A work group seeking solutions for the Kentucky Teachers' Retirement System's financial woes meets for the second time Friday. The panel has six additional sessions scheduled before its Dec. 1 deadline for submitting its report to Gov. Steve Beshear.
As this process goes forward, we'll hear many of the same debate themes we heard a few years ago when a legislative task force studied the Kentucky Retirement Systems (which covers state and local government workers).
We'll hear talk of changing the rules for future teacher hirees so they contribute more to their pensions and work longer before becoming eligible for retirement. No doubt someone on the panel will suggest replacing the current "defined benefits" plan with a "defined contributions" approach (or a hybrid of the two) going forward. Cost-of-living adjustments will be mentioned. There will be calls for more oversight of KTRS and more transparency in its operation.
When a pension plan's unfunded liability grows from $571 million to $14 billion in a 15-year span, it tends to prompt talk of making changes, of reforming the system. (Although one person's idea of reform may be viewed by someone else as a heartless slashing of benefits for the state's underappreciated educators.)
Here's the thing, though: The two reforms that could help KTRS the most have nothing to do with benefits or the administration of the system.
While not the sole cause, a significant reason KTRS is in such a big hole is the General Assembly's failure to fund the state's actuarially required contribution (ARC) to the system for years on end. Money that by law should have been securing the future of Kentucky teachers was spent elsewhere on the favored projects and programs of a succession of lawmakers and governors. KRS was also shortchanged for years.
Reforming the mentality that has allowed this to happen so often in the past is key to shoring up the future for both KTRS and KRS. The best way to remove the temptation for governors and lawmakers to revert to old habits in the years ahead is to assure the state has a stable sustainable revenue base that can meet the ARC for the pension plans and pay for necessary programs and projects. And the best way to achieve that is through real tax reform that includes extending the sales tax to non-exportable services.