Kentucky's quasi-governmental agencies still face tough financial choices despite the general assembly's passage of pension legislation Wednesday aimed at providing them some relief.
House Bill 1, approved by both the state House and Senate and signed into law by Gov. Matt Bevin following a five-day special session, aims to relieve regional universities and agencies like public health departments and domestic violence centers from massive hikes in pension costs.
The law freezes pension costs for another year and allows the agencies to stay with the Kentucky Retirement Systems at full cost, leave the retirement system by paying a lump sum equal to future projected benefits payments, or buy their way out in installment payments over 30 years.
The Marshall County Health Department is one such quasi-government agency. It has already been making tough decisions because of the pension problems, according to Billy Pitts, public health director.
"It's just like when you're at home doing your own budget and you know you're not going to get more money from any other sources," Pitts said. "Your income is going to remain the same, but your payment to a particular vendor, or system, or whoever you may owe is going to go up by a drastic amount. You've got to do something."
According to Pitts, the department's payment to the pension system (without the freeze) was projected to be an additional $566,000 annually.
"This health department in 2008 was paying 8.5% to the Kentucky Retirement System. So, on a payroll of $1.6 million annually, we paid $136,000 to KRS," he said. "Last year, for a payroll of $1.65 million, we paid $824,000. That's an 83% increase (over that span) to the pension system.
"Then, we were expected, before today's decision, to pay that additional $566,000 for a total of $1.4 million (when) 10 years ago we were paying $136,000 for almost the exact same payroll," he said. "And, keep in mind there was no additional funding coming in."
Pitts said the health department staff has been cut by almost 30% over the last 15 months when the pension issue came to the forefront, although a good portion of that was done through natural attrition. A couple of pretty fair-sized programs also had to be cut, he said.
"If the money's not there, it's just not there," Pitts said. "You can only do what you can do, and that's where we are."
The Merryman House Domestic Crisis Center in Paducah is another quasi-government agency.
"Since the employer contribution rate has been frozen for a year, there is no immediate effect on Merryman House or other agencies," said Mary Foley, executive director.
"However, we will have to begin making some changes and difficult decisions in preparation for next year. We certainly have some employees who are vested and have been for 10, 20 years. We would have to pay the unfunded liability to get out."
For the past five years, Merryman House has chosen to employ staff through a sister nonprofit, according to Foley, but the agency still has five Merryman employees.
"Just those five employees would have an impact of an additional $75,000 on our budget. Other quasi-government agencies who have more than five employees will obviously have even larger numbers to deal with," she said.
"We would like to say 'thank you' to all those that helped set the one-year hard freeze," she added.
Pitts is hopeful his department can weather the crisis without any further reductions.
"At the moment, going forward with this health department, I'm going to try to press on with where we are, and just move forward. And, I believe we can," he said.
"We've got a great board of health. We've got a great community that loves this health department and is supportive of us.
"With the cuts in personnel and programs we've made, I feel we can probably weather this ... if they don't go crazy with it (pension system)."