FRANKFORT, Ky. (KT) - Kentucky State Budget Director John Chilton wants the consulting firm whose analysis said Gov. Matt Bevin's plan to overhaul the retirement system for public school teachers would cost taxpayers an extra $4.4 billion over the next 20 years to try again.
The analysis by Cavanaugh Macdonald Consulting was the first official scoring of Bevin's proposal, which he unveiled last month. A similar analysis for the Kentucky Employees Retirement System that covers state workers was to be released Monday, but Chilton, a member of the retirement system’s board, said it would not be made public, as it was still a draft document.
Chilton said Cavanaugh Macdonald’s initial analysis of the current pension proposal uses assumptions that are different from those in its annual valuation reports, including significant changes in retirement patterns and an investment return assumption different from the rate recently approved by the TRS Board.
The request for the recalculation recognizes there will be certain assumption changes based upon the pension proposal, but the changes by Cavanaugh MacDonald regarding assumed investment returns and future retirement patterns were significant departures from those used in prior valuations.
Chilton said the Cavanaugh McDonald numbers are significantly different than the actuarial calculations provided to the consultants during the planning process.
“In the past, a lack of realistic and rational actuarial assumptions helped obscure the distressed financial status of the plans and contributed to the long-term unsustainability of the plans,” he said. “We will ask Cavanaugh Macdonald to prepare calculations with several alternative assumptions so that policy makers can make informed decisions based on scenarios that include realistic assumptions and that are satisfactorily reconciled with those that Cavanaugh Macdonald provided in the past.”
Actuarial calculations help to inform policy makers as they consider proposals in the legislative process. The state wants the firms to provide the full scope of information necessary to help understand how the future might look. There is no one single scenario that can be known in advance.
Officials says they believe a recalculation of the analysis based upon the request provided by Director Chilton, will provide a more complete picture of what the possible outcomes will be realized from the pension proposal.
The consultants only projected for the next 20 years, as they are required to by law. Bevin spokesperson Amanda Stamper said the plan will show "significantly better funding" over 30 years. And she said the state will be able to afford "additional payments over the next 30 years, thereby saving the teachers' pensions."
Majority Republican House and Senate leaders have been meeting to come to an agreement on changes to the state’s public pension systems, since an outline of legislation was unveiled by Gov. Bevin, nearly a month ago.