Kentucky’s state workers hit the exits: Retirements up 18 percent

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Nearly 1,300 more state workers than expected chose to retire during the fiscal year that ends this month, creating an 18 percent spike at the already cash-strapped Kentucky Retirement Systems, according to newly released data. And the numbers could get even more dramatic in August, which is traditionally the most popular retirement month for state workers.

The largest surge in retirements — 30 percent — came from Kentucky’s state government, compared to a relatively more modest 10 percent increase in retirements from local governments. The $16 billion KRS is responsible for providing benefits for 372,524 active and retired public employees. It faces an unfunded liability of $27 billion.

Why state workers are leaving

State workers say waves of budget cuts over the last decade and reductions in employee benefits, including pensions, have made public employment far less attractive.

“It’s no mystery what happened. The governor and the legislature did this,” said David Smith, executive director of the Kentucky Association of State Employees. “You’ve got their attacks on public pensions. You’ve got yet another state budget that doesn’t have raises for most state employees. You’ve got state agencies so badly understaffed it’s miserable for the people left behind.”

Overall, between attrition and outsourcing, the state workforce today is about one-fourth smaller than it was a decade ago, with roughly 36,000 employees. But Kentuckians still expect the same level of service they received when there were 12,000 more people on the state payroll, Smith said.

Who is leaving

“What the retirement numbers don’t tell you is who we’re losing,” Smith said. “We’re losing our good social workers. We’re losing our good correctional officers. We’re losing people with institutional knowledge who served the public in important positions, and quite frankly, once they’re gone, a lot of those jobs will remain vacant.”

In fiscal year 2018, which ends June 30, 8,445 state workers announced their retirements. That’s a significant increase from the roughly 7,100 public employees who retired during each of the three previous fiscal years.

What it means for the Kentucky Retirement Systems

David Eager, executive director of KRS, said his agency can absorb the cost of those extra retirees this year.

“That’s not a major problem,” Eager said.

The larger problem, he said, is the trend that those extra retirees represent. KRS is financially supported by active state workers who contribute money from their paychecks. KRS, in turn, supports retired state workers through pension checks. But in the last few years, the number of retirees has exceeded the number of active workers.

“By and large, state government is shrinking,” Eager said. “That does have an impact on us. So we’re paying out more than we have coming in.”

If state government wants to replace some of the workers who retired during this fiscal year, it will face the challenge of doing so in a tighter job market with the public sector’s comparably modest wages, Eager said.

And in the wake of changes to the state’s public retirement systems in recent years, new public workers no longer get traditional pensions, which had been a recruiting tool, he said. Instead, they get 401(k)-style retirement accounts that put the responsibility on them to save enough for their old age, just like many private sector workers.

What it means for the citizens of Kentucky

Working for the state no longer makes sense for a lot of people if they possibly can land a job with a private employer, said Jim Carroll, spokesman for Kentucky Government Retirees.

“Most state employees haven’t seen a pay raise to speak of since 2007,” Carroll said. “Can you think of many major corporations that have treated their employees that way? There are so many ways we have mistreated them, if you set out to deliberately disincentive the state workforce, you could not do a better job than we’ve done here.”

'Most state employees haven't seen a pay raise to speak of since 2007. Can you think of many major corporations that have treated their employees that way?' – Jim Carroll on why retirements are up 18%Click To Tweet

While some people criticize government and say they favor slashing the public payroll even further, “when you call Frankfort and you say ‘I need a copy of my birth certificate,’ and there is nobody there to process your request in a timely fashion, you’ll care then,” Carroll said.

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Written by John Cheves. Cross-posted with permission
from the Herald-Leader via the Kentucky Press News Service