By Jack Brammer
FRANKFORT – Gov. Steve Beshear signed an executive order Tuesday to create a 23-member group to address the state’s financially strapped Teachers’ Retirement System.
Beshear named David Karem, a former Democratic state senator from Louisville and a former chairman of the state Board of Education, to chair the panel and to submit a report to him by or on Dec. 1.
Beshear leaves office in early December and could turn over any recommendations to the 2016 General Assembly.
The creation of the special panel drew applause from the top two legislative leaders – House Speaker Greg Stumbo, D-Prestonsburg, and Senate President Robert Stivers, R-Manchester – but criticism from House Minority Leader Jeff Hoover, R-Jamestown.
Hoover said he was “extremely disappointed.”
“Gov. Beshear had a real opportunity to create an independent, non-partisan panel to give a thorough review of KTRS in an effort to make substantive recommendations to solidify the system,” said Hoover in an email.
“Instead the governor chose to fill this task force with self-serving special interest groups that have been part of the problem, not part of the solution.”
Hoover said House Democrats this year proposed $3.3 billion in bonds, “which would have handed taxpayers the bill and crushed Kentucky’s economy for decades to come.
“Meanwhile an outside group recently advised investors to exercise caution in purchasing bonds in Kentucky because of our tremendous pension debt and sluggish economy in the Commonwealth.”
Hoover said he was calling for an independent panel with experts in areas like investments and actuarial audits “so we can deliver on our promise to teachers that they will have a stable retirement system for years to come.”
Beshear had no immediate reaction to Hoover’s comments.
Members Beshear has placed on the working group besides Karem include David Adkisson, chief executive officer of the Kentucky Chamber of Commerce; Mike Armstrong, executive director of the Kentucky School Boards Association; Jason Bailey, research and policy director for the Mountain Association for Community Economic Development; Mary Ann Blankenship, executive director of the Kentucky Education Association; state budget director Jane Driskell; state Auditor Adam Edelen, who will be a non-voting member; Amanda Ellis, associate commissioner of the Office of Next Generation Learners in the Kentucky Department of Education; Finance and Administration Secretary Lori Flanery; Gary Harbin, executive secretary of the Kentucky Teachers’ Retirement System; state Treasurer Todd Hollenbach, who also is a board member of Kentucky Teachers’ Retirement System; Cabinet Secretary Mary Lassiter; Personnel Secretary Timothy Longmeyer; Roger Marcum, chairman of the Kentucky Board of Education; Brent McKim, president of Jefferson County Teachers’ Association president; Brigitte Blom Ramsey, executive director of the Prichard Committee for Academic Excellence; Tom Shelton, executive director of the Kentucky Association of School Superintendents; Bob Wagoner, executive director of the Kentucky Retired Teachers Association; Wayne Young, executive director of the Kentucky Association of School Administrators; two members of the Kentucky Senate designated by Senate President Stivers; and two members of the Kentucky House of Representatives designated by House Speaker Stumbo.
Beshear, in a release, said he wants the Kentucky Teachers’ Retirement System Funding Work Group to develop recommendations to resolve a funding shortfall and stabilize and secure funding for the system that serves more than 75,000 active and more than 45,000 retired members.
“Our teachers are the foundation of our educational system for the future of our children and grandchildren,” Beshear said. “We must assure that the Kentucky Teachers’ Retirement System is able to fully honor our commitments to our teachers and those who retired from teaching.
“Today I’m asking a group of experts to find ways to ensure the future of the KTRS.”
According to the system’s 2014 actuarial valuation, there is a $14 billion unfunded liability and a 53.6 percent funding status. This is compared with the system’s $571 million unfunded liability and 95.7 percent funding status in 2000.
Beshear said he recognizes that other study groups have examined the KTRS in recent years, but “since the issuance of the reports by these study groups, a number of changes and improvements have been made by the KTRS.
“We can utilize this prior work in this effort. It is critical that we explore the options and develop recommendations to aid the 2016 General Assembly as action needs to be taken next spring to address this crisis.”
The work group will review practices in other states regarding pension benefits, conduct a comprehensive review of funding options and make recommendations for improving the fiscal solvency of the state system, Beshear said.
It also may contract for consulting services, he added.
Karem, in a release, said, “I applaud Gov. Beshear for tackling the issues surrounding the solvency of teachers’ retirement and for not just kicking the issue down the road for our next governor to handle.
“With teachers unable to receive Social Security, I believe there is a compelling case that their retirement system must be stabilized. I’m honored to head this work group with such a dynamic membership, and look forward to issuing some real ideas to Gov. Beshear that will help all our teachers.”
Senate President Stivers said he is “pleased with the new working group to address issues with KTRS.
“I appreciate the governor’s willingness to take action on a very serious issue that is definitely a priority for all legislators. This will not be a quick fix, but rest assured that the Senate Republicans are committed to finding long-term solutions to make this system viable in perpetuity for teachers and all Kentuckians.”
Speaker Stumbo thanked Beshear “for taking action and authorizing this diverse and well-qualified work group. There is no doubt that additional and significant money is needed to address the long-term stability of the Kentucky Teachers’ Retirement System.”
Stumbo noted that in this year’s legislative session he sponsored the bill to issue $3.3 billion in bonds to aid the teachers’ retirement system but that the measure died in the Senate.
“My hope is that this work group will inform and help the legislature find the best solution for the needed funding. The General Assembly proved in 2013 that we can take on a project of this size, as we did with state retirees, and I’m confident we can do it again in 2016 for our teachers – they deserve no less.”
Beshear said recent bond rating warnings issued by national credit rating agencies regarding the KTRS are “further evidence that this fiscal crisis has financial implications beyond this administration.”
“If Kentucky is to compete for 21st century jobs, we must have a world-class education system for our children,” he said. “The success of such a system is dependent upon the recruitment and retention of outstanding educational professionals.
“If we do not have a stable, secure retirement system for our teachers, Kentucky will never be able to compete in education at the highest levels.”