The following is an editorial from The Kentucky Gazette, Aug. 14, 2013. Reprinted with permission.
It might surprise you to know that the employees of 1,169 entities participate in Kentucky’s County Employees Retirement System. That came to 47,452 retirees and 94,636 employees as of June 2012. Could be more now; could be less.
Most of these employees are government employees – they work for the water districts and counties, school districts and cities – and they have earned a government pension.
But some of these people are employees of “instrumentalities” of government; that is, they aren’t true government employees. For this reason, they should not be allowed in CERS.
We’re certainly not suggesting that the employees of instrumentalities don’t deserve pensions. Rather, we’re suggesting that the pensions shouldn’t be provided at taxpayer expense.
As we know, most of the revenue in the pension funds is derived from investments (65 percent to 70 percent), and the employees pay into the fund as well (5 percent or 6 percent, depending on their hire date). But, according to Reuters, roughly 20 percent of Kentucky’s pension fund revenue comes from the taxpayer. Depending on the national economic climate and returns on investment, this could be more, could be less. Either way, citizens write the checks to cover the difference.
CERS, which is one of the three systems under the umbrella Kentucky Retirement Systems had, as of June 2012, an unfunded liability of $3.59 billion in its pension plan for employees in non-hazardous occupations, and a $1.26 billion liability in its plan for employees in hazardous jobs, a total of about $4.85 billion. These obligations mean the plans do not have enough money to fully cover retirees, who’ve earned full benefits, and current employees, who’ve earned partial benefits. The non-hazardous plan had 60.7 percent and the hazardous plan had 58.1 percent of the money the plans need to pay pension benefits, according to the 2012 KRS Comprehensive Annual Financial Report, the most recent available.
Twenty percent of the $4.85 billion comes to $970 million that individuals, business owners and consumers must redirect from other spending preferences to pay for pensions, and part of that covers people who aren’t government employees.
Apparently, a number of these entities work under contract with the local governments or exist to provide services to government entities. Take the Kentucky League of Cities, for example, and the Kentucky Association of Counties. It’s been said here before that these two entities, which both own for-profit insurance companies that make millions of dollars a year, should not be part of the public pension system.
Let’s add to the list the Kentucky Magistrates and Commissioners Association, the Kentucky Judge-Executive Association, the Riverpark Center, and Housing Oriented Ministries, to pick out a few.
As near as we can tell, Hous-ing Oriented Ministries, a non-profit corporation based in Whitesburg, is a program of the United Church of Christ. Also a non-profit corporation, the Riverpark Center is an entertainment venue that hosts Broadway shows, among other programs. And the magistrates and judge-executive associations should be dropped from CERS because they simply are not government entities.
To be fair to current employees, those in the system should be able to continue and accept the pension promise that’s been made to them. Going forward, though, lawmakers need to amend KRS 78.510 (3), which gives broad authority to the Kentucky Retirement Systems board to determine which entities can participate in CERS:
“(I)f the (retirement systems) board is willing to accept the agency, organization, or corporation, the board being hereby granted the authority to determine the eligibility of the agency to participate.”
After Kentucky’s General Assembly sets CERS right, then members can start on the Kentucky Employees Retirement System, which has the same problem. KERS participants include Commonwealth Credit Union, the Kentucky Bar Association, Nursing Home Ombudsman Agency of the Bluegrass Inc., Judi’s Place for Kids … You get the picture.