Despite many billions in public pension debts, Kentucky has a state pension fund that is literally overflowing with cash — the one reserved for legislators.
Last week, lawmakers in Frankfort were briefed on the Fiscal Year 2021 performance of their Legislators Retirement Plan, which provides them with state-subsidized pensions and health insurance.
Their $79 million pension plan has a funding level of 108.9 percent, which is up from 106.3 percent in 2020. Their retiree health insurance plan is 362 percent funded.
By comparison, the pension plan for most state workers enrolled in the Kentucky Employees Retirement System stands at 18.4 percent funded, putting it among the nation’s worst. The pension plan for educators at the Teachers’ Retirement System of Kentucky is 65.6 percent funded. The plans face a combined $26.9 billion in pension debt.
The offices of the House speaker and Senate president did not immediately respond to requests for comment on Wednesday.
The Legislators Retirement Plan is enjoying “out-sized investment returns,” steadily swelling its coffers, Bo Cracraft, executive director of the Judicial Form Retirement System, told the Public Pension Oversight Board on Nov. 22. The plan’s five-year average return is 15.1 percent, Cracraft said.
“In a normal world, I did not expect us to earn 15 percent a year for the last five years, which is double the assumed rate of return,” Cracraft told lawmakers on the board. “But yes, the funding level has continued to grow.”
Annual updates about legislators’ good fortune are seldom joyously received by public workers whose pensions are not doing nearly so well.
“I’m glad they know how to fully fund one pension,” joked Jim Carroll, spokesman for the Facebook advocacy group Kentucky Government Retirees.
Carroll added that he appreciates the General Assembly’s efforts to pay the full recommended contributions to the state worker and teacher pension funds in the last few state budgets.
The state pension funds are in poor shape because of two decades of under-funding by Kentucky governors and legislators. But starting in 2017, state leaders began shoveling huge sums of money into state pensions in an effort to replenish them, at a growing cost to the rest of the state’s $12 billion General Fund.
Lawmakers awarded themselves state pensions in 1980, creating a separate plan — one attached to the judicial retirement system — to stay out of the now struggling retirement system that provides benefits to rank-and-file state workers.
They passed a “pension sweetening” law for themselves in 2005 that dramatically boosts their monthly benefits if they can get a high-paying job in the state’s executive or judicial branches or at a regional state university, even for just a few years.
The Herald-Leader reported in 2019 that nearly two dozen past and present legislators presently collect or can expect to get lifetime pensions above $50,000 a year, on top of whatever retirement benefits they’ve arranged from their full-time jobs outside of the legislature. The average annual payout that year was $23,934.
“It’s not for me to say whether part-time state legislators should be getting full-time state pensions,” Carroll said.
“Of course, they like to say that they aren’t really part-time anymore, that they work full-time even when they’re not in session,” Carroll said. “I understand their point. But how many of them are also lawyers or doctors or business owners or have some other full-time occupation going on back home in their districts?”