Patching the sinking ship

Opinion Post Thumbnail

The staff editorial is the majority opinion of The Murray State News Editorial Board.

                         Autumn Brown/The News

Many alumni of Murray State University will make their home here in Kentucky, and will go on to work in the public job sector. Teaching will be the chosen profession for many; there’s job security, for sure, though the pay is far from stellar.

And though most aren’t planning ahead for retirement, it might be time to start.

Proposed changes to retirement funds in place for public state employees will likely be in place for decades to come. Most of us are concerned with keeping the lights on despite historically low wages, but now is the time to listen up and pay close attention to what will affect many in the long run.

The entire system is horribly underfunded, and the state’s debt ranges from $34 billion to $68 billion depending on who you ask. A wide range, for sure, but it’s definitely a ‘crisis’ either way. Changes have been mulled over by Gov. Matt Bevin and the consulting firm PFM, and not everyone is happy.

We’re particularly concerned with the changes affecting teachers at public schools, and it is important to highlight the differences in the current defined benefit program and the proposed replacement.

In the current pension-style program, also known as a defined benefits, a teacher’s contributions to the pool are combined with those of their employers and the state government. No matter how much a teacher pays in, they will receive retirement funds monthly until death, and each year the payments will be adjusted by 1.5 percent to account for inflation. This program’s success is dependent on all parties contributing the amount they are supposed to.

The proposed changes would include moving new teachers to a 401(k) program. Teachers would be required to contribute 9 percent of their earnings, with the opportunity to add another 3 percent. The state would then contribute 4 percent of a teacher’s salary to the retirement fund. Another 2 percent would come from the employer.

Bevin’s administration has circulated an informational graphic that details the comparisons between the two, though the data isn’t as clear as it could be.

The estimates provided for the amount accrued via the 401(k)-style program are based on a few presumptions. The first is that all teachers will attain an 18 percent contribution rate. And the estimates for both programs are, according to the graphic, “based off the current salary schedule published by Franklin County public schools for Rank II teachers with a starting salary of $42,000.” The average starting salary for Kentucky teachers actually varies by a wide margin per district.

The statistics vary depending on which department or agency you ask, so the exact amount one could save under the new retirement fund is not entirely clear.

The Murray-Calloway County Chamber of Commerce Board is much less conflicted over the pros and cons of a new retirement system, having voted unanimously against the plan. This is sure to get the attention of the local community in a big way.

Tax reform and other measures are being suggested as alternatives, though Bevin has a strong opinion of naysayers. Last week, Bevin said that opponents to the proposed measures lack “the sophistication to know what’s at stake.” This drew of the ire of many critics, who were quick to call out his biased and inflammatory language.

The future of Kentucky retirees is uncertain, though the mounting debt must be dealt with soon to avoid even more shortfalls for the state.

It’s easy to get lost in the numbers, but the conflicting information being presented means that a consensus may not be coming as quick as some would hope. But it is important for those who may depend on these programs in the future to be critical of all changes to their finances.

Education must come before action, and it is up to us to discern fact from fiction, no matter where you fall on the political spectrum.