Kentucky Pension Crisis Goes Nuclear As Teacher Retirements Surge 64% Over Last Year

As Kentucky's Governor Matt Bevin and legislators attempt to design a pension reform bill that will save the state's various public pension plans from literally running of cash in "three to five years," or worse yet bankrupting their state, some teachers and other public employees have decided they're not going to wait around to negotiate and instead turned in their retirements notices to lock in their current benefit structures.

As the Carrier-Journal points out today, Kentucky's Teachers' Retirement System saw a 64% surge in teacher retirements YoY in the month of September.  Meanwhile, system-wide retirements increased a staggering 37.4% in September and are up 23% so far in October. 

The number of public employees deciding to retire has surged in recent weeks as the governor and legislative leaders prepare to enact a pension reform plan this fall.


The Teachers' Retirement System has received applications of 120 members who have decided to retire on Nov. 1. That's up 64 percent over the 73 members who retired on Nov. 1 of last year.


And Kentucky Retirement Systems reported this week that 677 state and local government employees across Kentucky have submitted notices they will retire this month, an increase of about 23 percent over the 551 retirements the system saw in October of last year.


The increase at KRS was even larger in September when 746 employees decided to retire — a jump of 37.4 percent over September 2016.


Beau Barnes, deputy executive secretary and general counsel for the Teachers' Retirement System, said, "I've not spoken with (the retirees) so I don't know exactly why we see the increase. But we've been getting lots of calls here from members concerned about what's going on."

Of course, as we've pointed out so many times in the past (see: One Chart Explains What Bernie Madoff And Kentucky Public Pensions Have In Common), every successful ponzi scheme requires precisely one critical component to keep it afloat: a steady stream of fresh capital to fund redemptions.  Inversely, every ponzi meets it's inevitable doom when participants finally realize they've been duped and all rush for the exits at the same time, which Kentucky employees now seem to be doing.

Not surprisingly, Governor Bevin and others have tried to calm the mass exodus which could very well thrust their state into outright chaos, but Kentucky employees have chosen to take the "better safe than sorry" approach.

The surge in retirements occurs even as Gov. Matt Bevin and legislative leaders have been assuring employees and teachers for months that there is no need to make a rash decision to retire. That's because they say that any reforms passed into law at a special legislative session this fall will not take effect immediately and employees will have time after that session to retire under the same terms as if they would retire now.


"I believe, and appreciate, the governor and the legislative leaders' commitments to giving employees time to make an informed decision," McKim said. "But I guess there are some people who are taking what they think is a 'better safe than sorry' approach."


Larry Totten, president of the advocacy group Kentucky Public Retirees, said, "In spite of my advice, we've seen some panicking and jumping by some people who are worried."

So what does Kentucky have to 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, PFM's conclusions, which include freezing current pension plans, slashing benefit payments for current retirees and converting future employees to a 401(k), have been ill-received by pensioners.  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, even if all of that is accomplished, State Budget Director John Chilton recently said that Kentucky would still need to find an extra $1 billion a year just to keep its frozen pension systems afloat. Moreover, absent tax hikes the state will ultimately be forced to cut funding for K-12 schools by $510 million and slash spending at most other agencies by nearly 17% to make up the difference.

In the end, of course, this just puts all federal taxpayers one step closer to fulfilling their "patriotic duty" to bail out a fraudulent, failing state pension system...which will be quickly followed by Illinois, New Jersey, Pennsylvania...


toady BarkingCat Wed, 10/11/2017 - 16:56 Permalink

Yeah... too much "paper" wealth already. All that 401k stuff really was a turning point for me. Don't get me wrong, I still have a ton of "unrealized gains" in the market, but once I saw how they were fucking up pensions and social security, and then the housing bubble.... well, I've pulled a bunch of "realized" money out to cancel out all my debt and set aside everything I need to keep eating if my "unrealized gains" become "permanently unrealized".

In reply to by BarkingCat

The Wizard Five Star Wed, 10/11/2017 - 16:02 Permalink

That is correct, almost every state pension plan is underfunded. The states can thank their previous administrations for kicking the can down the road for future administrations. Bevin is facing the problem head on unlike his predecessors.One way out of it is to legalize cannabis and hemp. Cannabis can be taxed much easier than hemp which is more of an industrial product.Also, tell the horse racing industry to get out of the way and legalize casino gambling. A good number of Kentuckians go to Ohio and Indiana to gamble.I will send my consulting invoice to you Matt.

In reply to by Five Star

Lore True Blue Thu, 10/12/2017 - 04:49 Permalink

I would not be a government employee at this juncture.  It seems to me that the segment of the population to get screwed the hardest will in the end be your typical government bureaucrat who figures that the power of coercion will protect his financial ass.  NEWWWS!

In reply to by True Blue

Sean7k Joe Davola Wed, 10/11/2017 - 15:23 Permalink

You make a common error, well two really: one, there is no such thing as judicial review ( Marbury v Madison be damned, it violated the constitution) and two, courts lack an enforcement provision.

If the people or the State fail to honor their rulings, they are meaningless. Just ask the Cree indians when Jefferson ignored the Supreme Court. One of three instances where the court ruled in favor of treaties made, yet the rulings were ignored.

State workers will find out the law is pretty useless unless people follow it...

