A federal judge has dismissed a lawsuit that challenged Kentucky’s historical underfunding of the state’s teacher pension system, but the plaintiffs say they will file the lawsuit again in a state court.
The Teachers Retirement Legal Fund argues that over recent decades, state leaders broke the law by not setting aside enough money for the Kentucky Teachers Retirement System, which manages the pensions of about 141,000 current and retired teachers.
In an order issued last week, U.S. District Judge Gregory Van Tatenhove ruled that the state is protected by sovereign immunity, which shields states in most cases from being sued by individuals.
“The relief requested by the Plaintiffs is purely monetary; the effect of a judgment from this Court would be solely monetary and would force the Defendants to withdraw from the State treasury to fund KTRS,” Van Tatenhove wrote.
“This Court may not award such relief due to the sovereignty of the Commonwealth of Kentucky granted by the Eleventh Amendment.”
Kentucky legislators and governors have for nearly two decades signed off on budgets that set aside less money than necessary to keep the pension systems from losing money and selling off assets.
As the pensions systems became some of the worst-funded in the nation, Gov. Matt Bevin and the legislature passed a budget that poured an additional $1 billion into the funds.
But pension officials say the systems will need even more during the next budget cycle — a $5.4 billion total that amounts to around a quarter of the state’s already overstretched $21 billion budget.
Randy Wieck, a teacher at DuPont Manual High School in Louisville who filed the lawsuit, said the courts should force the legislature to find a way to better fund the teacher pension system.
“We’re asking the court to remind them of their duty to repair that damage that has been done,” Wieck said. “They have to have maintained an acceptable funding level, somewhere in the neighborhood of 90 percent.”
Wieck said the case could set precedent for the courts to recognize the so-called “inviolable contract,” the state’s contractual promise to honor pension benefits as they’re laid out when employees are first hired.
Bevin has promised a special legislative session later this year to make changes to the state’s pension systems.
Lawmakers have been tight-lipped about what solutions they’ll agree to, but Bevin has repeatedly pushed for shifting future state employees from defined benefit retirement plans to 401(k)-style plans.
A consulting group hired by the state recommended major changes to the pension systems by shifting future state employees to 401(k)-style plans, raising the retirement age to 65 for most state workers and clawing back cost of living adjustments given to pensioners over the last 20 years.