In attempting to reduce current payouts, Kentucky granted excess benefits to workers who would go on early retirement. The result was less than stellar.
Just four years ago, there were 51,027 state workers contributing toward the pension fund and 34,120 retirees drawing benefits from it. By 2009, the number of workers slipped to 50,394 while the number of retirees leapt 19 percent to 40,531.
(In a separate fund for Kentucky State Police workers, there already are 239 more retirees getting pensions than active troopers on duty. County governments, served by a third fund, had 93,481 workers and 45,564 retirees.)
At the same time, benefits got a little richer for workers who left under the “incentive windows” the legislature created in recent years to encourage retirement and reduce the payroll. One such incentive let workers base their pensions on their best three years of salaries rather than their best five years.
These incentives cause headaches at the Kentucky Retirement Systems because they send droves of workers for the exit years earlier than expected, Burnside said. That produces more people taking money from the funds, fewer people giving money and less money to invest for gains, he said.
Most state employees hired before 2008 can retire after 27 years and collect a pension based on an average of their best-paid years of service. For instance, a worker who earned $50,000 a year would draw an annual pension of $27,000 for the rest of her life, plus cost of living increases. Workers who perform “hazardous duty,” such as police officers, can retire after 20 years.
In the private sector, only about one in five workers still have a “defined-benefits” pension that guarantees payments for life, according to the U.S. Bureau of Labor Statistics.
The Kentucky Chamber of Commerce has used its Frankfort lobbying clout in recent years to call for a less generous public retirement package, in part because the costs help to starve other priorities, such as education.
“Clearly the state has tremendous financial problems now and we need to find ways to address this situation,” said Dave Adkisson, chamber president.
Adkisson challenges the notion that government employees deserve better retirement benefits as compensation for salaries that are smaller than the private sector’s. Based on the most recent data, Adkisson said, the average Kentucky state employee gets $40,900 a year, compared to $34,950 a year for the average private employee in Kentucky.
Once again, the first thing to do is stop digging deeper holes.
Defined benefit pension plans need to be stopped immediately for new hires. Second, as many public union jobs a possible (in theory all of them) should be privatized.
Finally, existing benefit promises need to be look at from every angle to see what can be done. Cities and counties can go bankrupt, but states can’t.
The ultimate solution for states is simple: default.
Public Pension Plans are like Rotting Whales
Every day, union supporters send me emails whining about these kind of posts. One person proposed I was “ignoring whales” while focusing on minnows.
Here is the deal, public unions along with corrupt politicians have bankrupted nearly every state in the union. This is one of the biggest issues facing the US, if not the biggest issue.
Yes, we bailed out the banks, but no one railed against that more than I did. The battle was lost. The new battle is for fiscal sanity. It makes no sense to fight battles that are over. We cannot undo the bank bailouts. We can do something about public unions and public union greed.
Public unions and untenable pension problems are the whales in the living room. It is high time we do something about it because the whales are rotting and the stench is unbearable.
Mike “Mish” Shedlock
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