MURRAY — For about the past half year, Murray State University President Dr. Bob Jackson has referred to the ongoing Kentucky pensions battle as the biggest financial issue the university must face.
During Thursday’s annual retreat of the university’s Board of Regents that traditionally precedes the first meeting of the full board – scheduled today – Jackson repeated this again. This time, though, the Regents were able to see exactly to what he was referring in terms they understand well … numbers displayed in full view.
“It’s not going away any time soon,” Jackson warned prior to a presentation from university Vice President of Finance and Administrative Services Jackie Dudley and Director of Human Resources Joyce Gordon that dealt with those numbers.
Most obvious were the figures of the fund getting all of the attention statewide, the Kentucky Employees Retirement System pensions for both non-hazardous and hazardous workers. In 2018, Murray State was responsible for a pension liability of $114.9 million as its contribution for non-hazardous workers which Dudley said accounts for nearly 500 employees, nearly two-thirds of which are classified as either Tier 1 or Tier 2 employees, meaning they have the most seniority.
In the just-completed 2019 fiscal year, that total went up to a little more than $121 million, despite fewer employees, nearly 400, being in that system. It is the KERS system that is generally regarded by many as one of, if not the, worst-funded pension systems in America at between 12 and 14 percent.
Those numbers also show how much more stable other systems are with the liability for 2018 non-hazardous workers being more than $21.7 million, as opposed to 2019, just over $21 million, a drop of nearly $700,000.
“That $6.1 million (for the KERS non-hazardous increase) is predicated on it being funded at 49 percent … 49 percent,” Jackson said, reminding the Regents and others in the audience at Heritage Hall that if not for a special session of the Kentucky General Assembly this summer, this would have been required at about 84 percent.
“House Bill 1, which was just passed and we went to Frankfort to testify in favor of, will expire on June 30, and unless something is done between now and then, it goes back to 84 percent,” he said, adding a pair of pieces of what he called bad news to the mix. “Financial experts are not very optimistic. (Credit rating company) Moody’s issued a white paper in regard to House Bill 1 as (Kentucky’s public universities) stand as institutions and I can tell you it’s not favorable, so right now, I would not recommend going into the private marketplace to deal with this, based on experience.
“(KERS) also issues the (liability) number to the legislature and it’s placed in the state budget, and it’s been done that way for many years. That number is statutorily established and it’s on the recommendation of the KERS. And KERS has been very clear that we should not expect 84 percent next year. Remember, we took a one-year reprieve and we testified on that bill’s behalf for a freeze to give ourselves options for analysis, but for that one year, that’s millions of dollars KERS is forgoing.”
Regent Jerry Rhoads of Madisonville – like Jackson, a former state senator – then offered an obvious conclusion.
“So you’re saying the freeze is going to thaw,” he said, his remark met immediately with Jackson nodding in agreement.
Board Chairman Dan Kemp said during Thursday’s meeting that an action item for today’s meeting at Pogue Library will be to ask the firm that puts together the university’s financial audit each year to investigate options to, as Jackson put it, “mitigate our exposure to KERS.”