In reply to by Joe Davola

4shzl migra Wed, 10/11/2017 - 14:54 Permalink

When the real crunch comes and Social Security and Medicare are also at risk, you'll see federal preemption of all state laws governing public pensions.  Yes, taxes will go up, but benefits will be capped and then kneecapped.  Please spare me any constitutional/states rights arguments.  When TSHTF, the deep state will do whatever it has to do to survive.

In reply to by migra

JohnGaltUk migra Wed, 10/11/2017 - 15:46 Permalink

Thats right, you will be taxed in to oblivion and beyond. This is text book, the Romans did it and every stupid society that ever tried socialism, its just the nature of the beast. Luckily, the founding fathers fore saw this development, hence the second amendment. You must point your guns at tyranny. Hell the USA revolution was over a 3 to 5% tax and look what you guys are accepting today.“Well, Doctor, what have we got—a Republic or a Monarchy?”  “A Republic, if you can keep it.”I guess USA citizens need to decide if they want to keep it or not.

In reply to by migra

Stan Smith migra Wed, 10/11/2017 - 16:02 Permalink

   I call BS.   Any tax increases will be pushed back against hard -- especially property taxes -- which is what funds most school districts.    Let's say some states/municipalites attempted to DOUBLE property taxes.    Does anyone with a fucking brain think that would fly?   Of course not.    And to make matters worse, even if that did come into play,  it's sticking a finger in dike.    It wouldnt be nearly enough to plug the shortage in most states or municipalites.   Some, yes.   Most, no.   These people simply arent going to get paid what they were told they were.    It's not viable in anyway, shape, or form.    Now, they'll still get paid something to be sure.    But every pension around is in trouble -- including Social Security -- thanks to plenty of factors, not the least of which is T-bills hanging around at less than 1%.    Oye.    What a cluster fuck.

In reply to by migra

JRobby Wed, 10/11/2017 - 14:40 Permalink

"Take the lump sum !!!""Oh, I wouldn't know what to do with that much money""Take the fucking lump sum while there's some left !!!"

Juggernaut x2 Wed, 10/11/2017 - 14:48 Permalink

Where's the gloating about Red State KY like when there is a negative article about Blue State IL? No "You damned liberal hippies need to stay there and not move down here to Methville,TX" comments?

Gatto Wed, 10/11/2017 - 14:44 Permalink

1.  Cut all current retirees to 60% of pension not counting last year over time bumps, and other gimmicks used to enhance payment and cap all COLA increases to no more than 1% per year.2.  All current employees switched to self funded 401K's.3.  Legalize pot.4. Problem solved, next!

Bill of Rights Wed, 10/11/2017 - 14:43 Permalink

Teachers ( I know laughable ) work hard, they work 9 maybe 10 months out of the year, have summer off, half days, Field trip perks and so on, and they want more. The " We deserve " crowd is about to get a reality check...

True Blue Juggernaut x2 Wed, 10/11/2017 - 14:59 Permalink

And; just out of curiosity, how many of those second graders actually learn to properly multiply? What are their scores on standardized tests? Oh, plummeting literacy rates, inability to do basic math and absolutely no clue about biology, history, or for that matter any other subject.Frankly, they shouldn't even get paychecks (much less even a cat-food retirement) given the declining state of 'education' for which they are directly responsible.

In reply to by Juggernaut x2

Anteater True Blue Wed, 10/11/2017 - 15:07 Permalink

So go volunteer, Einstein. Schools are always open to volunteers.See if you can make it through a single 90-minute standup routine.Then tomorrow, you have to have 90-minutes of new material, andremember the names of 130 students in your audience yesterday.Then Wednesday, you have to have 90-minutes of new material, andremember the names of 130 students in your audience yesterday.Then Thursday, you have to have 90-minutes of new material, andremember the names of 130 students in your audience yesterday.Then Friday, you have to have 90-minutes of test material, andspend the rest of the day grading and reporting to administration.You've just made it through the easiest week of your school year.Only 189 more shows to write. Better get going. Weekend is short!

In reply to by True Blue

Scuba Steve Anteater Wed, 10/11/2017 - 15:54 Permalink

Haha, yea right. Fukkin liar.Same syllabus year after year for most, with some tweaks. Even if they are newbies, there are ready made planners just like everything else in this world, they follow a script.Dont pretend that the 90 minute standup is not an old script .... just a different year.Ive seen how the structure is in a school for teachers.Dealing inner city and discipline might be another animal but the 90 minute standup is all script.

In reply to by Anteater

hllnwlz Anteater Wed, 10/11/2017 - 16:07 Permalink

At this point, if you're not testing digitally or on scantrons, you've failed.Almost no teachers actually read and comment meaningfully on written tests; they just write a score.  Kids can't improve based on that feedback.Commenter below is right about scripts: most teachers know exactly what they're going to do each year because they did it on the same day the year before. Most teachers get their Masters degrees online in a pay to play scam where they basically do no challenging work (think University of Phoenix); it's an accreditation scam that the unions and the distric leadership have a wink and nod agreement on.Administrators put in a lot of hours, but mainly their job is political and they are rewarded for hiding problems rather than dealing with them.  Read about the horrific decline (worse than usual) in LA since they got rid of suspensions and detentions under Obama-era DOE regs about race quotas for discipline.Are there great, hard-working teachers out there?  Yes.  But they stop being hard-working and results-driven when they realize the shitbird in the room next door shows movies all day, every day, and gets paid THE SAME.

In reply to by Anteater