Teachers Demand $3,200 From Each Kentucky Household To Fund Pension Ponzi For 2 Years

Tyler Durden's picture

We have written frequently over the past couple of weeks about the disastrous public pension funds in Kentucky that are anywhere from $42 - $84 billion underfunded, depending on which discount rate you feel inclined to use. As we've argued before, these pensions, like the ones in Illinois and other states, are so hopelessly underfunded that they haven't a prayer of ever again being made whole.

That said, logic and math have never before stopped pissed off teachers and/or clueless legislators from throwing good money after bad in an effort to 'kick the can down the road' on their pension crises. As such, it should come as no surprise at all that the Lexington Herald Leader reported today that Kentucky's 365,000 teachers and other public employees are now demanding that taxpayers contribute a staggering $5.4 billion to their insolvent ponzi schemes over the next two years alone. To put that number in perspective, $5.4 billion is roughly $3,200 for each household in the state of Kentucky and 25% of the state's entire budget over a two-year period. 

Kentucky’s General Assembly will need to find an estimated $5.4 billion to fund the pension systems for state workers and school teachers in the next two-year state budget, officials told the Public Pension Oversight Board on Monday.


That amount would be a hefty funding increase and a painful squeeze for a state General Fund that — at about $20 billion over two years — also is expected to pay for education, prisons, social services and other state programs.


“We realize this challenge is in front of us. That’s obviously part of the need for us to address pension reform,” said state Sen. Joe Bowen, R-Owensboro, co-chairman of the oversight board.


“In the short-term, yeah, we’re obligated to find this money,” Bowen said. “And everybody is committed to do that. We have revealed this great challenge. We have embraced this great challenge, as opposed to previous members of the legislature, perhaps.”


In presentations on Monday, the pension oversight board was told that total employer contributions for KRS in Fiscal Years 2019 and 2020 would be an estimated $2.47 billion each year, up from $1.52 billion in the current fiscal year. Nearly $995 million of that would be owed by local governments. The remaining $1.48 billion is what the state would owe.


The Teachers’ Retirement System estimated that it would need a total of $1.22 billion in Fiscal Year 2019 and $1.22 billion in Fiscal Year 2020. That would include not only an additional $1 billion to pay down the system’s unfunded liabilities but also $139 million to continue paying the debt service on a pension bond that won’t be paid off until the year 2024.

Of course, the $5.4 billion will do absolutely nothing to avoid an inevitable failure of Kentucky's pension system but what the hell...


As we've said before, the problem is that the aggregate underfunded liability of pensions in states like Kentucky have become so incredibly large that massive increases in annual contributions, courtesy of taxpayers, can't possibly offset liability growth and annual payouts.  All the while, the funding for these ever increasing annual contributions comes out of budgets for things like public schools even though the incremental funding has no shot of fixing a system that is hopelessly "too big to bail."


So what can Kentucky do to solve their pension crisis?  Well, as it turns out they hired a pension consultant, PFM Group, in May of last year to answer that exact question.  Unfortunately, we suspect that PFM's conclusions, which include freezing current pension plans, slashing benefit payments for current retirees and converting future employees to a 401(k), are somewhat less than palatable for both pensioners and elected officials who depend upon votes from public employee unions in order to keep their jobs...it's a nice little circular ref that ensures that taxpayers will always lose in the fight to fix America's broken pension system.

Be that as it may, here is a recap of PFM's suggestions to Kentucky's Public Pension Oversight Board courtesy of the Lexington Herald Leader:

An independent consultant recommended sweeping changes Monday to the pension systems that cover most of Kentucky’s public workers, creating the possibility that lawmakers will cut payments to existing retirees and force most current and future hires into 401(k)-style retirement plans.


If the legislature accepts the recommendations, it would effectively end the promise of a pension check for most of Kentucky’s future state and local government workers and freeze the pension benefits of most current state and local workers. All of those workers would then be shifted to a 401(k)-style investment plan that offers defined employer contributions rather than a defined retirement benefit.


PFM also recommended increasing the retirement age to 65 for most workers.


The 401 (k)-style plans would require a mandatory employee contribution of 3 percent of their salary and a guaranteed employer contribution of 2 percent of their salary. The state also would provide a 50 percent match on the next 6 percent of income contributed by the employee, bringing the state’s maximum contribution to 5 percent. The maximum total contribution from the employer and the employee would be 14 percent.


