Kentucky’s underfunded pension system has the state “under water” and will take an entire generation to totally solve.
That was the message Tuesday from Kentucky Chamber of Commerce President Dave Adkisson, featured speaker at the Southern Kentucky Chamber of Commerce’s monthly membership luncheon at The Corbin Center.
Back in 2007, Adkisson said he was among others warning publicly that the pension system needed reform.
“For the first five years or so, it was hard for us to get Frankfort to pay attention to that,” he said. “Now, we’ve got a crisis on our hands.”
Just this week, the state’s budget director said the pension system for most state employees (excluding teachers and those employed by city and county governments) would run out of funds in two years. For every $100 of promised benefits, only 13.8 cents was in the bank to cover them.
“That’s pitiful,” Adkisson said. “That’s the worst funded [pension system] in the nation.”
“It’s not a matter of … well, it’s just another issue and we can deal with that tomorrow. That’s what’s been happening for 10 years.”
Overall, Kentucky’s public pension system is only about 38 percent funded and has $60 billion in unfunded liabilities — about six times the state’s total annual budget.
Adkisson praised Gov. Matt Bevin for having the courage to tackle the issue and not accept the status quo. He said a plan unveiled by Bevin, former House Speaker Jeff Hoover and Senate President Robert Stivers rates about a 6 or 7 on a 10-point scale on how far it would got to solve the problem. The Chamber’s own proposal gets a 5 or 6 he said. A recent proposal by school superintendents, teachers and other education officials was a 2 or 3.
Adkisson said the upcoming session of the General Assembly will be the toughest in many, many years because of the pressure to solve the pension problem, as well as enact tax reform. He added that even during the most recent session, it wasn’t as difficult because federal stimulus money helped offset the pain.
“This time, with this pension crisis looming, there is no Washington parachute. There is no rescue,” Adkisson said.
“This is our problem. We own it and we’ve got to dig our way out of it.”
Besides pension reform, Adkisson said the Kentucky Chamber’s priorities for this session include: stabilization of education funding, legislation that requires teaching essential skills in schools, workers compensation reform, tax reform, statewide infrastructure improvements and the ability of physicians to peer-review procedures performed on patients without the fear of those reviews being used as evidence in court for malpractice lawsuits.
Adkisson lauded the 2017 session of the General Assembly as the most productive for businesses in 30 years. He pointed to passage of Right to Work legislation, repeal of prevailing wage, medical review boards, charter school legislation, passage of a pension transparency bill and modernization of alcohol laws as chief among 22 legislative victories.
“It was an historic session. Things the business community had waited on for 30 years … got done in the first five days.”
The Kentucky Chamber of Commerce represents 68,000 employers, mostly private, in the state.
Adkisson praised local economic development efforts, pointing to recent addition of businesses like Smart Wood, KOWA, Sims Bark and others.
“A lot of communities in Kentucky would like to see that kind of activity, so consider yourself fortunate that as the economy improves, you are getting a piece of the pie.”
He also discussed, briefly, his public support of construction of a quarter horse race track and gaming facility in Corbin … a partnership between Keeneland and Churchill Downs.
About 115 people attended Tuesday’s luncheon.