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The Pension Gamble (full documentary) | FRONTLINE

[Music] it was a promise made to all state workers they said if you dedicate your life to public service we would guarantee you a solid retirement but what happened they have effectively raided pension funds the pension was used basically as a piggy bank frontline correspondent martin smith investigates how did it go down with the policemen and the farmer i don't think it went down well with anybody my insurance is crap my pay is crap but i love what i do when i was promises pensions 14 million dollars had been paid to undisclosed individuals for doing little or nothing it was happening all over the country this is a crisis of epic proportion if we are unable to meet the pension obligations this comes at the expense of everything else that we care about the real cost of the pension gamble kentucky might be the first one to go down but it won't be the last [Music] this is a story about gambling and making bad bets it's about having your retirement that you thought was secure go south we came here to kentucky because kentucky's pension system for its police firefighters teachers and other public workers is among the worst funded in the nation with our interest in pensions we of course noticed a horse called promises fulfilled i decided to place a bed so this promise is fulfilled what do we think about that horse it's like a long shot well today i think a long shot has a chance with the yeah we're in kentucky we're doing a show about the pension problems you know the teachers and the firemen and the cops people who work hard all their lives and they're worried they're not going to get a pension crazy the people that we depend on most in our community right you got me mad makes you mad yeah i am ready for you okay well in uh in the derby number three promise is fulfilled what you want to put on it a hundred dollars to win yeah i had no expectation that the horse would do much at post time the odds board had it at around 50 to 1.

on the other hand if it won i would win 5 000. [Applause] well promises fulfilled led the pack for half the race but in the back stretch where you couldn't really see what happened the horse dropped from first to 15th out of 20. [Music] all i knew was that in just two minutes i lost my 100 dollars the kentucky derby was never in doubt [Applause] kentucky is drowning in a financial crisis the state's public pension funds which fund retirement plans for our teachers firefighters state police and other public employees experienced a shortfall of more than 36 billion dollars kentucky is not the only state in trouble nearly half of all states haven't saved enough money to pay for the benefits they've promised to government workers in total it's estimated they are short trillions of dollars that's trillions it's a problem that will affect everyone so why should you care because the bigger the problem becomes the more tax dollars will be needed to fix it that means fewer tax dollars being spent in areas of need like schools or roadways talented teachers and other public servants may look for careers elsewhere pension problems are sparking some concern for workers in northern kentucky kentucky's pension system one of the worst across the country it matters what happens in kentucky because what is kentucky's problem is new jersey's problem is illinois problem is connecticut's problem is california's problems is go on and on and on this is a crisis of epic proportion in the united states of america and it's time we wake up and address it one public employee in kentucky who wondered if his pension was okay was a history teacher at a local louisville high school i understood that i would never earn a great deal of money you enter teaching because there's a certain warmth you feel for instructing young people and trying to help them we're going to convert it from chemical to chemical chemical bingo and so it's an idealism that drives a teacher and that's the beauty of english we are learning to be effective communicators but one of the reasons that we accept the low salary is that we won't have to despair of our retirement that there will be some form of a safety net for us when we get too old to trundle into the classroom a guarantee a guarantee it's a promise and a good chunk of our salary is taken out from day one and deposited into a retirement plan if y'all can come up with a good idea for a little project or something you want to do we can maybe utilize that outdoor christina frederick trosper a teacher in knox county kentucky also signed up because of the promise of a guaranteed pension that's what i was kind of explaining to them when you get to this one i remember my parents telling me you know you'll have a pension you know you'll have job security and those are things you can't get in a lot of other places tomorrow thank you knew i would never be rich but i thought i would you know be comfortable and have those things that i can you know depend on so that i could make decisions for my family for my kids in the like long term things that my parents weren't able to do everybody sitting here has been betrayed by the state i also met with some police some active some retired it was a major thing for me i felt if i got hired on this police department and if i did what i was supposed to do i got my life planned out i'm going to retire i'm going to have an income coming in i'm going to get health benefits for the rest of my life health benefits for my spouse it it had a major impact on my decision to do this it was kind of the same with me i didn't get into policing a little bit later than normal i was almost 30 as i was very well aware of the of the pension benefit for me that was a big deal i knew that if i could get 20 years out of the career that my wife and i would have health insurance and that i would have some kind of attention when you look at public servants your teachers