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Kentucky governor seeks redo of teacher pension analysis

Posted at 6:09 PM, Nov 14, 2017
and last updated 2017-11-14 18:09:47-05

LOUISVILLE, Ky. (AP) — Gov. Matt Bevin’s efforts to overhaul Kentucky’s ailing pension systems took another twist Tuesday when his administration asked consultants to redo their analysis of his proposed changes to retirement benefits for public school teachers.

The request comes days after consultants forecast Bevin’s pension bill would cost Kentucky taxpayers an extra $4.4 billion over 20 years to fund teacher pensions. That projection assumes more teachers would retire early and the state would earn less on investments.

Bevin’s administration signaled Tuesday it doesn’t like the assumptions used by the consultants in their analysis of how the governor’s proposal would impact the Teachers’ Retirement System.

The redo request comes as the Republican governor considers convening a special legislative session in Frankfort to deal with one of the country’s worst-funded public pension systems.

Bevin recently presented legislation that would eventually shut down the pension system in favor of a 401(k)-style plan for state workers and public school teachers.

The proposal has drawn vigorous opposition from state workers. Republican leaders in the GOP-controlled House have said they don’t have the votes to pass the bill without changes.

Bevin’s office said in a statement Tuesday that it will ask the consultants to use “a more appropriate set of assumptions” in a follow-up review of the pension system for educators.

The initial analysis included “significant changes” in retirement patterns as well as an investment return assumption far different from the rate recently approved by the TRS board, Bevin’s administration said.

The consultants assumed TRS would earn an average of 6 percent return on its investments each year. TRS currently assumes a 7.5 percent annual return on investments.

State Budget Director John Chilton said the consultants’ assumptions were “significantly different” from actuarial calculations provided during the planning process.

“In the past, a lack of realistic and rational actuarial assumptions helped obscure the distressed financial status of the plans and contributed to the long-term unsustainability of the plans,” Chilton said.

In their redo, consultants will be asked to prepare calculations that include “several alternative assumptions so that policy makers can make informed decisions based on scenarios that include realistic assumptions,” Chilton said.

Chilton also will ask that the follow-up analysis stretch for 30 years, even though state law requires a 20-year analysis, Bevin’s office said.

So far, Bevin’s administration has not released a similar analysis of the pension system for state and local workers.

While lawmakers review Bevin’s plan, Kentucky’s retirement systems continue to get worse. The board of trustees for the Kentucky Employees Retirement System learned recently that the pension debt increased by more than $5 billion for the fiscal year that ended June 30.

Nearly all of that increase is because the board of trustees predicted the state will earn a lot less from its investments than it has previously. The state depends on investments for a large portion of funding for benefits.

The debt is how much money the state does not have to pay promised retirement and health insurance benefits over the next 30 years. Last year, that debt was a combined $21.7 billion across the five systems in the Kentucky Employee Retirement System. But this year, consultants say that debt is now $26.7 billion.

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Associated Press Writer Adam Beam contributed to this report.