Even though the Kentucky State House passed legislation last month to issue $3.3 billion in bonds to shore up the seriously under-funded Kentucky Teachers Retirement System, the Senate this week stripped out all language pertaining to bonds and instead suggested creating a task force to study the problem further later this year.
But why not do both?
I'm no fan of our current over-generous pension system that robs us of teacher longevity and productivity by promising unrealistic benefits at outrageously young ages. But the fact is, we've made those promises and now we need more money to back them up. Issuing bonds now - when interest rates are historically low - would be relatively inexpensive and still allow us to honor the commitments already made to past and present teachers.
But… that task force could still do a world of good by recommending fundamental changes to the retirement system going forward. And the primary goal should be to replace the current extravagant defined benefits plan with a defined contribution plan.
It's time to stop digging the hole. Even though we're committed to the promises made to former and current teachers, we're not obligated to keeping making even more unrealistic promises to new teachers as they enter the system.
The laws of economics are no different for public employees than private employees, and the sooner we realize this, the better our chances of avoiding disaster.
I'm Bill Lamb and that's my Point of View.
“Edited 3/13/15 to reflect corrected dollar amount of proposed bond issue. WDRB regrets the original error.”