your cops your firefighters the pension represents our promise to them and also an acknowledgement that we might not be able to pay you what you're worth right now but we're going to be there for you on the back end it used to be that nearly half of all american workers had defined benefit pensions a guarantee that you would get a good percentage of your salary and benefits upon retirement this is the life what with my retirement plan and the few dollars i'd saved i didn't have a thing to worry about workers and their employers contributed funds that were then invested on wall street i'm chairman of the pension fund of this corporation we're looking for a well-diversified list of high-quality bombs and some common stocks over the years private corporations have largely stopped offering to find benefit pension plans most public employees still have them the policy that we'll recommend here gives us a 60 chance of actually achieving the assumed rate of return the decisions about how to invest and grow pension fund money are made by a pension board and its financial advisors and for many years kentucky retirement systems or krs was flush with cash krs investment return on that money for that period estimated to be about 2 billion 20 years ago it looked as if it would not ever have a problem it's got to have an interest rate on it that gives us the same earnings today betty pendergrass sits on the board of krs where was the kentucky retirement system sitting in 1999 it was sitting in it nearly 100 percent funded but then in 2000 the dot-com bubble burst krs lost 1.2 billion dollars i've served in the best of times and now is the worst of times kentucky was suffering but politicians were reluctant to raise taxes to pay the full cost of their bills and they began to divert pension money what will kentucky do that's what you're assembled here in frankfort to decide in kentucky the pension was used basically as a piggy bank the problem was once you've started to short your state pensions to cover the budget shortfall it's hard to just do it the one time one of the few local reporters paying attention was john chiefs been riding for 20 years now about the state's pension system and it's been you know sort of a slow motion car crash chiefs watched as one governor after another invested in roads bridges libraries and more pension obligations were not met as governor i'm thrilled to be able to support this project not only with enthusiasm and congratulations but with money i think it emboldened the politician specifically 2.4 million they realize nobody's paying attention i think they get a little bolder about it and they realize why no one's looking i can do this they have effectively raided pension funds and by rating it means they just simply have not made the payments that they are morally required to make to fund the retirement promises that they've made david sirota is a reporter an opinion writer so instead of making those payments they've used that money for roads schools things that are important but that other tax revenues are not funding and the thing is is that the bill will come due the bill will come due i had heard kind of rumblings from teachers early on like oh they're taking money from our pension fund and this and that i'm like oh they'll fix it you know and that was i think that's kind of where we were you know they'll fix it and then i got married and i had some kids and you know that wasn't what was on my radar and i think a lot of people were like that i had my head in the clouds i'm a teacher i'm busy i got a family i got a life they take a bunch out of my paycheck uh every two weeks and so that's going into a little pile that's gonna accrue interest i figured this is on autopilot i don't have to worry about the pension by 2008 kentucky's pension funds were in very bad shape and things were about to get much worse stunning news on wall street tonight at one point the market fell as if down a well over 700 points the collapse of lehman brothers triggered turmoil in markets around the globe in the 2008 collapse kentucky was hit hard we traveled to kentucky for a firsthand look at how the recession is hurting just about everyone when i first got here things were booming there's a lot more factories that were open and businesses and i mean you can see businesses are closing all over kentucky is to horse racing what detroit is to the american auto industry but even the sport of kings feels the sting of a global recession nearly every sector of kentucky's economy was affected krs lost 2.8 billion dollars [Music] it punched a hole in the boat i mean the boat was taken on water but now we got a halt there was a huge downturn in the funding status because of that crisis and you can't pay that back in five years the economic turmoil of recent years is putting a comfortable retirement at risk for many americans so the investment crews are feeling the pressure to get the returns up so that we're generating more money going into the system now you're swinging for the fences right with less money available many pension funds are under pressure to take on more risk by investing starting in the fall of 2009 kentucky's public pensions decided that to dig out from under they would invest a portion of their portfolio in some of wall street's more exotic and risky investment vehicles like hedge funds is that they're trying to gamble their way out of the problem and wall street was more than happy to answer kentucky's call pension money is extremely important here the world of pensions is a world of money and if you really want to dig around the heart of power of economic power in the united states that's where much of the money on wall street is from the public doesn't necessarily view pensions as giant pools of money going out with a 100 alberta right when you say the word pensions people's eyes gloss over they don't really pay much attention but there's one set of people who are paying a lot of