For those already retired, the consultant recommended taking away all cost of living benefits that state and local government retirees received between 1996 and 2012, a move that could significantly reduce the monthly checks that many retirees receive. For example, a government worker who retired in 2001 or before could see their benefit rolled back by 25 percent or more, PFM calculated.


The consultant also recommended eliminating the use of unused sick days and compensatory leave to increase pension benefits.

Meanwhile, PFM warned that the typical "kick the can down the road approach" would not work in Kentucky and that current retiree benefits would have to be cut.

“This is the time to act,” said Michael Nadol of PFM. “This is not the time to craft a solution that kicks the can down the road.”


“All of the unfunded liability that the commonwealth now faces is associated with folks that are already on board or already retired,” he said. “Modifying benefits for future hires only helps you stop the hole from getting deeper, it doesn’t help you climb up and out on to more solid footing going forward.”

Of course, no amount of math and logic will ever be sufficient to convince a bunch of retired public employees that they have been sold a lie that will inevitably fail now or fail later (take your pick) if drastic measures aren't taken in the very near future. 

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LindseyNarratesWordress's picture

The (((frauds))) never fucking end...



Countrybunkererd's picture

All togenther, lets sing it now! -

The wheels on the bus are falling off, falling off, falling off...

jcaz's picture

Yes, because they've done such a fine job of herding KY kids almost all the way thru the 8th grade.......

Manthong's picture


So what makes them so goddam special that they can’t take the hit that their legislators provided them.

And don’t give me that “it a contract or it’s the law.

Millions of us have been contractually or legislatively promised retirement and/or equity money by government or employers only to have their malfeasance make it blow up in our faces.

Stackers's picture

"It's for the children" ....

oh wait, no it's not you self serving toads.

MisterMousePotato's picture

"Of course, no amount of math and logic will ever be sufficient to convince a bunch of retired public employees that they have been sold a lie ... ."

Oh, yeah. Sure. There they were. Poor, hardworking babies, minding their own business, working selflessly for the good of others, paid hardly anything for their nonstop efforts when some slick politicians working on behalf of the greedy and duplicitous taxpayers came up out of nowhere and forced a bunch of too good to be true promises on them that no one could have seen were too good to be true.


The truth is that employees.gov banded together and collectively bribed the folks who were supposed to be working on behalf of the taxpayers, too, to give them and promise them grotesquely excessive largess at their neighbors' expense.

Keyser's picture

Simple solution for Kentucky, just set up toll booths on every highway leading into the state... That should take care of the problem, really, it should?!?!

El Oregonian's picture

LOL, the teaching snowflakes are all about to become melted. The puddle of tears will be epic...

J S Bach's picture

Please stop calling the scheme "Ponzi".  It's "Madoff", thank you.

Stuck on Zero's picture

Kentucky used to be the leader in furniture manufacturing and tobacco.  Congress sent the furniture manufacturing to China and banned tobacco.

Escrava Isaura's picture


Are pension Ponzi schemes?


So is life. Starting with religion and capitalism, especially the neoliberal capitalism.

The problem with these teachers, society in general, is that they are living a lie.

Now, it’s not that they don’t understand what’s happening but, it’s that they don’t understand that they don’t understand.

And, they can’t understand ‘accept’ that they don’t understand, because they believed. Believing ‘having faith’ was the ‘real’ problem to begin with.


Fizzy Head's picture

I dont understand that you dont understand that the 'real' problem starts at the top... where the green money grows. It is not the little workling stiff that has some faith thats the problem, it's the den of theives at the top.

man from glad's picture

Maybe they should be placed leading out of the state as I venture folks are going to start fleeing en masse when the big tax hikes hit.

BlindMonkey's picture

Meanwhile, in DC....The MIC keeps rolling in funny money.  I guess as a country we would rather bomb foreign kids than teach our own. 

Cloud9.5's picture

Does this mean that bourbon is going to get more expensive?

Scuba Steve's picture

...and then the music stopped. Haha, Haha


man from glad's picture

Not so funny as more and more of these pension funds go bust there will be a "Bail-in" and we all get to participate. (and of course our money will be perfectly, perfectly safe).

nufio's picture

Just like savers are constantly being assraped residents of fiscally conservative ( a very relative concept ) will get assraped. The fed will just print money and fill all these holes in the end and if you didn't get into enough debt you will be a loser. 

