OP-ED by William Kelley, KRTA President published in the Lexington Herald-Leader.
Over the years, we have heard a lot of rhetoric from some lawmakers about the affordability and sustainability of the Kentucky Teachers’ Retirement System (TRS). I’m guessing we’ll probably hear a lot more political rhetoric after a new experience study, commissioned by TRS, adjusted key assumptions such as the anticipated rate of return, payroll growth, and life expectancy that resulted in an additional $3 billion in unfunded liabilities.
TRS, like other pension systems across the United States, performs an actuarial experience study every five years to adjust assumptions based on relevant data that dictates actuarial required contributions to our pension plan including “catch up payments” for unfunded liabilities.
TRS is doing extremely well not only for its beneficiaries, but Kentucky’s Taxpayers. TRS continues to rank in the top 5 percent in the United States for administrative management and investment returns. TRS posted a 30-year annualized return of 8.35 percent, which was nearly a percentage point higher than its prior investment assumptions and nearly 1.15 percentage points greater than its new expectations. When you include this with the fact that the General Assembly has fully funded the pension system the last five years, TRS is poised for continued success. We appreciate the Kentucky General Assembly meeting their obligations in recent years.
While it is true that lower investment rate and payroll growth assumptions will result in an increase to the annual state contributions over the next budget cycle, don’t let Frankfort Politicians convince you that TRS or pensions by their very nature are unsustainable. The real culprit is the short-sightedness of Frankfort politicians who chose to ignore their funding obligation to TRS from 2007-2016 in favor of other priorities. There are plenty of examples of pension systems across the United States such as Wisconsin, whose legislatures met their financial obligations, and their systems are now fully or near full funding.
When you fail to fund $500 million in contributions not only do you lose out on the initial capital contribution to the fund but essentially an additional $500 million in investment income is lost over the next 10 years. Failure to pay $1 dollar now results in $2 dollars in costs to taxpayers in 10 years based on TRS’ 30-year annualized investment returns.
Kentucky’s Teachers have faithfully, dutifully, and consistently contributed double-digit percentages of their paycheck to fund a dignified retirement, while our elected officials failed to live up to their commitment from 2007 – 2016. Considering TRS is one of the most highly regarded pension systems in the United States, Frankfort Politicians shouldn’t use this new experience study to justify any future cuts to contributions or benefits.
Instead, our elected officials should stay the fiscally responsible course and pay the debts owed to our education community – a key component of Kentucky’s working class. Remember, Kentucky’s Teachers are not eligible for social security. Our pension is all we have in retirement.