Report: Extra billion needed to fund Kentucky's public pension system
A board meeting to discuss Kentucky's pension system brought out a packed house on Monday afternoon.
People filled the room to capacity more than 30-minutes ahead of the Public Pension Oversight Board's meeting. All gathered to hear the findings and recommendations of an audit performed by the PFM Group.
State budget director John Chilton started the presentation by saying his office is predicting a $200 million shortfall for Kentucky's 2018 budget. Chilton says Medicaid & pensions, estimated to make up just over 30% of the budget in 2018, are putting a "big squeeze" on other budget items. He said the state would need an extra billion dollars a year to fix and fund the pension system.
Mike Nadol of PFM pointed out during his presentation that this report is only the framework and that there are no easy answers.
"We understand this isn't a new problem for the Commonwealth...things have been done to chip away at issue. There is not a quick fix."
Part of the economic outlook report done by PFM says pensions are still severely underfunded by $35 billion to $85 billion. The report went on to say, "There is uncertainty in the economic outlook for the future that warrants great caution."
PFM recommended the state switch to 401 (K) style defined contribution retirement benefit, with a mix of employer and employee contributions for Kentucky Employees Retirement System (KERS), County Employees Retirement System (CERS), and Judicial Form Retirement System (JFRS). Also, there would be a mandatory employee contribution of 3% of their salary and a base employer contribution of 2%.
Among other recommendations, shifting teachers back into social security and defined contribution benefit.
During testimony, a pension consultant said Kentucky State Police retirement fund is the Commonwealth's second worst when it comes to funding. Nadol suggested raising the retirement age to 60 for future police officers and firefighters.
Governor Matt Bevin's office made full copy of the