Pension Reform



Kentucky has one of the worst funded public employee pension systems in the country. In other words, the state doesn’t have enough money set aside to pay for the promises we’ve made to our public employees. The total unfunded liabilities range from $40 billion to $60 billion, an amount that is four to six times the size of Kentucky’s annual General Fund budget.

Why is it bad for business?

Businesses looking to locate new operations want to be confident the state’s fiscal house is in order and our state has favorable financial ratings. This pension crisis and our lower bond ratings are impacting our ability to attract companies and create new jobs. 

Why hasn’t something been done?

There is no easy solution. We can’t simply tax our way out of this problem; changes to the structure of retirement benefits are required. The reality is that failing to act now by making the tough choices and bringing all sides to the table to compromise will mean even tougher choices in the future. 

Adjusting to the financial reality our state faces will cause drastic stress on our state government, our schools, our cities and our counties. Our businesses will be at risk if their local payroll and property taxes must be increased to offset drastic increases in pension costs for our cities and counties.  

Why can’t we keep kicking the can down the road?

The time is now to put the pension systems on a sustainable track.  Every year that passes without significant changes simply kicks the can down the road and increases the chance that taxpayers will be asked to pay more to make the system solvent in the years ahead.


• Create consistency across Kentucky’s retirement systems

• Spread the risk of the plans to protect taxpayers from shouldering the costs of the systems’ liabilities alone

• Ensure a disciplined approach to requiring responsible payments into the systems by moving to a level-dollar funding formula

• Begin to correct imbalances in the pension systems including employees living 16 years longer on average than when the system was created

• Allow public employees more flexibility and portability with their retirement plan, similar to what is offered in the private sector

© Kentucky Chamber of Commerce · 464 Chenault Road · Frankfort, KY 40601 · (502) 695-4700