Gov. Matt Bevin’s administration is asking for a redo of an analysis that says his proposed changes to the teacher pension system would cost taxpayers an extra $4.4 billion over the next 20 years.
Bevin has proposed moving future teachers into 401(k)-style retirement plans and increasing the amount of money the state puts towards the system every year.
The analysis by Cavanaugh Macdonald Consulting showed that under Bevin’s plan, the state wouldn’t see savings until 2034.
Budget Director John Chilton said the analysis used incorrect assumptions of retirement patterns and of how much money the pension system would make from its investments.
“The actuarial assumptions in Cavanaugh Macdonald’s most recent report are significantly different from those in the actuarial calculations provided to our consultants during the planning process,” Chilton said in a statement.
“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. 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.”
The request comes a day after Chilton said the governor would not release a similar analysis of how the bill would impact the pension funds of other state workers.
Bevin’s proposed overhaul of the pension systems would move most future and some current state employees onto 401(k)-style retirement plans. Current workers would have their benefits capped after 27 years of service and switched into 401(k)-style plans going forward.
By closing the conventional pension systems to new workers, the state will have fewer contributions from the paychecks of active employees.
The Cavanaugh MacDonald analysis showed that by 2038, the state’s teacher pension debt would be $11 billion instead of $9.6 billion.
Chilton requested that the consulting firm extend their analysis to 30 years “so that the long-term effects of the pension proposal can be modeled within the 30-year amortization period contained within the legislation.”
Bevin has promised to call a special legislative session sometime this years for lawmakers to vote on changes to the pension system, but resistance from state worker groups and a sexual harassment scandal implicating top Republicans in the state House of Representatives has stalled the initiative.