Probably the most sensible thing to do today for a state is just to get into a lot of debt for infrastructure projects because they can pay it off in inflated dollars a few years from now.

Endgame Napoleon's picture

Kentucky has a per-capita income of $18k. It is hard to see how Kentucky's childless, single citizens who must pay all household bills on the $18,000 per year can afford to lose $3,000 per year.

Many of Kentucky's parents who use the school system have a spousal income, so the parents take two jobs out of the economy, often two jobs with benefits, like the ones awarded to state employees.

Few state employees are childless. The ones who make it a year to get civil servant status are almost all parents, and few childless people are even hired.

Kentucky has a lot of single parents, making low wages and working the 20 hours required by welfare reform. They get free groceries, free or subsidized rent, almost free childcare, monthly cash assistance, energy assistance and Child Tax Credits between $3,337 and $6,269.

Perhaps, the high-end child tax credits, which are often spent on trips to the beach with boyfriends, should be halved to contribute to the teachers' pension fund.

janus's picture

schools are destined a return to pre-DOE days.  Past is always prologue, gentlemen.  We're going back to a lil house on the prairie approach.  Schools will be under local supervision and oversight -- curriculum, teacher's pay, the works.  If a community doesn't give a shit about its schools...oh well.

it's time we deprive these demons their indoctrination centers.

Why should we have pity on these teacher's unions when they've been selling out their communities, students and their very souls for decades on end?  Teachers, your loyalties are strictly to your students and their communities; of course there will be a price to pay for your betrayal.  Go ask your union for the return of all your dues; then come plead to the tax-payer.


Akzed's picture

Yeah but where are kids gonna learn how to put condoms on if not for public skools?!

Offthebeach's picture

It's Kentucky.  Daddy I'll show em.

jcaz's picture

"What's a condom, son?"

Lucky Guesst's picture

Northern Kentucky is populated mainly by people who work in and around Cincinnati Ohio but don't want to have their kids corrupted by Cincinnati Public Scools. Lots of wealthy and intelligent, don't forget hard working folks here. I happen to have a teen in KY schools and I have to say we love it. He is gifted though so he would have done better with NO schools than at least half of today's teens.

JoeSexPack's picture

Yes, N Kentucky is often a wealthy suburb of Cincy.


Football announcer Chris Collinsworth lives there.

Déjà view's picture

Fontana, Ca...aka 'Fontucky'...sans fondness for fondue...

ceilidh_trail's picture

I moved to NKY from LI, NY 40+ years ago and never looked back. My 19yo daughter is a senior at NKU. It's amazing that pinheads still stick to old stereotypes that never applied to this part of the world. Oh well, our gain. They should google "Thomas Massie" as an example of this general part of the world.

BennyBoy's picture


I'm not surprised the teachers are under funded.

It's as if they taught themselves math.

Cloud9.5's picture

Guys the real money in education is not made in the classroom.  It is made in administration.  When I walked onto the campus of my alma mater back in 1964, the administration consisted of a principal, an assistant principal and the principal’s secretary.  Today you have a principal, three assistants, six deans, a secretary, book keeper, administrators for the I.B. program, a host of aids, half a dozen guidance counselors and two full time cops.  It takes a score of people just to administer the state wide tests, and the list goes on with ever increasing numbers of IT specialists. The proliferation never stops.

This list does not even include the legions that work at the central office of the county school board.  And then of course, there is the absolute army that works for the Department of Education in Tallahassee.


Rumor has it that there is even a Federal Department of Education that employs an redundant army of federales.

Ace Ventura's picture

Bingo. Here in central VA, the local county school administrator makes $298,000 per year in BASE salary, with another hefty $12,000 per year thrown in for a fucking CAR allowance. That's about $50,000 more per year than the GOVERNOR OF THE ENTIRE STATE. And as you pointed out, he has a platoon of approximately 5-6 deputy adminstrators ALL of whom orbit the $200,000 per year salary range, with concurrent car allowances as well.

