LOCAL GOVERNMENT CRISIS LOOMING FOR 2008 GENERAL ASSEMBLY

TO ADDRESS:
KENTUCKY COUNTIES
IN 1994 financial conditions were:
37% of Kentucky counties 2004 tax rate generates enough revenue to
cover expense
55% of Kentucky counties 2004 tax rate does not generate enough
revenue to cover expenses
KENTUCKY CITIES
Pension and insurance but strain on Kentucky Retirement systems
BY MIKE RUTLEDGE | ENQUIRER STAFF WRITER
With total pension-system costs of Kentucky cities projected to balloon three
times their size in 2017 from what they were last year, Northern Kentucky
officials are looking for allies to cut the pension payments cities make for
employees.
Officials in Erlanger, Fort Thomas and Covington are hoping to build alliances to
make changes and spare their cities' budgets.
Last year City of Florence, Kentucky made $1.3 million in pension payments for
its employees. Projected 2017 payments---without changes to the pension
system and assuming same number of employees with average 3 percent annual
raises---is projected to climb over $4 million.
According to a Kentucky League of Cities study City of Fort Thomas last year
paid $656,367, projected to rise more than $2 million in 2017.
William P. Hanes, executive director of Kentucky Retirement Systems, which
manages the County Employees Retirement System, believes the 2017 numbers
will be higher than those estimates.
"It's potentially a major financial problem for local governments in Kentucky," said
Fort Thomas Councilman Roger Peterman.
"To look at these projections, the burden will become overwhelming - I guess it
depends on your definition of overwhelming, but within 10 years, easily."
Erlanger City Clerk Linda Carter - who also serves as human relations director -
is a board member of the Kentucky Public Human Resources Association, which
includes officials from county governments, airports, sanitation districts, libraries
and area development districts.
Those local entities also are affected by CERS cost hikes, she said.
"If we all joined forces, we would be a voice to be heard" in urging changes,
Carter said. "We can be a force if we all join together."
State Rep. Michael Cherry, D-Princeton, and Sen. Damon Thayer, R-Georgetown,
co-chairmen of the Interim Joint Committee on State Government, said there isn't
much lawmakers can do to reduce benefits.
That's because retirees and current employees who were hired before July 2003
were guaranteed pension levels and health-insurance coverage.
"The balloon payments that are going to be due for baby boomer's are
going to be a big problem for state and local governments," said Thayer.
"It's a very complex and controversial issue," Thayer said. "But the
taxpayers are going to realize this is a serious problem, because at some point
governments are going to have problems (paying) the costs."
Breaking the "inviolable contract" with current and retired employees is
"not even a topic of conversation," Thayer said.
"I don't want ... to alarm current employees," Cherry said. "I don't envision
us doing anything that will affect current employees' or current retirees'
benefits."
If those aren't touched, Cherry conceded, major savings to local
governments "might be 20 years off - but the sooner we stop the clock, the
better."
That's not soon enough, Covington Mayor Butch Callery said: "We need to
stop talking about this issue and take some action."
It is the health coverage that is causing the crisis, Hanes said.
The problem is the guarantees lawmakers gave over recent decades - often at the
request of city and county governments that now are facing the costs. Often, no
government organization has testified against changes that added to the system's
burden.
"They should be concerned," Hanes said about local officials. "They should
have been concerned 10 years ago."
Cherry said he hopes to study the issue next year, and then make potential
changes in 2008 or 2009.
Callery is pushing for quicker action. He argues the state should separate health-
care costs from the pension system - as most governments do. He urges
creation of a blue ribbon commission to examine the issue.
Callery wrote Cherry a letter, suggesting three people for that panel:
MIKE BAUER, a retired Independence resident who has 30 years of pension-
benefits experience;
Covington Assistant City Manager BILL MOLLER, a former Cincinnati finance
director who was involved in that city's pension management; and
PETERMAN, the Fort Thomas councilman, who also is a bond attorney.

"That is so premature," Cherry said. "I do have his letter, and I've got it filed."
Cherry said he and Thayer want to "get smart enough to present to the
legislature a framework for studying the issue. That's where we are right now."
| Copyright 2006, Enquirer.com

Suggest 2008 General Assembly address this financial chaos during 2008
session.

Sincerely,
Bill Huff
319 Dixie Manor Ct
Harrodsburg, Ky. 40330-1923
859.734.2228
dash@copper.net