attention that's good and it's the richest and most powerful people in the world on wall street how much money are we talking about in public pensions today there's about three trillion dollars part of it's being paid out in benefits and much of it being invested last fall but here is where it gets tricky knowing how to invest is difficult i'd like to go through all the recommended policies and vote in mass and then if someone some trustees have financial experience but others are police and firefighters appointed to the board to represent their co-workers often not trained in portfolio management they've got their correlation matrices and their risk and return assumptions by asset class it's complicated and some of our trustees don't have that skill set they're better at fighting fires than i am they're better at catching criminals than i am but they don't have the financial skills 3.5 i would like to see sharp ratios for each one of the major asset classes today betty pendergrass is a trustee who has investment experience is are we getting paid for the risk we're taking i mean you know that on wall street they call pension funds dumb money that that hurts but it's true what i would say is the bounds of reason are 350 above the 10-year treasury john ferris is an investment manager in lexington until recently he chaired the krs board he says that wall street regularly exploits pension funds in 2008 only two members of the board had any investment management experience they are much healthier i think that the pension board that was put together between 2008 and 2016 was probably the dumbest of money and thus your 60 billion dollars in the hole exactly how do they amass hundreds of investments when they have no experience and how to choose they just take anything that's recommended it seemed that way a lot of them would say we'll openly admit they're not even you know sure what they're voting on i trusted the state to deal with my money okay i don't know nothing about doing that among those police i spoke to one had served two terms as a krs trustee ed you were a trustee yes now in all due respect you're a police officer are you in a position or equipped to be able to evaluate a complex financial instrument like a hedge fund one of the first things we were told as elected trustees when you went on the board when your responsibility is to be to get yourself educated and the first question i had was how to do it the retirement system sent me and other trustees to different investment symposiums it's a complex thing i did not claim to be an expert in the pension system i knew a little bit about it and i did to the best of my ability to make the best decision with the information i had at the time even with the best information it's hard to choose a winner think of that horse race with only 20 entries in the world of high finance there are 10 000 hedge funds how do you know where to bet one of the first ones krs chose was called aerohawk durable alpha it had no track record and long odds arrowhawk was one of the first sort of alternative investments as we call it where we had these third-party middlemen who would come to kentucky retirement systems and introduce krs to these alternative investments they came to krs and said you should be putting your money in these funds and we think these are the best places for you to invest the state's money these middlemen are called placement agents apparently unbeknownst to us the placement agents were being paid fees so they were compensated very generously for us giving our business to these funds the lead placement agent for aerohawk there's a fellow from new york named glenn's surgeon yeah this is glenn surging yeah so this guy he was the salesman for arrowhawk correct so in 2009 when arrowhawk was being considered the only person on the krs board with much investment management experience was chris tobey he thought it was a risky bet every time you hire a hedge fund you're looking for a fund that has a track record experience right and this one didn't correct but glenn sturgeon had a relationship with adam tosh the chief investment officer of krs at the time tash told us that toby told me that krs's chief investment officer adam tosh convinced the board to invest in arrowhawk which resulted in a large fee from arrowhawk for tasha's man glenn surgeon and how much money was he paid to bring in arrowhawk 2 million for arrowhawk but he brought in some other investments a total of 6 million but at the time of the vote the board didn't know there was a placement agent operating in the background because it was never disposed in financial statements it was never disclosed anywhere even the existence of placement agents i think that one of the key issues is disclosure of placement agent fees and as toby then hired ted seidel a financial crimes investigator they eventually filed a 32-page complaint to the sec i thought it was a good case the sec and state auditors investigated and found no laws were broken but the auditors did conclude that tosh violated krs's disclosure rules tosh left kentucky and has not returned our calls surgeon has since died what's the headline here well the headline was that there were these abuses involving placement agents 14 million dollars had been paid to undisclosed individuals for doing little or nothing it was happening all over the country public funds pay hundreds of millions in placement agent fees so it's a significant problem and it's a real waste of retirement savings arrowhawk proved to be a loser after krs invested 100 million dollars the fund failed and closed down krs eventually recouped its money from arrowhawk but another hedge fund investment involved the camelot group camelot had a manager who in a separate case was charged and pled guilty to personally pocketing over nine million dollars of investors money despite this krs would continue to invest in more hedge funds it was a great big put all of the chips on the red