Can the state bail out the quasi-governmental agencies from drowning in pension costs?

05/01/2013 06:40 PM

Non-profit groups and quasi-governmental agencies that are part of the Kentucky Retirement System could get some relief for their rising pension costs when state lawmakers craft the next two-year budget, said Gov. Steve Beshear.

“The thing that these quasi-governmental agencies do need to understand is that the $100 million in new revenue that we created when we passed the revised pension plan does include funds to help pay for the increase in pension costs that these quasi-governmental agencies will have,” Beshear told Pure Politics on Tuesday. “So it’s not like we’ve put an obligation and we’re not going to give them anything to help meet that obligation.”

That will be decided next year, he added.

But it might come too late for some. The mental health agency Seven Counties Services, Inc., has filed for bankruptcy protection and has asked to be released from its obligations to the Kentucky Retirement System. Seven Counties’ president told Pure Politics its pension costs will force the agency to close next year.

Depending on what the court decides, that could create a precedent for other non-profits or quasi-governmental agencies, like public health departments, to bolt from the retirement system.

Beshear declined to comment on Seven Counties’ specific situation because it’s in court.

Bill Thielen, executive director of the Kentucky Retirement System, said roughly half of the money owed by employers as their contributions to workers’ pension fund comes from Kentucky’s general fund. The rest comes from a mix of federal grant money used to cover salaries, or fees agencies collect or the gas tax, which is the major revenue source for the Transportation Cabinet.

He said how the new $100 million in revenue the legislature approved is divvied up — whether it all goes toward the state’s required contribution or some is siphoned off to help the quasi-governmental organizations — is up to Beshear and the General Assembly.

Sen. Damon Thayer, R-Georgetown and the GOP Senate leader, said helping out quasi-governmental organizations “wasn’t part of the conversation when we passed pension reforms” at the end of the regular session.

Democratic Rep. Brent Yonts, D-Greenville, did try a last-ditch effort to include a provision that would allow mental health centers and public health departments and other groups to opt out of the Kentucky Retirement System. But because it came with a price, lawmakers had to scuttle it.

Thayer said he sympathizes with the mental health agencies that are struggling with high pension bills. At the same time, he said they did choose to be a part of the system several decades ago.

Thayer said it’s too early to say whether the state can afford to help the quasi-governmental organizations with their pension costs.

“I’m not prepared to make that commitment at this time,” Thayer said. “As a state legislator, I feel our top priority is fully funding the (actuarially required contribution) to the retirement fund.”


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