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11/14/17 — Updates: Pension Plan, Rand Paul, Dan Johnson, & Jeff Hoover

Robert Kahne
My Old Kentucky Podcast
Published in
5 min readJan 4, 2018

Pension Reform Update

  • When we last talked about pensions two weeks ago with Morgan McGarvey, Jeff Hoover was still the speaker of the House and a bill had been released. Now that people have had a few weeks to process the bill, there is more to say.
  • We have a bill score from Cavanaugh Macdonald Consulting, which said that the bill would increase the deficit in the Teachers retirement system by $1.4 billion and would reduce the projected funding ratio from 80% to 71%.
  • The analysis projects return on investment from the pension accounts would be 6% under the new bill, as opposed to 7.5%, which is their projection under the status quo. The difference occurs because the new plan will necessitate more conservative investments, since the pension plan would be closed to new members and would only receive money for existing members of the plan.
  • The analysis also predicted that the 5 year COLA freeze would be offset by a mass of retirements.
  • The Bevin administration’s spokesperson, Amanda Stamper, is not an economist. (She’s a graduate from the great Integrated Strategic Communications program at UK). She gave some odd, probably “on the fly” economic analysis when asked for comment about this plan. Directly from the C-J:
  • Stamper said that makes it “not a fair comparison.” She said the consultants should have provided numbers using a 7.5 percent return and then recommended the state switch to a 6 percent assumption.
  • ???????
  • The Kentucky Center for Economic Policy (friends of the show!) released an analysis of the bill which said that the pension bill would actually cause more harm to the pension system. This group is nonpartisan, but is a liberal group. Their report points out that the 401(a) plans cost more because of greater trading costs and less balanced portfolios, plus pulling people out of the pension plan makes it more difficult to pay down liabilities. Finally, the report also makes the case that weakening pensions hurts the economy because less money gets injected into communities where state pensions make up a large portion of trade.
  • On Monday, the KRS Board of Trustees met and received new information about the KRS system. It wasn’t great.
  • The debt has jumped by more than $5 billion in one year, driven as usual by the unfunded liability in the KERS non-hazardous plan, which is about 13% funded and which saw it’s unfunded liability grow by $2.5 billion last year. (There are 5 different pension plans, and while all of them are less funded than we would like, the only true, glaring problem is with KERS non-hazardous). Retirement are up 16% this year compared to the year prior. The KRS board didn’t say why, but it’s pretty obvious this is to do with the spectre of pension reform.
  • At this meeting, we also learned that the Governor’s office has an actuarial markup of the bill as it relates to KRS, (not TRS, which is what we have already). However, the Governor is Not releasing that markup, because, in the words of budget director John Chilton: “they’re now making changes to the bill. The old bill is now irrelevant”.
  • Regardless, Matt Bevin went onto Leland Conway’s show on WHAS radio (the only place he will go to speak to the media) and said that he believed that there are still “the votes to pass the bill”.
  • Then, on Tuesday, Governor Bevin sent back the bills scoring that was done for the TRS system, and asked that it be redone using “a more appropriate set of assumptions.” It appears that the Governor was upset that the investment returns for the DC plan were only 6% instead of a 7.5% rate, so they sent the analysis back to be redone. That happened despite the fact that Cavanaugh McDonald provided good reasons for assuming a lower rate of return.
  • So, maybe they are moving forward with the bill they have now? WHO KNOWS?

Resources:

More Updates

  • Rand Paul returns to the Senate and hires a lawyer
  • Paul announced Monday that while he was still in a great deal of pain, he was returning to the Senate that day to fight for liberty and tax cuts.
  • It also came out on Monday that Rand Paul has hired a personal injury attorney, and the attorney’s firm confirmed that they had been retained, though they have not commented yet
  • So it sounds like Rand Paul will also be filing a civil suit, probably for assault and battery I am guessing. So not only will Boucher face criminal charges, he may also face a civil tort lawsuit
  • On the state criminal case, there is a pretrial conference on November 30

Resources

Resources

  • https://insiderlouisville.com/metro/metoo-rally-expresses-publics-disappointment-with-dan-johnson-settlement/
  • The Fall of Jeff Hoover goes national
  • The only real update to this story is that on November 10th, Hoover’s family confirmed that Hoover was in the hospital for a heart-related issue. He was released yesterday.
  • It’s been just over a week since Hoover’s resignation from his Speaker position, but the story has now hit national news outlets
  • The Times published a piece on Sunday about veils of silence about sexual misconduct claims in state houses and Jeff Hoover’s face is the main photo for the article. He wasn’t really the main focus, but it talked about how members of his own party were demanding his resignation

Resources

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Robert Kahne
My Old Kentucky Podcast

Written by Robert Kahne

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