By Tom Latek
Kentucky Today
A mandatory 401(k)-style plan will not be part of an overhaul of Kentucky’s public pension systems, lawmakers said Wednesday, because the savings wouldn’t be sufficient to make it worthwhile to the state.
Senate President Robert Stivers, R-Manchester, said the overhaul, which is now in the hands of legislative staffers, has undergone substantial change since it was unveiled last October. The most significant being a move away from the 401(k)-style plan endorsed by Republican Gov. Matt Bevin.
Senate President Robert Stivers speaks with reporters about a proposed pension overhaul on Wednesday at the Capitol. (Photo by Tom Latek/Kentucky Today)
The provision was the most controversial part of the proposed pension overhaul and drew boisterous protests from government employees.
With legislative elections coming later this year, angering Kentucky’s politically active state workers and teachers wasn’t seen as a wise move by many incumbents on the ballot. But lawmakers said the decision to stray from the 401(k)-style plan had only to do with dollars and cents.
“If you’re in a defined benefits system, you want to continue in a defined benefit system,” Stivers said.
Kentucky’s pension plans for government employees and school teachers are among the most underfunded in the nation, to the tune of somewhere between $30 billion and $80 billion.
House Speaker Pro-Tem David Osborne said data shows changing employees to a 401(k)-style plan has short- and long-term financial costs.
Stivers said lawmakers are considering giving new teachers the ability to choose from a variety of retirement plans, but he didn’t elaborate.
Drafting the roughly 200-page bill has been a tedious and long process for lawmakers, who are now halfway through this year’s legislative session.
The teacher’s lobby has a stranglehold on Frankfort. In many districts, the various boards of education are the largest employer and they have a huge influence on the legislators from their districts. So is there anyone looking out for the taxpayers? If Teachers and other State employees aren’t converted off of the current Defined Benefit Plan and onto a Defined Contribution Plan, the taxpayers of the Commonwealth will continue to be on the hook for the Teacher’s pension plan for generations to come.
And why can’t the teachers be responsible for their own retirement savings? The taxpayers already pay teacher salaries, why should they also be responsible for their retirement years? Unlike the majority of the taxpayers in the state, these teachers are highly educated people. Many have multiple degrees including multiple Masters degrees, even Doctorates. I think they can figure out how to be responsible for their own retirement savings.
The teacher retirement system is a holdover from the progressive socialism of the 1930’s when it was thought that the government was the best choice for ensuring an individual would be taken care of in their retirement years. Retirement years that, at that time, usually only lasted 15 – 20 years. Things have changed since then and now people are living longer in retirement; well into their 80’s and 90’s, 25 – 35 years or more into retirement.
The system wasn’t designed for that longevity.
Just like social security, the number of retirees will continue to grow while the number of working taxpayers required to fund the system will continue to decline. And then where will we be? Looking to raise taxes. Squeezing more and more out of the taxpayers. Hurting the working poor most of all; because those school taxes are pernicious little buggers. They’re in utility bills, phone bills, auto tag registrations, property taxes, etc. Many don’t even require a vote of the taxpayers to authorize an increase.
Yes, converting current teachers to a 401k style plan may have more upfront cost now, but it would be far less costly in the long run. Remeber, it’s $80 mil in the hole now. It’ll take that much just to bring it up to date, plus more and more to keep it going.
I guess it’s easier to continue a Ponzi scheme than to unwind one.