Local health departments, mental health agencies and domestic violence shelters are asking state lawmakers to shield them from massive pension contributions that they say will bankrupt them or severely limit services.
As of last July, most state agencies pay 83 percent of employee salaries to Kentucky’s pension system. That means on top of paying an employee’s salary, state agencies have to send an additional 83 percent of that salary to pay for state worker retirements.
But last year Kentucky’s 118 quasi-state agencies, like public health departments, got a temporary reprieve from that higher contribution rate, keeping it at about 49 percent.
That reprieve is set to expire this July.
Scott Lockard with the Kentucky Health Departments Associations said if the higher contribution rate goes into effect, within 12 months, 42 counties across the state will have health departments that are insolvent.
“I assure you if we cannot deliver the quality services we deliver to our constituents every day, somebody’s going to have to,” Lockard said. “It’s going to have a major negative impact on this state and that is nothing none of us in this room wants.”
In 2017, the agency that manages pensions for most state employees adopted more pessimistic assumptions — 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 to retirement.
The legislature passed short-term fixes — the one-year reprieve for quasi-agencies and a “phase in” for local governments that caps how much pension costs can increase over the next decade.
Eileen Recktenwald, executive director of the Kentucky Association of Sexual Assault Programs, said the increase would effectively close rape crisis centers.
“Our programs are the safety net for many individuals seeking treatment — this would severely affect access to mental health care and other needed services. If these services disappear, no one will be responsible for responding to these victims,” Recktenwald said.
Sen. Damon Thayer, a Republican from Georgetown, said that by providing short-term relief to these agencies, lawmakers would only be contributing to the pension systems’ funding problem.
“If we reduce that contribution rate, the system continues to be underfunded. And so the conundrum continues,” Thayer said.