Taking liberty to the airwaves: 'Future Shock' on WGTK's 'The Joe Elliott Show'

Phil Moffett, Bluegrass Institute president and CEO, will discuss the institute's new series on Kentucky's public pension systems on "The Joe Elliott Show" on Louisville's 970 WGTK-AM today at 1 p.m. EST.

Listen live here and call in at 502-571-0970

"The Joe Elliott Show" airs weekdays from Noon to 3 p.m.

Read the first in the series entitled "Future Shock," which considers:

• How Kentucky’s pension mess started and grew.

• Who the players are and who voted for the bills.

• Examples of gross abuse of the public pension system.

• Solutions based on free-market principles

Bluegrass Institute report: Private groups gorging at state pension trough

Workers at politically connected private agencies eligible for taxpayer-funded retirement, health care benefits

For Immediate Release:
Tuesday, Oct.11, 2011

Contact: Jim Waters at 270-782-2140

(FRANKFORT, Ky.) – A new Bluegrass Institute policy brief shows that hundreds of workers at a multitude of agencies – including some private organizations – are feeding at Kentucky’s taxpayer-funded public pension trough.

According to “Future Shock – Kentucky’s public-pension hole: Deep and getting deeper,” even staff members at the Kentucky Education Association, the state teachers’ union, are allowed to join the Kentucky Teachers’ Retirement System – as long as they had prior involvement in any of the commonwealth’s six public employee pension plans.

“Kentucky’s public pension plans are more than $31 billion underfunded and the hole is getting deeper by the day,” said Phil Moffett, the institute’s president and CEO. “We must understand how we got in this hole and what we need to do to get out. Getting private industry and privately employed individuals who work on contract with the state off the public dole is a good start. The ‘Future Shock’ series will shine a bright light on the problem and present solid free-market solutions.”

Also included in Kentucky’s pension plan are a faith-based housing group, master commissioners and their staffs and the Commonwealth Credit Union.

The credit union currently has 365 members in the Kentucky Retirement Systems, including 253 active employees, 83 current or former workers vested but no longer contributing to the plan and 29 current retirees.

A recent report by the Lexington Herald-Leader noted that Commonwealth Credit Union has $890 million in assets and $58 million in annual revenue.

“Why is this healthy and profitable private company getting corporate welfare at taxpayer expense?” Moffett asked.

Responding to claims that Commonwealth was allowed to join the state pension system because “its customers are government employees,” he said: “This seems ridiculous. Wal-Mart in Frankfort probably has a very large group of customers who are state workers. Should they also receive state pensions?”

Today’s release previews a full research report on the state’s ailing public pension system, which currently faces a $31.4 billion unfunded liability.

The institute will release the report, which is authored by Lowell Reese, owner of Kentucky Roll Call, a public affairs publishing company in Frankfort, and former state Chamber of Commerce executive, in sections that address:

• How Kentucky’s pension mess started and grew.

• Who the players are and who voted for the bills.

• Examples of gross abuse of the public pension system.

• Solutions based on free-market principles.

For interview information, please contact Jim Waters at 270-782-2140 or jwaters@freedomkentucky.com.

States are now suing pension systems for information

Pension systems all over the nation are in crisis and they have garnered quite a bit of media attention over the past few months.

Today, Andrew Harris of Bloomberg.com reported that that the state of Colorado is suing the state's pension system to obtain information about the top 20% beneficiaries of the system. The lawsuit does not seek to obtain identities but does seek amounts paid and the ages of the retirees.

This is a huge step toward transparency and accountability for the pension system in Colorado and perhaps leaders in Kentucky should take note...it could/should happen here soon!

Budget surplus!? Think again

The Beshear administration is touting a budget surplus for this fiscal year and claims that roughly $100 million will be deposited into the rainy day fund.

This is a bit misleading, no? When a state has billions of dollars in unfunded liabilities in public pensions and has to borrow $97 million from a future year's Medicaid budget to plug a hole in the current year's, an extra $100 million does not count as a "surplus".

Until the pension system is fully funded and Medicaid (which is currently on an unsustainable path) is on solid ground, claiming a surplus seems a bit premature.

Talking about pension reform is just the first step

With Kentucky House leader Greg Stumbo stating that pension reform for new hires is up for discussion, does this mean we may finally get somewhere with state pension reform in the next General Assembly?



