Failing retirment system and

understanding the information

being put out regarding the study

Over the course of the past week, there has been increased attention given to the issue facing our public pension systems, much due to the report issued by PFM, a third-party, independent consulting firm. While I think it is good that both elected officials and the public are understanding this situation is dire for our commonwealth, I worry that there has been much misinformation spread regarding the subject, especially with concern to our public school employees. Please allow me the opportunity to share with you some information that I hope will help with that.

To begin with, the recommendations PFM released are nothing more than that. The work they did, as a consulting firm, is to be commended. However, it is important to remember that they are not legislators, nor attached to any government agency. Any restructuring of the pension systems has to come from the Kentucky General Assembly. We will, of course, consider the recommendations of PFM, as they have much expertise in the field, but at the end of the day I expect a legislative proposal to look quite different than their recommendations. While some of their recommendations probably make sound accounting sense, they are not feasible in a real world scenario.

One of the most publicized recommendations from PFM which has caused much concern among retired teachers and state employees is that any cost of living adjustments that have previously been approved would be removed in the future. Estimates show this could potentially have a negative effect of approximately 25% for some. I fully recognize that our retired teachers and state employees live on limited incomes and such a reduction is not a step that we should take. This is not something I can support, nor do I believe there is will in the General Assembly for such a drastic measure.

Please also understand that there is no complete proposal as of yet. I have been engaged in weekly intense meetings with Governor Bevin, legislative leaders and expert staff over the course of the past couple of months trying to find the best way to address this issue. The simple fact is there is no easy answer, but working together we hope to bring forth a proposal that has the least impact on our teachers, state employees and retirees, while also bringing fiscal solvency to the pension systems and putting our state on better financial footing.

The Commonwealth of Kentucky has legal obligations to our retired teachers. These were taken into account when they ended their service to our state, based on advice given to them by representatives of Kentucky Teachers’ Retirement System. I pledge to you that I will not support any proposal that I believe does not meet those obligations.

I fully recognize the contributions our teachers and state employees, both current and retired, have made to our communities and the debt of gratitude we all owe them. I have long been a believer that the best form of economic development is a strong education system, and that cannot be in place if we do not show the greatest respect for those in the classrooms and administrative positions. Since the issuance of the PFM report, I have implored those coming from all vantage points to tone down the rhetoric and for us all to have mature conversations about how we achieve our common goals. At the end of the day, I have the utmost confidence every Kentuckian desires to see our commonwealth thrive and we can best accomplish that by standing united, rather than falling divided.

If you would like to stay up-to-date on all legislative action of interest to you during this session of the Kentucky General Assembly, you can visit www.lrc.ky.gov or call the LRC toll-free Bill Status Line at (866) 840-2835. As always, I welcome your thoughts and comments. You can send me a message either at Jeff.Hoover@lrc.ky.gov or by calling (800) 372-7181.