early said. The rest is paid with investment income (69 percent) and pension contributions from retired judges (8 percent).

The new actuarial analysis, conducted by Mercer Human Resources Consulting in Louisville, said the number of senior judges increased substantially last year because of the elections, which forced many judges to decide whether they wanted to retire or run for re-election. Twenty five judges retired last year and joined the program.

The new analysis said pinpointing the actual cost is difficult because it requires factoring in what the judges would have made if they had waited longer to retire and drawn a higher traditional pension.

The analysis also noted that the program is not a "pay-as-you-go" plan, like Social Security, and is mostly paid with investment income, not taxes or current judges' payments into the plan.

Supporters say the program is sorely needed to keep cases moving, particularly in rural counties. They say cases will grind to a halt in some areas without senior judges.

The chief judge of the Court of Appeals, Sara Combs, said in a recent interview that she initially opposed having senior judges hear appeals cases. Lambert put them on the Court of Appeals over her protest, she said. (Senior judges do not sit on Supreme Court cases.)

But after the wave of retirements last year, she changed her mind."It turned out to be a very good thing," Combs said. "The court would have had to have shut down without them."

House Bill 465, which the House passed by an overwhelming margin, seems unlikely to move out of the Senate Appropriations and Revenue committee, said the bill's co-sponsor, Rep. Rob Wilkey, D-Scottsville.

The bill extended the program, originally created as a pilot program, and also tightened eligibility standards.

Wilkey said ending the program will cause problems for the court system because there is conflicting language in the law over whether the pilot project ends this year or in 2009.

When asked whether the General Assembly needs to clear up that confusion, Williams said, "That's what courts are for."