Op-Ed: Belief in Magic Won't Help Kentucky's Pension Crisis
I heard an interesting interview recently.
Louisville media personality Terry Meiners interviewed former Governor Steve Beshear regarding his recent book release. Probably the most startling revelation dealt with his belief in magic. As he told Terry, he has a horse named Magic. The former Governor also appears to believe that magic can be used to resolve the thorniest problem our Commonwealth has ever confronted: our pension debt.
There is no financial issue confronting the Commonwealth with such staggering ferocity as our pension debt. Over the past decade, payments to our pension plans have grown from $573 Million to $1.6 Billion annually. This represents going from 5.4 percent of the Commonwealth’s annual budget to 13.8 percent. Many attempts at reform over the past decade have been made but none have been enough to stop the financial tsunami that is now upon us.
In 2013, as a freshman senator, I worked closely with Senate Majority Leader Damon Thayer and Governor Beshear to help pass Senate Bill 2, the most sweeping pension reform the Commonwealth has ever seen. However, due to pressure from the House and as with attempts before, it was not sufficient to stem the financial tide.
You can imagine my disappointment when I heard former Governor Beshear, who knows full well the details as to why we are in this mess, trying to downplay the nature of the pension problem saying, “...this is a game.” His rhetoric is an attempt to turn this most urgent problem into a partisan whirlwind. I can assure you that there is nothing less partisan than our pension debt, and an unfunded liability in excess of $45 billion that falls to all taxpayers is not a game.
Given his rhetoric, I feel compelled to give a refresher course of how we have arrived at this problem: We know that over 20 percent of the unfunded liability is related to budgets that were recommended by governors and approved by general assemblies that did not fully fund the Commonwealth’s required contribution. The total dollar amount of the underfunding of the Commonwealth’s pensions was $3.74 billion. Of that amount, Governor Beshear authored budgets that underfunded $3.26 billion or 87 percent of the total problem.
Further, we know that nearly 25 percent of the unfunded liability is due to faulty assumptions on payroll growth. Those assumptions were set by an actuarial firm and then approved by a board that was comprised of many members appointed by Governor Beshear. Those appointees included his own Personnel Secretary who is now in federal prison (remember, he pleaded guilty to accepting bribes and illegally contributing to campaigns including the campaign of now-Attorney General Andy Beshear). How could the governor’s personnel manager not know to stop and ask why payroll numbers were incorrect?
One can only surmise that he was shielding the governor from tough choices. Or maybe he, too, believed that the magic money tree would fix the problem.
Written by Sen. Chris McDaniel, a Republican from Taylor Mill, serving his second term in the Kentucky State Senate