KY Policy Blog

Pension Framework Makes Harsh Benefit Cuts, Adds Costs Without New Revenue

By Jason Bailey
October 18, 2017

The governor and legislative leaders released a framework today that makes substantial cuts to pension benefits for current workers, new employees and even retired teachers. It includes a shift to a 401k-type defined contribution (DC) system for future employees that is no cheaper than the current pension plan but will reduce retirement security and make it harder to attract and retain a skilled workforce. In addition, the framework calls for big new contributions to the plans without any new tax revenue to make that possible.

Major aspects of the proposal read more

Report Shows Kentucky’s Preschool and Kindergarten Programs Effective, Need Greater Investment

By Ashley Spalding
October 16, 2017

High quality early childhood education has long been understood to be an important investment with a significant return. While our state has done more in recent years to expand access to preschool and full-day kindergarten, a new report from the state Legislative Research Commission shows there is real need for additional investments.

Preschool

The report describes how effective our state’s preschool program is at preparing children for kindergarten — especially those from low-income households or who have disabilities. However, while full-day preschool is shown to be most effective just 40 read more

Group Provides Insight Into Growth of Kentucky’s Inmate Population

By Ashley Spalding
October 13, 2017

The Kentucky Justice Reinvestment Work Group, which held its third meeting this week, plans to propose criminal justice reforms in December for consideration during the 2018 General Assembly. The first step in this process involves exploring in-depth the drivers of our state’s high inmate population, with technical assistance from the Crime and Justice Institute (CJI) at Community Resources for Justice — an organization that has had success helping Louisiana and Alaska identify meaningful and cost saving reforms.

Our state’s criminal justice system is certainly in need of reform. As noted read more

Kentucky Will Face Transition Costs If It Switches to 401ks

By Jason Bailey
October 3, 2017

Proponents are claiming Kentucky will face no transition costs from shutting down its defined benefit (DB) pension plans and moving employees into 401k-type defined contribution (DC) plans. That assertion ignores why there are transition costs from closing a plan.

DB plans are pre-funded, as the governor’s staff recently noted in an email to the General Assembly that cited an article from the Reason Foundation. Being pre-funded means DB plans are not designed for new workers to directly pay for the benefits of retired workers. Looking at that fact alone, one read more

Decline of Private Sector Defined Benefit Plans No Model for Public Plans

By Jason Bailey
September 20, 2017

Calls to end Kentucky’s defined benefit (DB) public pension plans often refer to the move away from DB plans in the private sector and suggest the public sector should follow suit and become more “modern.” But along with the harm to private employees that has accompanied this trend, industry and government are apples and oranges when it comes to pensions. The decline in private sector plans results from increased regulation as well as economic changes and other differences that do not apply to public sector plans.

Decline hasn’t spread to read more

Small Tax Breaks’ Costs Add Up Over Time

By Pam Thomas
September 8, 2017

Cleaning up expensive tax breaks is essential if we are going to invest in a stronger Kentucky and restore funding to our pension systems. The biennial Tax Expenditure Analysis (i.e. tax break analysis) published by the Office of State Budget Director provides insight into how much we are spending and on what. According to that analysis, our current tax code provides more exemptions than it collects in revenues.  There are so many that the document is 154 pages in length and lists 269 separate tax breaks valued at over $13 read more

Proposed 401ks Cost More Than Kentucky’s Existing Pension Plans

By Jason Bailey
September 6, 2017

The 401k-type defined contribution (DC) plans proposed by PFM in their final report would cost more than Kentucky’s existing defined benefit (DB) plans, according to data from PFM itself and the systems’ actuaries. Under a switch, the state would be making bigger contributions for a plan that reduces the retirement security of its workers. That hardly makes it a solution to the state’s pension funding challenges.

The cost of the DC plan is higher in part because the existing pension plan for new employees is already inexpensive if funded on read more

Clawback of Cost of Living Adjustments Would Be Major Hit to Retiree Checks

By Jason Bailey
August 30, 2017

The Bevin administration’s consultant recommends a massive cut to many retirees’ incomes by rolling back past cost of living adjustments (COLAs) — a proposal that could reduce pension checks by as much as 32 percent.

The plan in PFM’s report would claw back COLAs earned between 1996 and 2012 for those receiving pensions in all of the plans, including state and local workers, teachers and police.  For Kentucky Retirement Systems (KRS) retirees, that means their checks could be as much as 32 percent smaller for those who retired before 1996 read more

PFM Report Uses Exaggerated Claims to Justify Harsh, Counterproductive Cuts

By Jason Bailey
August 28, 2017

The final report from the state’s pension consultant PFM uses exaggerated claims about the condition of all of the state’s pension plans to justify harsh and ultimately counterproductive cuts to retirees, current workers and future employees.

PFM bases its recommendations on claims that existing actuarial assumptions must be altered immediately and dramatically for all of the state’s pension plans. Those changes add $1.8 billion to employer contributions in 2019 above what they would otherwise be.  But while the depleted state of the Kentucky Employees Retirement System (KERS) non-hazardous plan merits read more

Five Things to Keep in Mind as College Students Head Back to School

By Ashley Spalding
August 23, 2017

In colleges across Kentucky, students are beginning their fall semester — some for the first time, some returning to complete a degree. Here are five things about higher education in our state to keep in mind as the new school year begins.

State budget cuts have continued

Kentucky ranks in the bottom 10 states in the nation for per-student higher education funding cuts since 2008, according to a recently released report. We are also 1 of 13 states that continued to cut over the past school year, while the majority read more