The more we hear from experts on Kentucky’s pension crisis, the clearer it becomes: no Black-Friday-type-of-deal exists to bail out the state’s retirement systems, which face a nearly $40 billion unfunded liability.
But Santa made an early visit this year to Kentucky Retirement Systems’ executive director Bill Thielen, whose board paid $38,500 to a Colorado search firm to find a replacement for Thielen, who previously announced he would retire at the end of 2015.
Not only were none—none—of the 20 applicants interviewed, the board decided in October to offer Thielen a contract extension, keeping him on the job until June 30, 2018, and hiking his salary by more than $43,000 a year.
There’s more irony in this situation than snow at the North Pole.
Thielen gets a 25-percent raise to lead a system that includes the Kentucky Employees Retirement System, which has only 19 percent of the funding needed to meet its future obligations to pensioners.
Despite the fact that KERS is drowning to the point that it’s now cashing out investments to pay its pensioners, Thielen also gets an extra present—a big increase in his own pension.
Kentucky Roll Call’s Lowell Reese estimates that considering Thielen’s age, life expectancy and long tenure in government, the KRS board not only gave Thielen a hefty raise, it essentially awarded him a quarter-million dollar bonus over his lifetime by spiking his pension.
So basically, he’ll get an additional $250,000 for two and a half years of work. Not a bad gig, if you can get it.
Along with that “bonus,” Reese notes that Thielen’s a double-dipper who’s cashing an estimated $66,000 pension check each year from his previous position with the Kentucky League of Cities and will get a projected $49,155 annual pension from his KRS tenure.
It all adds up to $115,000 a year in taxpayer-funded pension payments to the man who leads a secretive operation and who’s made little effort to bring accountability to a system now so out-of-control that it won’t be long before you will hear talk of a tax increase the size of which will dwarf the jolliest Santa or the positive hopes many have for the incoming Bevin administration.
More than $20 billion is needed just to raise all state retirement plans to the 80-percent funding level actuaries claim is healthy.
“Where are you going to get that kind of money?” Reese asks. “You can’t even borrow that. To really fix the problem, it’s going to take a mammoth tax increase unless they come up with a magic plan.”
Representatives of both the state workers’ and teachers’ plans have said they cannot invest their way out of the crisis.
What about growing our way out of it?
The Lexington Herald-Leader’s John Cheves reported during the recent gubernatorial campaign that the additional $579 million in tax revenue that Frankfort is forecast to receive through 2018 “is already more than spoken for.”
How can Kentucky’s economy grow big—and fast—enough to bring in sufficient revenue to rescue our pension system when there already are so many hands out clamoring for more funding that the surplus revenue will disappear faster than the Freedom From Religion Foundation can say “Merry Christmas?”
“Public pensions for state workers and school teachers might need a stepped-up $2 billion just to stay afloat,” Cheves reported. “And Kentucky will have to begin paying its share of expanded Medicaid, starting with an estimated $247 million.”
Taxpayers should dare Speaker Greg Stumbo or his fellow dinosaur-ic Democrats who still control the Kentucky House to talk taxes and new programs while at the same time opposing Bevin’s plan to shine the bright light of transparency on pension spending and investment practices and implement business-friendly policies like right-to-work and real tax reform to attract job creators who could provide at least some of that needed magic.
Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at firstname.lastname@example.org. Read previously published columns at www.bipps.org.