FRANKFORT, Ky. — The Kentucky Teachers’ Retirement System has been plagued by “systemic” problems that contributed greatly to its chronic funding woes, a top Republican lawmaker said Wednesday as he defended the General Assembly’s record on pensions.
Senate President Robert Stivers said the problem lies with the retirement system, pointing out that lawmakers for years have fully funded the teachers’ pension system as required by law.
“The teachers need to be informed as to what their system’s doing,” Stivers said.
KTRS executives didn’t respond directly to Stivers’ criticism, but referred to their system’s investment returns, which they said in recent years have ranked in the top 10 percent of plans managing more than $1 billion. The system’s longer track record is also solid, with KTRS investment returns having exceeded long-term assumed rates of return of 7.5 percent, they said.
The Kentucky Education Association said it has “full faith” in KTRS leadership. While the Legislature has met its “minimum salary-based obligation” to KTRS, lawmakers fell short in meeting a two-pronged funding approach contained in state law to support the system, the education association said.
Stivers met with reporters as Gov. Matt Bevin and GOP lawmakers continue behind-the-scenes work on a Republican plan to revamp Kentucky’s chronically underfunded public pension systems. Stivers said the actual legislation could be released within a few days, and Bevin has said he intends to call on lawmakers to reconvene for a special session before year’s end. Bevin was joined by Stivers and House Speaker Jeff Hoover in announcing the plan last week.
Stivers’ stern critique of KTRS management comes as the Republican pension plan has drawn criticism from many current and retired teachers. Teacher advocacy groups warn the proposal could lead to a rash of retirements and departures, leaving schools with teacher shortages.
“Frankfort needs to take a breath, listen to what retired teachers and others are saying and stop rushing to address a problem that has been years in the making,” said Tim Abrams, executive director of the Kentucky Retired Teachers Association. “We need a solution that is fair to teachers and taxpayers, and won’t drive Kentucky teachers to other states or out of the profession.”
The GOP pension plan is aimed at salvaging one of the worst-funded public retirement systems in the country. As of mid-2016, KTRS reported unfunded liabilities of $14.5 billion.
Stivers on Wednesday referenced a teachers’ system report from recent years showing less than 10 percent of the KTRS pension debt was due to insufficient contributions from lawmakers.
Teachers should be pressing for answers about “systemic problems” that were the main contributors to the pension system’s woes, he said.
“Who’s asking the board and the KTRS system … what happened for all those years?” Stivers said. “Where did this go wrong? Why are you 80 to 85 to 90 percent of the problem? Why didn’t you ask for statutory change?”
Beau Barnes, deputy executive secretary and general counsel for KTRS, said that Stivers was citing a period when investment portfolios were battered by the Great Recession.
“That was, of course, one of the most significant market downturns in the history of this country,” he said by phone. “And all investors suffered during and after the Great Recession.”
Responding to Stivers, KEA said the Legislature’s statutory obligation to KTRS goes beyond a contribution based on a percentage of payroll. It said state law also requires lawmakers to plug any gaps between the payroll contributions and the amount needed to fully find retirement allowances.
Lawmakers failed to provide that additional funding in recent budget cycles, it said.
“Although the legislature has met its minimum salary-based obligation to (K)TRS, it has consistently avoided dealing with the ever-mounting unfunded liability,” KEA said in a statement.
Stivers said the Legislature has fully funded what state law required. He said the Legislature is not required by law to make that additional contribution.