Pension Obligations ‘Absolutely’ On The Minds Of JCPS Officials

Jefferson County Public Schools may eventually owe more than $1 billion in pension obligations over the long run, but the details—including the exact amount—are still unclear, officials say.

During the JCPS school board meeting this week, Chief Financial Officer Cordelia Hardin said the district is aware of the potential financial burden that has been caused by the state’s poor management of its pension system.

Hardin told the school board Tuesday that payments to the pension system could rise to at least $200 million, which would likely be required to be paid over several years.

JCPS has two retirement programs it’s pays into: The County Employees Retirement System, which includes non-teacher positions and any position that does not require a four-year degree, and the Kentucky Teachers’ Retirement System (KTRS).

JCPS has paid its required contributions into both systems every year, officials say. But the state is expected to begin asking for more.

In CERS alone, Hardin says the cost could range between $200 million to $500 million and the KTRS may be over $1 billion, she said Tuesday. As of this week, it’s unknown what percent of the unfunded liability JCPS and other school districts will have to begin paying off, but the state is trying to correct its reputation as having one of the worst pension systems nationwide.

Hardin says she expects state officials will tell JCPS how much they’ll have to pay down sometime in the next year.

Hardin says JCPS should “absolutely” be thinking about how it will pay for these obligations and says if the state forces the school district to pay a significant portion it could bring the district into a negative cash reserve balance.

“If the district does not [pay the obligations] then the state can come take over the district which that is certainly no district wants to happen,” she says.

The school district has been able to meet the required pension obligations so far and has maintained a cash balance well over 2 percent ($22 million in JCPS), which is a state rule.

Depending on how much the state says JCPS must being paying down, district leaders may have to look for additional revenue streams to meet the new payments. Hardin says raising taxes the maximum amount allowed could bring an additional $17 million in revenue, but it’s still too premature to say whether that would be needed.

District 2 board member David Jones Jr., who brought up the subject this week, says the future of the state pension payments pose a financial problem for school districts with tight budgets.

“I don’t understand a path out of that other than working with the state and we’ve got to get our local legislative delegation to understand the situation too so that’s another reason to talk about it,” he says.

Jones also says it’s important to understand the district’s financial reality before entering contract negotiations with the teachers union next week. He says pension obligations and state cuts may restrict how some of the issues between the union and the district that have been brought up this year are resolved.

“We’ve got constraints around the ranges in which we can work on. Beyond those amounts we have got to go back to the taxpayers if there’s going to be anything else done and I think they need to hear about it in advance,” he says.

Hardin says the district will have to answer to the pension system in fiscal year 2015 and must begin recording the unfunded pension liability then.

The second draft budget was approved this week. It does not include funding for compensation or cost of living increases. It does account for the nearly $17 million in cuts at the state and federal levels. Local revenue makes up nearly two-thirds of the JCPS budget.

The final draft will be approved in September.

Devin Katayama

Devin Katayama host middays for WFPL and reports on education and other Louisville issues.

@DevinWFPL

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