Local Governments Face Big Pension Increases If Relief Bill Fails
Local officials and advocates say that rising pension contributions will cripple city, county and school district budgets if the General Assembly doesn’t pass a bill providing some relief this year.
Senate Bill 66 would place a 12 percent cap on how much those pension costs can increase over the next decade.
But Republican leaders of the legislature say they won’t pass a relief package without making changes to the state’s pension systems, which have an estimated $40 billion unfunded liability.
And Senate Bill 1 — which overhauls retirement benefits to state workers, especially teachers — has stalled amid intense protests from state employees.
Bath County Judge-Executive Bobby Rogers said he would have to turn to raising taxes if the phase-in doesn’t pass.
“We don’t have anything to cut,” Rogers said. “When we came here three years and three months ago, we made a lot of cuts and we commingled some jobs, we cut back on employees at the county garage and we micromanaged county government. But with this hit, it’s just something that we can’t come through without an additional tax.”
Last fall, the Kentucky Retirement System board of trustees adopted more pessimistic assumptions for the pension systems — forecasting they would make less from investments and employee contributions than previously predicted.
As a result, Budget Director John Chilton sent a letter to local governments, school districts, universities and other quasi-governmental agencies stating that they will have to contribute about 50 or 60 percent more into the pension systems.
Eric Kennedy, director of governmental relations for the Kentucky School Boards Association, said that local school boards will face layoffs and reducing services in the classroom.
“When a school board sits down to set their budget and one cost increase such as this is so substantial and so sudden all at once, choices will have to be made,” Kennedy said.
Senate President Robert Stivers said that the phase-in legislation is “linked” to the pension overhaul bill, arguing that the state needs to make systemic changes before it can provide relief to local governments.
“Until we get a solution to this unfunded liability growing, it does no good to try to phase something in,” Stivers said last week.
Madison County Judge-Executive Reagan Taylor said without changes, “local government is going to drown.
“And the poorer counties are going to fall out of the boat first,” Taylor said.
Lawmakers have eight working days left in this year’s legislative session.