While we need to do much more than simply open the discussion about public pensions, this is certainly a step forward from Gov. Beshear's believe that this problem will take care of itself.

Stumbo on defined contribution

Charles George, manager of public affairs for the Kentucky Chamber of Commerce, tweeted from the Kentucky Chamber Business Summit and Annual Meeting where state representative Greg Stumo was speaking:

Defined contribution is certainly something that needs to be talked about. Why? Simply put, public pensions, as they stand now, are breaking the backs of cities, counties and states.

Pension reform is not necessary?

At least according to Gov. Steve Beshear...



He seems remarkably calm about an issue that is actually very serious. We do need pension reform.

h/t: cn2 Politics

Do you have an extra $1400?

Unfunded pension liabilities are a big problem in Kentucky...at every level. State, county, and local governments are all struggling.

CNBC published a story about a study conducted by two finance professors who claim that local governments will need to tax citizens by an average of $1400 more each year to cover the costs of rising pension liabilities. Yikes!

Sounds like we need pension reform.

Legislator pensions better funded than workers? Hmm...

A recent Lexington Herald-Leader article discusses how Kentucky's legislator pension plan is much better funded than the state workers' plan.

You do not have to get much past the title of the article before you say "Well, yeah, no kidding." Should it come as a surprise that those making the rules are somehow in better shape than the rest? Pension systems all over the state are in serious trouble and there needs to be swift and decisive action to get the state back on the right track.

Contact your legislator and ask them what they are doing to move significant pension reform forward in Kentucky.

Pension crisis primer

It is not a secret that Kentucky's pension system is in serious crisis.  Read more about this here.

We will no doubt be hearing more about this in years to come in Kentucky. In fact, don't be surprised if this issue is dominant in upcoming legislative sessions and election debates.

With that in mind, here is a simple and informative article that lays out some of the important language, terms, and concepts associated with pensions in Kentucky. This is a great primer for a basic understanding of the pension problem!

One peril of pension reform

The United States government is now at its borrowing limit. In order to continue to make interest payments on debt, the federal government is considering some short-run borrowing from federal government workers' pensions. Many federal workers, after hearing about this plan, may decide to rush into retirement earlier than anticipated:

About 550,000 full-time career federal government employees and U.S. Postal Service workers could hang it up and move on at any time because they are currently eligible to retire, according to government statistics obtained Thursday. The eligible workers represent about a quarter of the 2.4 million permanent full-time employees collecting government or postal paychecks.

It illustrates one of the problems of a government-run pension system where outflows are determined in part by the decisions of thousands of individual participants: you can't make disruptive changes in the system without potentially affecting short-run outflows. That means the program itself is subject to a constraint that may not be built into actuarial models.

The actuarial models used in relation to Kentucky Retirement Systems, thankfully, typically assume that when a worker retires that they take full advantage of just about every benefit offered and will maximize their pension and then retire. That is, they make fairly conservative assumptions about the retirement timing decision of the average worker.

But in Kentucky, like the federal government, workers can retire early and thus begin collecting pensions (albeit smaller pensions) at a younger age. A decision en masse by Kentucky's government workers to take early retirement would devastate KRS's finances in the short run and could obligate taxpayers (through the General Assembly and county governments) to far larger pensions payments in the short run. That's why I argue that any reform of the pension system should not affect the decision environment for current workers who participate in KRS's programs.

Kentucky's pension promises: worse than you think

The Pew Center on the States noted recently that Kentucky was at the bottom when it came to state-issued funding for its pension systems. In 2009, Pew noted that Kentucky put just 58% of the actuarially-recommended amount of money into the state's pension funds. In 2010, Kentucky again put just 58% of the actuarially-recommended sum. That put Kentucky at the bottom of the pension funding list.

First of all, this is a terrible turn of events that, far from being unforeseeable, was largely predictable. After all, lawmakers run for office every two or four years. Funding pensions properly during the good times is a challenge when reelection prospects might be shored up by funding a local arena project instead of making appropriate contributions to the pension funds. During the 2000s, Kentucky lawmakers put aside a small fraction of the recommended contributions into the Kentucky pension funds and the economy was doing reasonably well over the same period. What everyone should recognize is this: Kentucky's pension plans were underfunded before the financial crisis.

And it should come as no surprise that funding pensions during tight budgetary times is even more difficult. In tight budgetary times, it's easier to cut funding to pension programs than it is to social programs. Wise stewardship of government workers' pensions seems to always come second to some other priority in good times and bad.

