A group of Louisville teachers plans to file a class-action lawsuit claiming the governor and Kentucky General Assembly violated a contractual obligation by deliberately underfunding the teachers' retirement fund by billions of dollars.
Lebanon attorney Theodore Lavit said the lawsuit will name Governor Steve Beshear, Senate President Robert Stivers and House Speaker Greg Stumbo as defendants in the suit. The potential plaintiffs will seek $11 billion to restore money to the underfunded Kentucky Teachers Retirement System, which covers about 140,000 teachers across the state, according to sources familiar with the prospective case.
"Some experts believe that in four, maybe five years, at the present funding rate, that it'll be impossible to recapture what's needed," Lavit told Kentucky Public Radio. "There are quite a few teachers upset about the present state of affairs."
Currently, the KTRS pension is funded at about 50 percent, placing it well below what experts say is a pension's proper balance of its assets to its unfunded liabilities—the difference between how much money it has on-hand versus how much it has to pay out in benefits.
Put another way: It's the difference between how much money a household has in its bank account versus how much it owes on its credit card bills. KTRS has about $13.9 billion in such unfunded liabilities—a number that is expected to swell exponentially to about $23 billion in 2015 when new federal accounting standards kick in, according to the most recent numbers.