Higdon: Legislature working on long-term fix for teacher retirment system

By JIMMY HIGDON
14th District State Senator

SEN. JIMMY HIGDON

Sunday, April 12, 2015, 9 p.m. — As things have seemingly calmed down after the end of the 2015 Legislative Session in Frankfort, I would like to once again address the KTRS issue by reassuring all teachers that we are committed to finding a solution.

Conversations already have started in order to prepare a bill for the 2016 Legislative Session. Reports from KTRS inform us that even if nothing is done, the fund will remain solvent for the next 21 years. I assure you that something will be done soon to ensure that this system is sustainable for generations to come.

I have received numerous messages from many concerned retired teachers. I recognize your concern and understand that it makes several active and retired teachers downright angry.

I understand where you are coming from, but teachers have been made a promise and that promise is backed up by the full faith and credit of the Commonwealth of Kentucky.

So, let me also take this opportunity to address a few misconceptions:

– One of the most frequent requests I hear from teachers is that the Legislature needs to repay the money borrowed from KTRS. The state did borrow $850 million from KTRS, but that amount was repaid in full to KTRS in 2010.

– Another comment I hear is, “I made my contribution but the state did not pay their part.” The General Assembly has made its contribution every year of the required 13 percent match of the teacher’s contribution. The unfunded liability comes from monies the actuaries say we owe over the amount already contributed.

How did we get to a $14 billion unfunded liability? The combined retirement accounts lost over $6 billion in the stock market downturns of 2002 and 2008. A recent Program Review Committee report stated that about 20 percent of the unfunded liability was due to underfunding by the Legislature. What about the other 80 percent? One major factor, among others, is the fact that we all are living longer. When these funds were set up, the average life expectancy for a male was around 62. That is number is well into the 70s in today’s world. While a longer life expectancy is a good thing for Kentuckians, it takes a toll on retirement funds.

Another thing to consider is that when these funds were set up, insurance was not a factor. Today, insurance and cost of living adjustments make up a significant part of the unfunded liability.

Spiking is another factor that contributes to the problem. Over the years the legislature has made it very easy for most to enhance their retirement benefits.

I told every teacher and retired teacher that asked me to support the bonding in HB 4 that I would support bonding at some level but that the plan must be changed going forward for new hires.

We must quit digging and come up with a plan that is sustainable.

I do not advocate for a defined contribution plan. I understand teachers do not participate in Social Security, so it is my personal view that any plan must be a defined benefit.

Thanks to all teachers in my district and across the Commonwealth. I do value your service and I assure you that we are committed to finding a real solution to the shortfalls of KTRS.

Please feel free to contact me to discuss this issue and understand I am happy to meet and discuss this matter personally anytime. In closing, I reached out to KTRS, KEA, JCTA and KRTA the very day session ended in order to illustrate my commitment to working on this important issue.

I am always interested in your comments or questions. Please feel free to contact me by calling and leaving a message at the toll-free message line for legislators, 1-800-372-7181. Also, you are welcome to call me at my home, 270-692-6945. My e-mail address is jimmy.higdon@lrc.ky.gov.

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