FRANKFORT, Ky. (KT) - Legislation was introduced Wednesday to help local governments deal with huge increases in their pension costs.
The current-year contribution rate for County Employment Retirement Systems (CERS) employers is just over 19 percent of payroll for non-hazardous personnel and 31.55 percent of payroll for those in hazardous-duty jobs. In December, Kentucky Retirement Systems said the rates for the upcoming fiscal year would rise to 28 percent and 47.8 percent, respectively.
House Minority Leader Rocky Adkins, D-Sandy Hook, introduced HB 406, which would phase-in the huge jump - which amounts to a 50 percent increase overall - affecting cities, counties, school districts and universities.
“When the pension boards met in December, they lowered the assumption on returns from investments. When they did that, it upped the contribution rate from those local agencies and this softens that blow to their budgets. It provides a five-year phase-in, which won’t be more than 10 percent each year.”
Adkins says it has been talked about by the Kentucky Association of Counties (KACo), the Kentucky Leagues of Cities, and others who would be impacted.
“I’ve met with several school districts, the superintendents’ association and universities,” he said. “They have told me this is going to put a terrible strain on their budgets, along with other budget cuts of past years. This is to bring some relief.”
Adkins fears what this would lead to since CERS is the single-biggest public retirement system in Kentucky, with almost 230,000 active, inactive and retired members in every single county.
“This would have a deep and lasting impact on virtually every aspect of local government and our schools, which pay into CERS for such classified employees as secretaries, cafeteria workers and bus drivers,” he said.
“While there is broad agreement that CERS and the other public retirement systems need to be well-funded, so they can pay down the liability, this is too much too soon when the situation is nowhere as dire. This bill reflects that reality and provides a more sustainable way forward in the short-term for local governments and schools while keeping CERS on a viable long-term path financially.”
As for the public pension reform bill unveiled Tuesday evening, Adkins said he and the Democratic caucus are still going over the legislation, which runs nearly 300 pages, but they already have some concerns.
“For newly hired teachers, there is going to be a new cash balance hybrid plan. It guarantees zero growth, or no benefit, whatsoever,” he said. “We believe it is going to make it harder to attract teachers. We would prefer to see it move back to a defined-benefit plan.”
Adkins also said he is troubled by the cost-of-living adjustment for retired teachers, which the pension bill cuts in half for 12 years.
“If a teacher retired at the age of 59, over the span of living until their mid 80s, that would cost that retiree teacher somewhere between $75,000 and $80,000,” Adkins said. “We are also concerned that this could be a violation of the inviolable contract, and the potential of lawsuits, with that happening.”
HB 406 has not yet been assigned to a committee. The bill contains an emergency clause, which means if approved, it would take effect immediately upon the signature of the governor.
Adkins’ bill has 17 co-sponsors, all Democrats.