City discusses pension battle
The Harlan City Council discussed the ongoing issue of state pension plan reform during a recent meeting.
Mayor Danny Howard called on treasurer Charles Guyn, and it was during his report the issue came up.
Guyn handed out a letter to the council from the Office of State Budget Director John Chilton which shed some light on a proposal increasing costs to the city for the County Employees’ Retirement System (CERS).
“Required pension contributions will continue as a percent of your organization’s actual payroll, assuming no legislative changes occur,” states the letter. “The rates that will apply for fiscal year 2018-19 are substantially higher than the previous years.”
Guyn said he thought the council should be aware of the proposal.
“The way I understand it, the city, the counties and the schools paid they’re part in,” Howard said. “The employees paid their part in. And the reason we’re in this mess is because the state took their money and spent it someplace else and didn’t put it where it’s supposed to be.”
Howard said he can’t understand why the state is approaching the problem as they are.
“They (the state) are putting it back on the counties and the city to straighten up the mess that the state and the legislature are the cause of,” Howard said.
The letter states the CERS plans are in better shape than other Kentucky plans, but the funding level is still below 60 percent.
“If Kentucky plans were subject to federal standards for single-employer private plans, the CERS plans would be designated as having severe funding shortfalls because their funded status is less than 60 percent,” the letter states. “As such, federal law would require that all benefits be frozen and the plans terminated.”
The letter further states Governor Matt Bevin and state legislators believe two courses of action are appropriate:
• Assess the status of all of the plans, not just the CERS plans, using conservative and realistic actuarial assumptions. No more pretending that everything is just fine. Everyone needs to understand the severity of the situation. To do otherwise will lead to solutions that fall short of solving the problem;
• Examine the benefit structures with a view to lowering future costs without jeopardizing employee and retiree retirement security.
The letter additionally states Bevin and the members of the general assembly are considering — but have not decided on — changes to CERS and other state plans.
“What I’m hearing from other people, there’s a mass exit for the door,” Guyn said, referring to a large number of people expected to possibly retire.
A council member pointed out it will take a legislative action before any proposal will go into effect.
“I’ve talked to a couple of people that are in teacher retirement (plans),” Guyn said. “They’re close to being able to get out. They’re telling you there’s going to be a mass exit of teachers mid-year. Then you’re going to have a shortage of teachers.”
A council member stated the rumors of a large number of teachers retiring mid-year may prove to be untrue.
Harlan City Police Chief Mike Thomas pointed out a large number of police personnel have opted for retirement recently.
“Small cities and small counties cannot pay this, in my opinion,” Guyn said.