The Kentucky Retired Teachers Association is calling on lawmakers to drop the proposed suspension of cost-of-living adjustments, keep defined benefit plans, fully-fund the system and not alter the TRS board. Executive Director Tim Abrams and former Executive Director Bob Wagoner addressed the Calloway County Retired Teachers Association in Murray on Monday.
Abrams urged retired teachers to consider what suspending COLAs would mean for their finances.
"The biggest thing that we've heard from representatives is that they've not heard from retired teachers that they're concerned about the suspension of the cost-of-living adjustment," Abrams said. People have called his office, he said, asking KRTA to stop talking about the COLA suspension, that some retired teachers have expressed a willingness to sacrifice this aspect as a means to fix the pension issue. However, Abrams said after explaining with teachers the impact this will have on their finances, they change their mind.
"You don't become independently wealthy when you see that cost of living adjustment," He said. The exact amount depends on an individual's earnings. "The average pension of $3,000 a month for a 60 year old retiree, that five-year suspension over their lifetime, they would lose over $71,000." Suspending the COLA for five years, he said would net the state $3.6 billion over a 20 year period.
Retired teachers currently receive a 1.5% COLA each year. This would be suspended for the first five years of retirement under the governor’s plan.
Abrams also expressed a skepticism that the COLA will be put back after five years, as proposed. "In five years there's going to be different people up there and if we suspend it, I think the chances of us getting it back are slim."
Bevin's pension website says the pension crisis currently has a $15,000 liability for each Kentuckian. On this point, Abrams said the number isn't equitable since the COLA freeze would presumably cost an average retired teacher around $70,000. "I think that's a little bit unfair to push that much load off on Kentucky's retired teachers," he said.
KTRA is also urging lawmakers to keep defined benefit plans as opposed to defined contribution plans - 401(a) plans - which currently remains the core component to the proposed reforms. Abrams said he is concerned this change could pose a challenge in recruiting new teachers in Kentucky. "When they compare us to the private sector it's just not fair. The beginning teacher is going to make a lot less money than people in the private sector." Abrams said switching workers to such plans would cost taxpayers more money and provide a smaller benefit for teachers when they retire. He cited an assessment that the proposed overhaul would cost taxpayers an extra $4.4 billion over the next 20 years.
Ken Wolf is a retired history professor. He said he believed most retired teachers are concerned about the defined contribution proposal. "Many of us are really, really worried about the future of public education in this state and the ability to hire decent teachers." Retired Murray City Schools superintendent Bob Rogers said the plan would have a negative impact on Kentucky's children as experienced teachers will leave if accumulated sick leave is 'taken out' of their pension plan. Those who support the structure of Governor Matt Bevin's proposal have urged teachers to calculate how much they would make in a 401(a) plan, suggesting it would be more than a defined benefit plan.
Abrams said he believes there has been an "attack on public education" over the past several years with the push towards charter schools, which was signed into law in Kentucky earlier this year. Now, it's the pension issue, he said, and scholarship tax credits and vouchers are next. "We seem to be following a script of how we're going to destroy public education," he said, referencing in a follow-up "dark money" efforts by American Legislative Exchange Council (ALEC), funded by the Koch brothers, which promotes on their website charter schools and school choice.
Abrams said he wants lawmakers to find a way to fund the system. "We've heard a lot from legislative leaders that we need to stop digging the hole. They stopped digging the hole two years ago with the contributions that were made to the system we saw a decrease in the unfunded liabilities in TRS. We just need to stay that course." He said the percentage of funding in TRS has increased since lawmakers added $973 million in funding two years ago: last year it was at 54.6% and now it's at 56.4% funded. He also noted that the TRS board "is in good shape" as it is made up of teachers as opposed to political appointees, like the Kentucky Retirement Systems board.
In terms of finding the funding, some lawmakers and many in the public sector have pointed to the roughly $12 billion in tax exemptions, or loopholes, for various industries in the state. Abrams said if less than one percent of those exemptions are claimed then "it would go a long way toward solving this pension problem." He said, as an example, a property tax exemption on luxury houseboats is far less than what one would pay on a comparatively simple fishing boat, as reported by the Lexington Herald Leader. "Now that's not going to solve our pension problem, but why do we have things like that on the books? I think are several of those little things added together that could go a long way... Our hope would be that they would look at a lot of those exemptions. And I think the general assembly will," Abrams said.
When asked what would be acceptable in terms of a compromised "watered down" bill, Abrams said he wants no changes to retirees benefits. "A lot of people have said there could be some minor tweaks to future teacher retirement plans. I think that would be acceptable. But I think less than a defined benefit is really going to hurt public schools."
Abrams said he applauds Governor Bevin for addressing public pensions and money put into the system in this past biennium, but said the issues can be resolved without the "extreme measures" put forth in his plan.
He said a positive outcome of the pension proposal is that it has 'awakened' the public sector to engage with the government.