seven that's what we're going to do with pension money for firefighters and cops and janitors an old father is a louisville attorney who recently represented firefighters in a pension related lawsuit they decided we're not going to go public we're not going to say we need help we're going to try to save our rears and this will work isn't that what the gambler always dreams and so they start the beauty contest and they have perhaps 15 hedge fund managers that they interview and meet with and talk to and whittle it down to the final three winners the winners were pacific alternative asset management company or pamco prisma capital partners and blackstone alternative asset management each offered krs so-called funds of funds umbrella vehicles that contain dozens of underlying hedge funds with multiple layers of often hidden fees they are sometimes called black boxes they're putting them together in these black boxes which they so nifty named the henry clay fund the daniel boone fund and the newport kernels fund all for your viewers that are outside of kentucky famous names or entities here in kentucky today hedge funds are deemed by many investment professionals as inappropriate for public pensions because they are expensive and lack transparency [Music] while hedge funds contributed only some of kentucky's pension woes two class action litigators from san diego bill and michelle larocque sensed an opportunity here in 2017 they set up office in louisville have you gotten to a jurisdictional argument they said they were coming to the rescue of kentucky's state workers we are talking about the retirement of 350 000 plus individuals and we're also talking about a matter which quite frankly could bankrupt the state there is so much that we don't know i'm trying to find out what happened here okay that's fine we're just going to not look at it until we get a resubmit yeah the lorax had successfully sued enron for over 7 billion dollars in damages but bill larock had been disbarred and jailed for illegally paying plaintiffs in some other class-action lawsuits so they enlisted an old father as their lead counsel probably is a little bit of watching their own backs our team of lawyers are blessed to have as our consultant bill derock who's a disbarred attorney but indeed an expert in pension fund analysis and so we have somebody right there at our beck and call who has educated us about the breadth of this problem throughout the united states kentucky might be the first one to go down but it won't be the last as lead plaintiff they tapped an old friend of michelle the rocks jeff mayberry a retired state trooper from what i understand the funds were fraught with inflated fees allegedly they were exorbitant they were non-standard they were not of the norm tens of millions of dollars that's what i understand [Music] in the spring of 2018 we attended a pre-trial hearing in a courtroom in frankfurt mayberry faced 31 defense attorneys representing krs board members their financial advisors and the three hedge fund companies obviously the number of defense attorneys did make me realize that that's a big money here and they can afford the best in the country the agreements that these three hedge fund companies entered into with krs were always declared as secret we have never been able to find them in any public record we've never been able to find them on krs's website all of these defendants your honor are seeking to keep private their dealings with krs the defense has called for the case to be dismissed but old father argues that the hedge funds need to fully verify that krs got all the money it should have received that the funds didn't cheat krs by charging hidden fees there are abundant examples of your honor where these three fund managers told krs oh this sub fund manager refuses to disclose their fee charged to the public and the taxpayers of kentucky they say you're on a big fishing expedition looking for damaging inside information that you don't really know if it's there the united states supreme court has said that the point of discovery is to be on a fishing expedition and it is the beauty of civil litigation that we don't have to know a hundred percent of what everybody did when we filed the lawsuit when we survive those motions to dismiss it's going to be time for discovery and i am going to snag a lot of fish there is a belief on their part that if you file a lawsuit and you get your hands on something the public then gets to know about it pamko and prisma said in a letter to frontline that they did exactly what they were hired to do but declined to be interviewed blackstone's attorney spoke to us about the fees we don't know what the fees were exactly i i can tell you what blackstone's fees were right we know what blackstone's fees were that was disclosed but then there's a whole set of sub fees and if you read the contract there's no specificity it's vague if the fees were disclosed the nature of the fees were disclosed the contract laid out the fee structure for the underlying portfolio you're characterizing it a certain way it laid out the fee structures there's no transparency issue in your view there is no transparency issue they know exactly what they received they were target benchmarks that were established they received nearly three times what was expected in the target benchmarks we're still entitled at this point for no one to have prejudged anything that my clients have done we don't know yet in april 2019 an appellate court dismissed the lawsuit the plaintiffs are now taking their case to the kentucky supreme court to defend our reputation just because a complaint shreds us it doesn't mean it's true people in industry and on wall street think that what you're looking to do is to wear them down get them to a settlement and take the money how do you respond to that i was thinking about something that came up in the last hearing when their lawyers you know sort of accused us of grabbing