Chicago is What a Pension Crisis Really Looks Like for Kentucky

Kentucky’s Pension Crisis Cannot Be Ignored

by Laura Day DelCotto, Esq.

Moody’s downgraded all Chicago debt to “junk” status on May 13, including City, school district and park district paper.   The move follows the opinion issued by the Illinois Supreme Court that certain pension benefits could not be altered under the state constitution.

The Chicago Teachers Union has also sued the Chicago School District, accusing the District of failing to bargain in good faith to reach a new contract.  The District requests that teachers begin to pay more towards their own retirement.  In 1981, the school district bargained, in lieu of salary raises, to pay 7% of the 9% that each teacher pays towards his own retirement: so the “employer” paid its own portion PLUS approximately 80% of the employee portion, since 1981. Teachers have had 2% of their paychecks withheld for retirement since 1981.  According to reports, the City “owes” a teacher who retired in 2011 approximately $2.4 million during retirement.


The public sector and the private sector continue in a complete disconnect, and Kentucky is just masking its issues for now until our fiscal turmoil becomes a true fiscal crisis.   Private sector workers pay 6.2% social security tax, plus whatever additional percentage they withhold for their own 401(k) benefits. When they retire, that is all they have … no long-term “pension” benefits that someone else supposedly pays them for life.   The public sector retirement crisis is here. The only question is what the politicians are going to do about it.

For Chicago, Chapter 9 is not currently an option under Illinois law.  For Kentucky, the crisis is most likely going to end up in federal bankruptcy courts, unless Frankfort acts and acts quickly.  Bankruptcy is all about facing harsh unrealistic situations in an organized fashion, and that is unfortunately what is upon all citizens in the Commonwealth.


2 Replies to “Chicago is What a Pension Crisis Really Looks Like for Kentucky”

  1. States cannot file for bankruptcy. Kentucky governors and legislators have stolen funds from the state employee non-hazardous retirement for for some 15 years, to the tune of 3 billion dollars. This money was used to balance the state budget and pay for legislators’ pork barrel projects. Given that Kentucky’s state supreme court has ruled that state workers’ retirement is a “nonviolable” contract, the current governor and legislature had better act quickly to make amends for their thieving predecessors.

    1. From Laura Day: “Amazing how no one talks about the fact that the ARC was not funded year over year. In the private sector, employers who do not fund the 401k plan end up with both civil and criminal implications, with the DOL coming down on them in a heartbeat and debt that can never be discharged. Public sector “employer” gets to use money for other things. Not right. To fix this, all the issues need to be put on the table, including the question, what are the repercussions against individuals who did this?”

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