Kentucky operates two defined benefit pension systems, which are “retirement plans that promises its recipients a set level of benefits, generally for life,” according to Kentucky Chamber’s website. The two main systems are the Kentucky Retirement System and the Kentucky Teachers’ Retirement System, which provide benefits to public em- ployees during retirement. Pension benefits are based on an employ- ee’s final salary, the benefit factor and the length of service. Currently, Kentucky has 31.4 percent of the funds to fulfill pension benefits, the second worst amount of allocated funds in the country besides New Jersey.

How does the pension crisis affect my generation?

“As retirement of baby-boomers continues, the shortage in contri- butions to the pension needed to finance the pensions of retirees must be made up from other sources, either by increased contri- butions of current public employees, higher taxes on the general public or reductions in spending elsewhere… If the state opts not to raise taxes or cut benefits for retirees the funds must come from somewhere else. As higher education is a big share of the state budget, it may well be adversely affected.”

– Professor William Hoyt, Chair of the Economics Department and Gatton Endowed Professor

Does the fear of knowing your pension may not be there affect education majors?

“It does not make me reconsider my career choice at all. I didn’t choose my major with a pension in mind,” Makenzie Mentzer, elementary education junior, said. “I mean, the whole thing sucks, but I want to teach because of my love for kids, and I really want to make a difference in their lives. To be honest, I did not think about a pension whatsoever when declaring my major.”

Are Kentucky’s benefits too generous?

“Kentucky’s pension benefits, while higher than the average state, are not at the very top. The typical full career state government employee in Kentucky has a combined social security and pension replacement rate of approximate 88 percent of pre-retirement earnings (pension + social security = 88 percent of pre-retirement annual earnings), while at least 15 states have higher replacement rates.”

– Professor William Hoyt, Chair of the Economics Department and Gatton Endowed Professor