things from discovery and sending them to the media somehow you know look if they're proud of what they do and their business model and how they do it well then stand up and tell the world about it every month kentucky retirement systems makes over 100 000 pension payments with the average retiree receiving around fifteen hundred dollars the total outflow is nearly two billion dollars a year but by 2013 the krs board and kentucky legislators worried that in the future they would not have enough money to meet their obligations in 2013 pensions had moved to the forefront i think people started to realize we let this debt get out of control lawmakers decided it was time to make some drastic changes we changed the system so that you no longer get a defined benefit plan if you're a state employee and you've got this hybrid cash balance plan basically a 401k type plan basically a 401k type plan better than a 401k but not as good as a defined benefit plan the first to be affected were police firefighters and thousands of other public servants public school teachers were spared existing workers would keep their defined benefit pension but all new hires would be moved to a 401k style plan evening reason why i stopped tonight you're swerving the move into 401k style plans this was widely seen as a compromise but it's a big difference and it's a lot more uncertain with a 401k plan tom loftus is a local reporter who covers pensions how did it go down with the policeman and the firemen i don't think it went down well with anybody there is no way that we can continue because of demographics to offer the same plan to people who are not currently state employees one year later after reforms went into effect the pension crisis resurfaced as an issue in the gubernatorial race this time for state teachers and school workers the most important thing to do is stop digging the long shot candidate was matt bevin a former hedge fund manager and tea party favorite we have a legal and a moral obligation his campaign promise was if the pension system is bankrupt inviable contract is moot because if you don't have those dollars to pay those benefits then okay you don't pay those benefits the reality is if the money is not there then we have to think about how do we tighten our budget his big issue is to shrink government in kentucky to make it smaller he believes in private sector he does not believe in government we all represent those his end game is to shrink the pensions our why we indeed will be the next governor and lieutenant governor of this commonwealth of kentucky we had at that time and continue to have the worst funded pension system in the united states need a fresh start we truly do we need a fresh start this tells us that we as a state are in dire risk of becoming financially insolvent and that if we are unable to meet the pension obligations that we have to people this comes at the expense of everything else that we care about everything else that we would fund our state workers who have been promised the pension should be given that pension once in office bevin decided to stop shorting the pension system and to make what are called actuarially required contributions or annual arc payments we have an 82 billion dollar pension problem there are going to be hard decisions made by this body by the house governor bevin is doing what no governor has done for at least 15 16 years which is fully fund the ark again and that's no small achievement and it really is starving much of the rest of the state budget and we had better clean it up that isn't what's controversial what's controversial is he's saying we can't really afford to keep pensions going so teachers from this point forward teachers won't get pensions in kentucky anymore we have exhaustively gone through everything we can to ensure that we do in fact deliver on the promise bevin concluded that the teacher's pension system was unsustainable keeping the promise will save kentucky's pension systems under a proposal called keeping the promise all newly hired teachers would be moved to a 401k on a going forward existing teachers would also contribute a greater percentage of their salary to shore up the old system you were eradicating the pension for new teachers correct i mean this is in other words for new people who are not currently employed by the state they would not be given a defined benefit plan because it is not possible to promise that to them with any confidence that we can deliver we can't i think this is a very morally sound plan state senator robert stivers endorsed the plan it's something that the people of kentucky will understand and accept as the direction we need to go in future years a passionate crowd of state workers educators and retirees took to the steps of the state capitol with one message they want their pension the proposed bill calls for new employees to move to a 401k style plan and current employees kick in 3 percent of their salaries to shore up retiree health care funds you're going to be looking at specific countries and we're going to look at each one christina frederick trosper the teacher from knox county was alarmed her salary was already a challenge to live on kentucky's teachers have seen their wages adjusted for inflation increased by less than half a percentage point in the last two decades now trosper feared that lawmakers would come after her pension in about august september i really started paying attention to what was happening and just everything just kind of snowballed for me like all of it just kind of came together you dug the hole i didn't dig the hole one day trosper attended a town meeting and confronted senator stivers about his plan you all made a conscious decision to not fund your obligation and i don't care when you got elected or whatever but you've been there during the years that it has not been funded properly i want to know how are you going to raise the revenue to fund it properly because i