Kentucky House Speaker Greg Stumbo has taken up the Teachers Retirement System on one of their funding proposals.
Stumbo on Friday filed a bill calling for the issuing of $3.3 billion in bonds that will be used to fund the teachers system.
Retirement system officials had submitted two proposals to lawmakers; one called for around $1 billion in funding; the second proposal called for $3 billion in funding.
More details from the Courier-Journal:
Stumbo, D-Prestonsburg, said Friday that the retirement system could capitalize on current low interest rates of around 5 percent and use the bonds to supplement the state’s pension contribution for the next eight years.
“This window is going to close pretty soon,” Stumbo said. “I think the feds, this year, will allow those rates to rise some because the economy is getting better and because the banks aren’t making any money on deposits.”
KTRS estimates that a $3.3 billion bond issue would save the state around half a billion dollars annually by 2026. But the plan only works if investments yield a higher rate of return than the interest on the bonds.
Supporters compare the idea to refinancing a home mortgage at a lower rate. But skeptics view it more like using credit cards to pay off debt, and the measure would need support from a supermajority of lawmakers to pass in an odd year of the legislature.
But lawmakers haven’t forgotten about the transparency issues present at both state pension systems. Lawmakers may still attach strings to the funding that forces the teachers system to make some changes to their opacity. From the Courier-Journal:
Stumbo said he is comfortable allowing bonds for teacher pensions because KTRS appears prudent in its investment strategy. But he said lawmakers might consider additional measures to improve oversight of the system as part of the debate.
Stumbo added that lawmakers are not interested in providing bonds to Kentucky Retirement Systems — the pension system for state and local workers — because of lingering questions over investments and transparency.
The Kentucky Teachers Retirement System is one of the worst funded educator’s pension funds in the U.S.
Likewise, the Kentucky Employees Retirement System is one of the worst funded plans in the country.