Yes, but come tax increase referendum time.....rely on the seemingly clueless teachers to march their happy assess into the town hall meetings and bray about how we need to raise taxes because the chilrienz edumakayshun will suffer otherwise. Right alongside them are the county cops equally supportive of more tax-serf mugging, squealing about how their pay is less than 'neighboring xxxxx county', and if taxes dont get hiked....we'll lose officers and the chilrenz wont be safe anymore.



itstippy's picture

"“We realize this challenge is in front of us. That’s obviously part of the need for us to address pension reform,” said state Sen. Joe Bowen, R-Owensboro, co-chairman of the oversight board."

Joe Bowen has been in the Kentucky Legislature for 12 years.  http://www.lrc.ky.gov/legislator/S008.htm

Pension plan underfunding doesn't happen overnight.  Kentucky has been paying its state employees with I.O.U.s for years, in the form of pension benefits.  Now the I.O.U.s are due, and the citizens of Kentucky are blaming the state employees for the "crisis".  Bullshit.  Any Kentucky state legislator who's been around a while and participated in this fraud budget after budget should be voted out of office and publically humiliated.  They are as much at fault as the state employee unions are.  What a goddam mess.

The Wizard's picture

A mess handed down to a responsible governor, Matt Bevin, who placed light on the issue. He refuses to do what the past govenors and legislators have done, an irresponsible behavior of kicking the can down the road.

Kentucky is the most liberty minded state in the country with the people they are voting into office. It will take more time but they are heading in the right direction.

Bendromeda Strain's picture

When McConnell is found with a wooden stake through his heart, instead of cruising to reelection... then I will believe that.

ceilidh_trail's picture

I have cut ties with that bum better than a decade ago. He wins in the primaries and we lose.

FIAT CON's picture

Very simply done, as soon as you wake up 52% of the sheeple, and get them to understand some simple math.

The .gov employees are taking far too much from the trough, they need to be reduced to the level of the rest of us, without a pension plan paid for by their neighbor. 

Bendromeda Strain's picture

Liars gonna lie. Stupid voters voting for lying cucks in the McConnell state deserve financial sodomy.

waspwench's picture

Kentucky state legislators who have been around and participated in this fraud ought not only  to be voted out of office and publicly humiliated, they should be in jail.

Blankenstein's picture

The state employees are to blame.  Their votes were bought with these generous pensions

Endgame Napoleon's picture

When the parent is educated or adequately self-educated, that would be a better approach, yielding better results than most of the horrible bully dens called junior high schools and high schools.

In addition to the brutal social atmosphere, which is emphasized over the academics, few of the teachers are interested in the subject they teach. Most of them went into secondary school teaching for a "good second income," and that is how they do the hiring, too.

Due to a business I was in, I had occasion to ask two former superintendents of schools from two different counties about that issue, and they confirmed that teaching was a good second income for a mom.

One of them also backed up what I already knew about degrees in deemphasized subjects like history. To teach such a subject, you need to bring something else to the table, like coaching. That is the kind of thing that is vaulted in junior high schools, high schools and even in some elementary schools.

GunnerySgtHartman's picture

And don’t give me that “it a contract or it’s the law.

What they'll say is "WE WERE PROMISED ..."

CJgipper's picture

They were promised.  And they paid in.  And the money was in the fund.


Few people know that the legislators reallocated a bunch of money from the fund a number of years ago.  that's what's now catching up.  That and the ZIRP we've had for a decade that's crushing all pension funds now.

Oldwood's picture

Pro.ises that can't be kept.

Another tool of division in a bankrupt world.

Everyone should make it clear that our beef should be with the liars, not the defrauded....on either side of the ledger.

Someday we, as the human race, will learn the true cost of a really good deal.

Nah. We'll still blame someone else.

Scuba Steve's picture

3 prong attack:

1) Hang the Liars

2) the defrauded will take a haircut (you cant get nothin from nothin)

3) future sheep learn your lesson and know you'll be getting less in your labor benefits

waspwench's picture

So go after the legislators and confiscate all their assets and their pensions.   The public should not be paying for what crooked legislators have perpetrated.

CJgipper's picture

It was a decade ago.  Most of the legislators involved are now gone.

Blankenstein's picture

The money was relocated because there wasn't enough for other spending and the pensions.  The .gov employess never would have gone for phasing out pensions and having their own 401ks like everyone else.  


EBT excepted's picture

fo egsampuhl, dey takes away da "cummence and suhspend" in da soshul sacuratah...we alls been at woikin' fo dat shit all are misrubahl lives, and den dey be takes it fum us...

NumberNone's picture

Dow 1,000,000...amiright?