The retirement security of public employees across Kentucky is under siege.
Gov. Matt Bevin and lawmakers are threatening to switch newly hired public employees into a defined contribution 401(k)-style retirement plan. Others, including the Bluegrass Institute, are urging them to cut retirement benefits for current firefighters, nurses and teachers.
After years of Frankfort politicians underfunding our state’s public pension systems, we do have serious challenges to address. But making draconian cuts to retirement security won’t solve the funding issue and it will cause economic harm to folks around the state.
I’ve been a public employee for eight years, working for the city of Lexington. Every morning, I leave for a job that I love. As a resource recovery operator, I don’t make a big salary; I make a modest amount to support my family and me. When it’s time to retire, I’ve been promised a secure retirement through my pension, which I’ve paid into my entire career. I’ve paid my share, while for years Kentucky hasn’t paid theirs, leaving the state with underfunded pension systems. Now, the state wants to harm the retirement security of future public employees with risky 401(k)s and possibly even come after the retirement I paid for.
401(k)s are risky and do not provide for a secure retirement. 401(k) plans are subject to the whims of the market and if there’s a recession like in 2008, working people can lose much of their retirement savings. Unfortunately, when it comes time for retirement, many workers aren’t prepared with 401(k) accounts. The average savings in these accounts in Kentucky is only $32,499 — not nearly enough to retire securely. 401(k)s also have much higher fees, putting workers’ hard-earned money in the pockets of Wall Street executives.
Current public employees should be fearful as well. As reported in the Courier-Journal, some in Kentucky are looking to make cuts to our future retirement benefits. Our average annual pension benefit is extremely modest — $23,791 to be exact. This won’t give us the opportunity to build a custom-made yacht and travel around the Caribbean; we’re talking about a small amount that will help public employees support themselves in retirement. Cuts to our retirement may very well push many public employee retirees below the poverty line, which is $24,600 for a family of four. Is that how we want to treat our public employees who dedicated their lives to serving our communities?
Before even thinking about making these cuts to future retirees, lawmakers should also look at the positive economic impact pensions create. According to the National Institute on Retirement Security, state and local pension plan benefits support 33,748 jobs in Kentucky, making up 1.76 percent of the labor force. Additionally, each $1 in taxpayer contributions to Kentucky’s state and local pension plans supports $5.36 in total economic output in the state. If the state decides to cut pension benefits or eliminate pensions for newly hired employees, the unemployment rate will climb gradually and economic output in our cities and towns will decline.
I encourage every state lawmaker and the governor to look around — public employees and current retirees are all around you. They are your kids’ Little League coach, the person standing behind you in the grocery store and sitting beside you in church. Gutting Kentucky’s pension systems will hurt people in your own communities.
Think about this and come up with a better solution rather than destroying the retirement security of thousands of current and future public employees.