Sometime before the end of June, Governor Bevin is expected to call the General Assembly to the Capitol to address an issue that cannot be ignored: a sky-high jump in retirement costs for nearly 120 human-service agencies and our regional universities.
Time is truly of the essence, because few if any can afford that increase, which takes effect on July 1t. Many will close if the legislature doesn't act, and most others will be severely hobbled. That, in turn, could force state government to try to fill in the gaps, at a cost of hundreds of millions of dollars.
This is a complicated issue, but the impact of inaction is unfortunately all too easy to understand. Imagine dozens of public health departments shutting down, no longer providing primary care, immunizations and services like restaurant inspections. There would be long waiting lists at our rape crisis centers, domestic violence shelters and regional mental health organizations. Our regional public universities, meanwhile, would have little choice but to implement major tuition increases while simultaneously shutting down academic departments.
Many may wonder how we got here. The quick summary is that, two years ago, the Kentucky Retirement Systems' Board of Trustees - which Gov. Bevin disbanded and then re-formed to his liking - voted to drastically reduce retirement assumptions overnight. That decision added billions of dollars to the 25-year liabilities we owe current public workers and retirees.
Lower assumptions mean higher costs from employers to make up the difference. Think of it as a mortgage payment based each month on the value of your home; if it suddenly becomes more expensive, your payment has to go up.
The state was able to make those much-higher payments in the current two-year budget, but legislators gave a one-year freeze to the quasi-governmental agencies. That freeze ends June 30th, however, so if there is no relief, they will have to provide $120 million extra next fiscal year to the state retirement system; overall, that amounts to more than 80 cents on top of every dollar paid to their employees.
The General Assembly offered a two-part solution during the recent legislative session, and for a time it appeared to have the support of Gov. Bevin, until he then decided to veto it. Recently, he has proposed a similar two-part bill that still has many of the same problems as the one he rejected.
The House Democratic Caucus strongly supports the first part of the bill - granting a second one-year freeze in payments - but opposes the major changes the governor is proposing going forward. It appears many Republican legislators are having some doubts, too.
The problem with the bill is that it would all but force the quasi-governmental agencies to leave the state retirement system at a high cost - to them, to the state, to the public retirement system and to the employees who have dedicated their careers to public service.
We can do better than threaten the retirement security of hard-working Kentuckians and the needed services they provide and which benefit our communities in countless ways. We should not burden the quasi-governmental agencies with debt that will weigh them down like an anvil for decades. We should not give credence to a bill so unsure of itself that it actually bars anyone in government from using public funds to sue. And we should not weaken the nation's lowest-funded public retirement system by forcing it to take buy-out payments worth much less than they could get from their investments.
The clock is ticking, and that added pressure should be the last thing anyone wants with so many major decisions to make. That is why the House Democratic Caucus believes the one-year freeze is so important, because it buys the time we need to get it right and because the retirement system is seeing a positive cash flow. The cost of the freeze is also far cheaper than having the state scramble to take on services if the quasi-governmental agencies have to close.
None of this is "kicking the can down the road," as some allege; rather, it's making sure we're not blindly walking off a cliff.
Let's take the time to get it right, because in this case, we can't afford to get it wrong.