promise you your days in the senate will be no longer they will be it seemed like something snapped in you yeah it did and i told everybody i had an out-of-body experience i mean i'm a loud person and i'm not the type of person who you know sits back a lot of times but i shocked myself i went when you told me i was going to get my insurance is crap my pay is crap but i love what i do when i was promised this pension and what you're proposing is going to kill us you will kill us you will kill public education i understand that lady perfectly she is having certain fear of an unknown system where she's very comfortable with a known system and she's worried there will be less incentive for teachers to sign up knowing that they won't have a defined benefit pension plan and that she has young children and the quality of the teachers for them will be less well that that's an opinion there are many teachers that are teaching in the parochial systems that don't have those types of systems and they have very good outcomes and results universities i don't think many teachers have defined benefit pensions in universities now they're paid differently and more and more and that's a difference teachers in kentucky were not alone in february 2018 teachers in west virginia rallied to protest low pay and benefits 36 000 teachers walked out of class today west virginia teachers in turn sparked similar demonstrations in oklahoma and arizona it's the latest in a wave of protests sweeping across the country led by teachers who say the future of public education is at stake i think west virginia inspired us because i have next door in a mountain state that struggles with the same types of things that we do and that they were able to achieve their goals i think really ignited us bevin's controversial keeping the promise reforms were crafted into senate bill 1.

leading the charge was senator joe bowen who five years earlier had pushed through that pension bill affecting cops firefighters please ladies and please they'd like to have your hide some well the teachers were out there chanting yeah look at the end of the day we're trying to save the system for them that's that's the irony of all of this in my mind anyway is that here we are trying to save the systems and we're getting all this pushback angry and fearful teachers became a regular presence in the state capitol i'm the only governor in the lifetime of any of these teachers that has fully funded the plan and yet they seemingly hate what we're doing on a local radio show governor bevin shot back i mean reality is this is a group of people that are throwing into temperature and i'm surprised bevin has made a number of controversial statements about teachers over the last few months most politicians do not want to be seen as critical of teachers i mean matt bevin obviously has decided he's comfortable crossing the line i'm just flabbergasted at how remarkably uninformed folks are there's an old saying that you can't win an argument with an ignorant person and so if a person is uninformed about a topic they're not even able to make their own case for what they believe these are educated people with with the ability to listen and to understand so if they truly still believe that this is bad for them it is due to being misinformed and they're like how dare you say we don't understand well the choice of language is such agreed you're seen as arrogant dismissive talking down to teachers firemen policemen if people want to be offended they can be offended by anything you can parse things take things out of context even take them in context you think you must be inappropriately careful in your choice of language and really serve this debate and i think of people in a constructive way yes you do whether does everybody agree with that no no regrets no here's the thing i'm trying to save a system that needs to be saved by march 2018 the pension bill had stalled and time was running out so with just a few days left in the legislative session state republicans tried a last-minute maneuver if we do not take action on this pension bill they will be massive layoffs across the commonwealth of kentucky and we're called into a crowded capital committee room we do not handed a bill and told they were going to vote on it this is a good compromise plan but it turns out that they were handed a sewage bill that they were swapping out anything that had to do with sewers and putting in languages that changed the pension system in kentucky forever going forward well first of all this is very unfair to vote on a bill but i don't even check the number of pages that are on this field and then ask us to make this this decision today and then limit the discussion and no one had a chance to read it outside of the republican members of the senate i mean the democrats hadn't had a chance to read it the teachers association the public the press nobody else knew what was in there and this thing's about to become law this is a committee meeting sir yes sir it is and we're allowed to ask questions or anything pertaining to this bill which none of us have seen except a couple of you guys i've never seen such garbage thrown out here in my years in service we've had three or four there was a lot of anger in the room extreme it was an unpleasant task i was asked to do no one wants to make other people unhappy and i will say i voted on plenty of bills i didn't get to read unfortunately i had no choice but you have to consider all of the factors we couldn't pass a budget if we didn't have a pension bill and that is why i agreed we've got to get this bill back to the floor so we can have a debate full debate on it knowing that the optics were terrible i'm concerned first of all that what we're doing is illegal i'm i'm hoping that we can have a representative of the teacher organization to testify here today on this bill would that be permitted mr chairman uh that's not on the uh in the order no is there could