AFCSME’s Preliminary Response to Governor Bevin’s Proposed Budget
I am sure you all watched with anticipation as Governor Bevin gave his budget address to the legislature. His presentation was both promising and worrisome.
The entire budget structure centered on Governor Bevin’s top priority: to address the financially crippled Kentucky Retirement System (KRS). Many of AFSCME’s members participate in KRS through both KERS (Kentucky Employees Retirement System) and CERS (County Employees Retirement System). As has been widely publicized, KERS (the non-hazardous fund to be specific) is currently the most underfunded pension fund in the country; and, overall KERS is only about 20% funded leaving about a 9 billion dollar shortfall. Governor Bevin called for a thorough outside audit of KRS prior to articulating a detailed solution but we expect him to recommend switching all new hires to a defined-contribution 401(k) style plan rather than the current defined-benefit one. While we agree with Governor Bevin that funding KRS must be one of the legislature’s top priorities, we are vehemently opposed to any structural changes to the plan. Defined benefit plans not only provide stable retirements for workers (in a defined contribution plan the risk is assumed by the employee and subject to market whims whereas in a defined benefit plan the risk is pooled by the assets of the entire plan and it is professionally managed), there is evidence that they are cheaper to administer.
Otherwise, the main funding solution to the pension crisis is by saving money through deep spending cuts. As the Governor pointed out himself, the proposed budget is very austere. It calls for 9% cuts to most all government agencies (4.5% for the rest of this year since we are already midway through the fiscal year). While we applaud the Governor for exempting certain agencies such as SEEK and the Department of Veterans Affairs, these deep cuts prevent any pay raises for our members and will also surely lead to lay-offs. Additionally, it is questionable whether public austerity budgets actually do more harm than good to the economy.
The budget is not only a huge 330 page document, it is a process that will play out in the upcoming weeks as the House and Senate attempt to come together to approve a final version of it. We will be closely reviewing the entire budget document and monitoring the negotiations and will keep you updated as the situation unfolds.
Governor Bevin began his address by repeating the old Golden Rule adage ‘treat each other the way you want to be treated.’ So, in the meantime, please join us and contact your legislators and cabinet secretaries and tell them how you want to be treated by describing how important your job is to you and your families as well as the importance of your defined-benefit retirement plan.