I heard an interesting interview recently.
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% of the Commonwealth’s annual budget to 13.8%.
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 SB2, 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% 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% of the total problem.
Further, we know that nearly 25% 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 plead 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.
* We also know that 15% of the unfunded liability is due to the system failing to meet their projected rates of return. This is like the return you expect on your 401-k and is the largest factor in the success or failure of a pension system. When they failed to meet this number year after year, did Governor Beshear’s appointees fire the director of the system or hold him accountable? No, they gave him a 25% raise. After all, it’s just a magic game, right?
It saddens me to see someone who has, for nearly the past decade, had access to all of the best actuaries and numbers lie about the truth.
However, the ratings agencies have no motivation to lie.
Last week, Moody’s downgraded the Commonwealth’s credit rating, saying that, instead of the $37 billion in unfunded liabilities that Steve Beshear’s board reported, the real number is more like $70 billion…which happens to be the number that Governor Bevin and the current board believe is more accurate.
Governor Beshear stated in his interview that if he was in charge of the system, he could, “…make us look the best in the country or the worst in the country.” I’ve got a better idea. How about those who know the truth but hide from it get on a horse named Magic and ride back out of town and allow those of us who deal in reality to get to work.
Sen. Chris McDaniel of Taylor Mill represents District 23 in the state legislature. He was first elected in 2013
It takes a lot of chutzpah for some one like Chris McDaniel to call former governor Steve Beshear a liar when McDaniel in front of a packed forum in Newport, Kentucky a few years back stood up and told lie after lie about HB70 which would have restored voting rights to former felons. I wrote to him about these lies and he never responded. Secondly, McDaniel is expert at card stacking information, using only facts that support his position and omitting those that don’t. For example, he neglects to point out that through much of Beshear’s administration, he was dealing with the consequence of the worst recession since the 1930’s and unemployment rates around 10% which led to a loss in revenue collected and an increase in unemployment benefits paid out. Nor does he mention the failure of not only the governor but of the legislature, himself included, to deal with a tax structure that is antiquated and upside down, taxing those at the bottom at a higher rate than those at the top. He doesn’t point out that there is no shortage of revenue sources available, since the state gives away more in special deductions and tax loopholes than it collects in revenue. Maybe it’s because he doesn’t want to anger those big money people like the Koch brothers and Art Laffler who bought him and his party control of the state house. He works for them and not the people of Kentucky. We have the resources in this state to solve our problems. All we lack is the political will and the courage to do what needs to be done.