Caboni: Pensions Have Real Implications for Universities

Aug 28, 2017

Kentucky’s public universities are debating whether to break off from the state’s troubled retirement system and create a pension plan of their own. 

New Western Kentucky University President Timothy Caboni says it’s an idea that has to be considered.   He told WKU Public Radio that pension obligations are consuming an increasing amount of money from university budgets. 

"One of the things I've learned in the last few months is how much of a cost driver pensions are for WKU," stated Caboni.  "In one of our pension systems, the university's contribution in the past decade has gone from eight percent of an employee's salary to 48 percent."

President Caboni said pension costs have eaten away at other priorities on campus. 

Caboni added that pension reform must protect people already in the retirement system while considering changes for new hires.  He said that might include moving from defined benefit plans to defined contribution plans, similar to what the Universities of Kentucky and Louisville already offer.

Universities are debating a possible split from Kentucky’s retirement system as it faces an unfunded liability of more than $40 billion, according to official estimates.  Governor Bevin puts the deficit at $64 billion, which averages out to about $15,000 per Kentuckian.

The deficit threatens future retirement and health benefits for public employees.

Meanwhile, Governor Matt Bevin and Kentucky lawmakers will learn Monday how the state can dig itself out from under the pension crisis.  A consulting firm hired by the Bevin administration will issue recommendations on how to shore up the retirement system.  In May, the PFM Group told lawmakers they needed an extra $700 million a year to save the system.

One of the lawmakers tasked with overseeing pension reform is State Senator Joe Bowen of Owensboro.  As co-chair of the Public Pension Oversight Board, he says the options must include new revenue and some structural changes.

"When people hear structural changes, they must know these are efforts to save the system because if we don't make some changes, the systems can't be salvaged," Bowen told WKU Public Radio.

Kentucky’s pension system for state and local government employees is considered among the worst in the nation.

Governor Bevin has recently posted Facebook videos where he tried to allay concerns that lawmakers will cut benefits for current employees, but he’s offered few details on what solutions he might propose ahead of a special legislative session this fall.