Louisville educators who support a lawsuit seeking to recoup lost money from Kentucky's underfunded teachers' pension system clashed this week with the head of the Jefferson County teachers' union.
The Kentucky Teachers' Retirement System serves about 145,000 teachers across the state and is underfunded by about $14 billion, largely because the state legislature hasn't in recent years provided the necessary contributions to keep it solvent. New state pension accounting standards to be enacted starting this year will compound that $14 billion liability, raising it to about $22 billion.
The issue was at the center of a panel discussion Monday in Louisville that included Jefferson County Teachers Association President Brent McKim and Chris Tobe, a state pension expert and former Kentucky Retirement Systems board member.
If the legislature fails to take action, the pensions could enter a "death spiral" where it may not be able to make sufficient investments or meet its obligations to pensioners, Tobe and McKim said.
Some, including Tobe, estimate that could happen by 2036.
Reporter Jim McNair talks to Kevin Willis about his investigation into the use of hedge funds by Kentucky Retirement Systems.
Kentucky's underperforming retirement system for state employees keeps secret details of its so-called "alternative investments," and critics are calling for more transparency so the risks and potential pratfalls can be fully assessed.
In its latest story, the Kentucky Center for Investigative Reporting looks at the secrecy behind where the Kentucky Retirement Systems makes its alternative investments—and the concerns it raises.
Financial documents show that the Kentucky Retirement Systems dramatically underperformed last year, when compared to its cousin, the Kentucky Teachers Retirement System.
Last year, the Kentucky Retirement Systems' investment portfolio brought in about one billion dollars less than the Kentucky Teachers Retirement System.
According to Chris Tobe, a former trustee to the Kentucky Retirement Systems turned whistleblower, that means Kentucky is home to one of the best-performing public pensions, and, in the case of KRS, one of the worst.
“It really kind of tells you all the things wrong with the pension plan as far as administration. And all the right things to do,” said Tobe.
Moreover, last year the KRS underperformed the average public pension's investment plan by about $500 million.
Tobe says last year was such a bad year for the pension that KRS’ portfolio must outperform its projections for the next five years to make up for the hit.
Chris Tobe's interview with WKU Public Radio about the harsh reality facing Kentucky's pension programs
Chris Tobe is a man who is currently playing the role of “bearer of bad news.”
He worked as a trustee with the Kentucky Retirement Systems from 2008 to 2012, where he got an up-close-and-personal look at how the state’s pension systems were being underfunded. Tobe is also the author of the book Kentucky Fried Pensions, and he makes presentations around the state detailing the crisis facing the commonwealth’s pension programs.
While Gov. Steve Beshear and state lawmakers from both parties have hailed pension reform efforts passed in 2013, Tobe says it’s a drop in the bucket compared to what is needed to fix the underfunding issue.
Compared to the rest of the nation, Tobe believes “Kentucky is probably second worst to Illinois” when it comes to the health of its public pension programs.