you explain why we're not having a representative of the teachers to testify on this bill since they are the main people who are going to be affected by it we have heard loud and clear how the teachers feel about sb1 and this plan has made changes responsive to those questions does anyone have a question on the bill well that's why i'm asking these questions about the bill representative richards can i finish my my my time mr chairman i've called on representative richards representative richards it became clear to everyone in the room that the republican majority was not interested in hearing the democrats objections to the bill seeing no other questions madam secretary please call the role mr chairman it was absolutely just gut-wrenching to watch them vote you're out of order sir you're out order too by this statue it was well this is what we're going to do and this is how we're going to do it and we're going to over vote you because we have a super majority uh all in favor of the title amendment signified by saying aye aye all opposed no this committee is adjourned how can you guys shave in the morning without cut your throat everyone's upset tensions are high and that's when we had 5 000 teachers show up in frankfurt many teachers and state employees are upset about being caught off guard and not having a chance to see the bill before it passed in 20 years at the state capitol i'd never seen protests like that the teachers kept coming and coming they were there every day [Music] [Applause] [Music] decades ago that general assembly made you a promise they said if you dedicate your life to public service then while we wouldn't pay you enough we would guarantee you a solid retirement but they broke their promises [Applause] and they broke the law yes yes because the law doesn't allow you to change a sewage bill into a pension bill and pass it on the same day that's government that just like another slap in the face to take our pension bill and put it onto a sewer bill we thought oh that's symbolic [Applause] it was perfect i mean they couldn't have chosen a better metaphor here's your here's your uh here's your sewage get the new york money managers out of my pension [Applause] [Music] [Applause] [Music] many like randy weak blame wall street for creating the mess [Applause] others blamed the governors and lawmakers who neglected the pension fund over decades [Applause] inside the capitol with teachers filling the gallery lawmakers debated how to cut the budget to shore up the pension fund [Music] many of the cuts proposed were to public [Music] education system that all of us want to have i can submit to you this budget that's not good [Applause] i think teachers are beginning to realize that the whole system is under assault what is going to happen to that generation of children will they be able to learn if they come into school because the social safety net and it's very thin as it is has been shredded that the textbooks and learning materials in this budget are sliced by 16.7 million dollars [Music] all of those that are up for re-election right now that we're not friends public education we're hoping that they won't be there it is sad that we are where we are but unfortunately we have to take action everybody's going to be shocked to see how many of us come out in force to put in pro public education candidates [Applause] for now kentucky's attorney general has successfully blocked bevin's sewer bill in court but teachers are afraid of what the future holds the pensions of some other kentucky state workers are facing insolvency in around three years teachers worry that when the time comes for them to retire the state won't have the money to pay their pensions [Applause] state lawmakers don't want to raise taxes voters don't want to accept tax increases retirees i think rightfully don't want to accept cuts to benefits that they were promised so in kentucky the bill's coming due now we are going to see situations where pension funds literally do not have the money to pay out benefits to people who have been promised those benefits and yet i'm being fought in some instances by the very people that we're trying to save it's like saving the drowning victim it's like somebody they're fighting you biting you pulling you under you just need to knock them out and drag them to shore yeah for their own good and and we have to save this system governor matt bevin couldn't put it any more succinctly than that i appreciate the wake-up call i won't be the governor when this thing falls apart it's tough medicine but to save the system the next governor regardless of who they are or what ideology they represent it won't matter what lie they give reality will come crashing home [Applause] [Music] the end game is pretty clear pensions are on their way out [Applause] so we're going to have within the next generation or two is americans who are going to have terribly insecure retirements they're going to have to live on whatever they've managed to squirrel away to their own savings teachers the one benefit you got for sure was a pension to retire on with some security and dignity at the end of your career but in kentucky after the summer that might be gone what happens if you have no pension i don't want to think about that i don't know i don't i don't know that's excellent what is the difference between the first 16 problems many of us teachers are working paycheck to paycheck trying to make ends meet like a pivotal point right like it's like a make or a break i have no savings so my pension is everything without that i won't survive take your papers with you got a great day i'll see your beautiful faces tomorrow [Music] for more on this and other frontline programs visit our website at frontline [Music] to water front lines the pension gamble on dvd visit shop pbs or call 1-800 play pbs this program is also available on amazon prime video [Music] foreign

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