Kentucky governor releases pension report withheld by predecessor
Less than two weeks after taking office, Democratic Kentucky Gov. Andy Beshear has released an actuarial analysis of a pension reform bill that his predecessor failed to release to the public showing it would have cost the state’s worst-funded retirement plan more in the long run.
On Friday, Beshear released a 65-page report from the Irving, Texas-based consulting firm Gabriel Roeder Smith & Co. completed in November 2017 analyzing major pension and health insurance plan reforms for two of the state’s retirement plans proposed by Gov. Matt Bevin.
Bevin, a Republican, lost reelection to a second term by about 5,100 votes in November.
“After years of waiting, the people of Kentucky now know the proposed 2017 pension reforms would have left the Commonwealth worse off,” Beshear said. “The analysis commissioned by the former administration shows the proposed 2017 reforms costing the state retirement systems more and negatively affecting the retirements of educators and public employees, compared to the existing, bipartisan reforms made in 2013.”
Beshear said he released the actuarial report to let employees and taxpayers “know the truth” about Bevin’s plan, even though it wasn’t implemented because lawmakers proposed their own plan.
“If we are truly going to solve the problems we face as a Commonwealth, we must work together in an honest and open way,” he said.
Beshear, who as the state attorney general the past four years battled with Bevin on many issues, took the former governor to court contending that he improperly withheld GRS’ analysis of the 2017 plan in violation of the Kentucky Open Records.
Franklin Circuit Court Judge Phillip Shepherd said in a ruling earlier this year that while the pension reform report may be embarrassing to the Bevin administration because it “reveals substantial fiscal and economic problems,” that state law required its release.
Bevin appealed and received a stay of Shepherd’s order from the Kentucky Court of Appeals.
The GRS’ report indicated that over 30 years, the path to full funding of the pension liability would longer than with the 2013 reforms in place now, and that the rise in funded ratios would occur more slowly.
For the largest pension plan, the Kentucky Employee Retirement System covering the non-hazardous fund, GRS said the net combination of changes proposed by the Bevin-backed plan would have caused an initial decrease in the actuarial accrued liability and the unfunded actuarial accrued liability.
“However, it is unlikely that most of the potential savings will be realized, as it is likely the system will experience an increase in the number of retirements when a member becomes first eligible for an unreduced retirement benefit, as the new provisions provide a large economic incentive for the member to retire at first eligibility and seek other employment,” the analysis said.
Beshear is the son of former Gov. Steve Beshear, who was in office when the 2013 pension reforms were adopted.
The new governor said he released GRS’ actuarial report as part of his commitment to transparency. He took office Dec. 10, and has begun undoing actions taken by Bevin such as reversing work requirements in order to qualify for Medicaid.
In a Sept. 13 pre-session legislative committee meeting, lawmakers learned that the KERS non-hazardous plan is currently funded at 12.9%. Pension experts have called it one of the worst-funded public retirement plans in the country.
Lawmakers during the 2020 legislative session are expected to consider a bill phasing out the Legislators’ Retirement Plan and transferring members to KERS or allowing them to opt out of it.
“If we pass a bill like this, I think the public needs to understand that it will make a lot of people feel better, but it will not make a material change in the unfunded liability for our pensions,” Sen. Damon Thayer, R-Georgetown, said during the committee meeting.