A Richmond accountant who completed a financial audit of Letcher County Public Schools for the 2014-15 school year told the Letcher County Board of Education that the quality of workforce will eventually decrease if reduced retirement benefits continue to be offered to new teachers.
“The quality of people going into the education field is going to start to dwindle,” Rupert White, a certified public accountant with White and Associates, PSC., told the board on December 21. “There will come a point in time where you will compete for quality people.”
Letcher County Teacher’s Organization President Regina Brown said educators want the best quality in the classroom for students.
“They deserve it,” said Brown. “We deserve it. Our county deserves it.”
A new federal accounting rule requires a more conservative outlook when states lack a clear plan to pay down pension shortfalls. Under that rule, funding levels will drop to 42.5 percent and unfunded liabilities will top $24.4 billion.
The Letcher school district’s unfunded portion of the pension liability for the teacher’s retirement system is $91,307,242. — .4 percent of the $24.4 billion.
A big selling point for going into teaching, White said, once was a defined retirement benefits package — drawing a dependable retirement until death. Now retirement benefits are watered down and White said college graduates will steer toward more lucrative careers.
“Young people are very intelligent,” said White. “They look at what it pays and the benefits.”
White said that when Kentucky Teacher’s Retirement System was created, life expectancy and salaries were less. Retirees are living longer and in return drawing retirement for more years than expected.
Actuaries reported that Kentucky Teacher’s Retirement System (KTRS) ended the 2015 fiscal year with 55.3 percent of the assets needed to pay out benefits over the next three decades. However, the system is still struggling with negative cash flows and faces a $13.9 billion shortfall.
Gary Harbin, the system’s executive secretary, said Dec. 9 that officials continue liquidating assets to help cover benefit checks for retirees. Teacher pensions shed around $650 million in assets last year and are on track to sell another $750 million this year, he said.
The imbalance is expected to continue growing by about $100 million a year without additional support from the state.
“This is a crisis. It’s a crisis now. It’s a crisis for teachers in the classroom today,” Harbin said. “These contributions have to be here for us to be able to invest and to continue to invest properly. We have to know those monies are going to be here, and we have to have positive cash flow.”
The system manages retirement benefits for 122,000 members.
The state budget has underfunded contributions to Kentucky Teacher’s Retirement System since the 2008 fiscal year, and provided only 61 percent of the $914 million that actuaries recommended in 2015.
The Kentucky legislature will convene in January to begin work on a new twoyear budget. KTRS needs $520 million in additional allocations during the first year of the spending plan and nearly $513 million more in the second year.
Republican Sen. Joe Bowen, chairman of the Senate State and Local Government Committee, said lawmakers have been working behind the scenes on a legislative fix that would offer a “responsible and reasonable” approach that treats teacher and taxpayers fairly.
Bowen declined to provide details, but said the bill would include a funding component and likely impact some of the benefit calculations for new hires and current employees. Bonding is not part of the proposal, he said.
“I can assure you that there will not be some additional funding without some structural changes,” he said. “They will have to go hand in hand.”
Letcher Supt. Tony Sergent wants the continuation of accumulated sick leave days to be calculated into teacher retirement. Some teachers acquire 100 or more sick leave days during their careers to be averaged in to how much retirement they will receive. Sergent said sick leave days make a big difference in the amount of retirement one draws each month.
“Those are scary things for current employees,” said Sergent. “It’s a serious situation.”
Brown said teachers have earned sick leave days and should be rewarded.
“It’s important to us,” said Brown. “It shouldn’t be taken away from us at the end of our teaching careers.”
If sick days no longer factor into retirement, Sergent said teachers may start using large quantities of their sick days. More substitute teachers would be needed.
“(When) I started teaching, $17,000 was my salary,” said Sergent. “The draw for teaching is not money, obviously. You work that many days a year, you’ve got time off and your retirement. If they do change our retirement system, you will never get a young person to come out of college and go into teaching.”
Brown encouraged the school board and school district employees to contact legislators and ask them to fund Kentucky Teacher’s Retirement System and not reduce retirement benefits.
“One of the reasons a lot of us chose teaching over a more lucrative career after the love of teaching is the benefit package that was offered to our employees,” said Brown. “Slowly but surely over time those benefits have reduced. The one thing that has been firm for all of us is the fact that we had a solid retirement to count on for us.”
Compiled from Associated Press and Mountain Eagle reports.