This is not to say that funding social programs should or should not be a higher priority than funding state pensions. It's just to point out that what supposedly took lawmakers by surprise in 2008 and 2009 was as predictable as the tides.

Open records: School based decison making and the state pension system

Operation: Open Records 2011 is in full swing! Here are some updates on some recent activity

• Governor Steve Beshear recently made the claim that the state's pension systems would be on solid ground about 15 years.  A series of requests have been sent to his office to obtain the information he used to make this claim.  You can follow the process of these requests here!
• A request to obtain school based decision making meeting minutes in Jefferson County pointed to a database where anyone can view the meeting minutes for any school in the JCPS system.  This is a great resource for anyone interested in seeing what happens at the meetings responsible for important school decisions.  

Check back at the Operation: Open Records 2011 page for more updates!

Fresh talk from New Jersey applies to Kentucky's pension woes, too

New Jersey has serious pension funding problems. So does Kentucky.

New Jersey Gov. Chris Christie is proposing sweeping reforms. Kentucky Gov. Steve Besehar says problems will work themselves out in 15 to 18 years.

If Beshear is wrong, then solutions like bankruptcy, constitutional amendments and new laws surface. These offer good options for the governor, though, since they allow him to avoid making any tough decisions and punt -- just like he did in his last budget submission and on his promised "efficiency" study.

Even New Jersey lawmakers who also hold union membership know that current public-pension policies are unsustainable.

Listen to Stephen Sweeney, D-Gloucester, who also is an Ironworkers International Union member, compare private and public approaches to pensions:

- There could be a connection between funding for public pensions and lack of work in the private sector!
- People who run for office don’t want to say "no" to a lot of people!
- In the private sector, you can’t negotiate for something if there isn’t money to pay for it!

- In public sector, many of the managers work for unions because unions put them in office!
- If public employees want the benefits, they will have to pay more for them!

Straight talk. Heard anyone in Kentucky being that candid yet?

To Kentucky politicians: You can’t just change rules for new people; existing systems must be reformed. Take a trip to New Jersey where leaders -- even Democratic union members -- see the problem and appear ready to address it.

Pollyanna isn't dictating their solution set.

Wednesday Links: pension reform, open records, and health reform waivers

• The pension crisis grows in Kentucky. The Lexington Herald-Leader reported today that newly installed Lexington mayor Jim Gray is facing some opposition about budget cuts.  Tough decisions are ahead in the very near future - who is going to make them.  Read more about Kentucky Retirement Systems.
• Playing favorites... apparently four STATES have been issued waivers for the new health care regulations. Yes, you read that correctly - four entire states.
• It's that time again...Operation: Open Records 2011.  We will be using this site to track open records requests in 2011! Be sure to check it out.  Also, we would be interested in hearing your ideas for records requests...

Blue skies ahead for Gray's pension

A few days ago, State Labor Cabinet Secretary J.R. Gray retired three years following his appointment to the position. This calls for a celebration.

For his service, Gray will receive a high five, er...three from the state and a bloated pension bonus estimated at about $1.2 million.

Hey, no retirement party is complete without presents, right?

Thanks to a 2005 law, Gray's legislative pension is calculated on the salary he received in his three years as cabinet secretary -- $137,865 this year alone -- instead of the 26 years he served in the Kentucky House of Representatives.

This loophole permits lawmakers to base their legislative pensions on the salary of another government job held either before or after serving in Frankfort.

The law also lowered the salary multiplying factor used in figuring pensions from a "high five" to a “high three." Gray's six-digit salary from his three years as cabinet secretary counts as his "high three," which means his pension will be figured completely on his salary as secretary.

In contrast, his "high three" from his years as a state representative would have been a much lower number -- around $40,000.

In all, his pension added about $400,000 each year to his three-year salary as secretary, meaning Gray was essentially paid over a half-million dollars a year for heading the labor cabinet.

Now, he's retiring in time to barely meet the three-year requirement and cash out on his oversized pension.

Gray and all of the other political cronies who plan to take advantage of this taxpayer-funded cash cow might be celebrating. But citizens are not.

UK economist John Garen discusses KY state budget

Dr. John Garen on Kentucky State Budget from freedomky on Vimeo.

What state spending problem?

This SNL clip was referenced from Hulu.