By Wes Swietek
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A substantial proposed increase in mandated employer funding to shore up the state retirement system could have a large impact locally. The increase and other cuts already have Warren County Public Schools looking at a potential tax increase.
Last week, the state budget office sent a letter to employers in the County Employees Retirement System outlining proposed increases in the employer contribution for the coming fiscal year.
The city of Bowling Green would be hit hardest by the hike, costing it an additional $3.6 million a year; followed by WCPS, $1.6 million; Warren County government, $743,000; and the Bowling Green Independent School District, $651,000.
The percentage increase varies by classification of employee. Currently, agencies contribute 19.18 percent of an employee’s salary for jobs classified as nonhazardous, a figure proposed to be increased to 28.86 percent. For employees in the hazardous job category, the proposed increase is from 31.55 percent of an employee’s salary to 56.17 percent.
For school districts, the hike comes on top of expected budget cuts, as Gov. Matt Bevin ordered state departments last week to cut their budgets about 17 percent.
Commissioner of Education Stephen Pruitt last week had an emergency conference via Skype with school superintendents to notify them of an almost $70 million cut to Kentucky Department of Education funds.
While Support Education Excellence in Kentucky funds would not be cut, other funding to local schools would be affected.
The WCPS board of education has set a public meeting for 7 p.m. Tuesday at the central office to discuss the proposed tax hike. In light of the $1.6 million increase in CERS and the other cuts, WCPS issued the following statement Tuesday morning from Chief Financial Officer Chris C. McIntyre:
“This drastic increase between two budget years must be absorbed by local dollars as State funding is not expected to increase. … Warren County Schools is strategically planning for upwards of a $3 million dollar funding cut while, I might add, arranging for Jennings Creek Elementary School to be online next school year. … The Superintendent and I are recommending to the Board of Education tonight the tax option of a 4 (percent) revenue increase. This increase will equate to $9 per $100K of assessed property value or a 2.05 (percent) rate increase from 44.0 cents to 44.9 cents per $100 of assessed property. This, in and of itself, will not shore up the anticipated funding cuts. Thereby, the District is exploring all options whereby these cuts will least impact the staff of Warren County Schools and most importantly our continued excellence in safety, achievement and opportunities for our most critical asset, our students.”
The CERS hike would mean the BGISD would be on the hook for an additional $651,000 – from $1.19 million to $1.86 million – in the coming year.
“It really limits our ability to create any new programs, our ability to give raises to employees,” said Superintendent Gary Fields. “In reality, what we’re talking about are people, and that’s really difficult. I just think we’re going to have to find more ways to just be more efficient.” Fields added that with the raise not going into effect until next year, “at least we have time to plan.”
“Wouldn’t it be great if we could allocate that $600,000 to giving some of our employees that are our lowest-paid employees, give them a raise and give them added benefits that could not just benefit them and their families, but benefit our entire community where they’d be out spending that money?” Fields said.
For the city of Bowling Green, the hike would be from $6.4 million in employer contributions to approximately $10 million for the 2019 fiscal year that starts July 1.
The large hike is being proposed as a way to shore up the troubled Kentucky Retirement System, of which the CERS is a part.
Bowling Green Assistant City Manager Katie Schaller-Ward said the city had inclinations the proposed hike was coming, so city officials “will review the budget and determine where we can extract” the extra funds.
“We were expecting a number like this,” she said, adding that the legislature could modify that proposed increase. “We’re hoping for a compromise,” she said.
There has been repeated discussions of a possible special legislative session to deal with the state’s pension crisis, but no session has been scheduled.
Warren County Treasurer Greg Burrell estimated the increase to the county from the pension funding hike would be about $743,000, adding that the county had not yet formulated a plan to deal with the increase.
The long-discussed CERS hike prompted Bowling Green city commissioners in August to pass a nonbinding resolution seeking a split of the CERS from the KRS.
The state retirement system, which administers the CERS as well as other public employee retirement systems, has a reported $26 billion or more in unfunded liabilities. The CERS is the most solvent of all the retirement funds under KRS and has about $12 billion in assets – 73 percent of the total assets in the KRS.
The Kentucky League of Cities, which represents city and county governments, has been pushing for years for a separation of the CERS from the KRS.
The state legislature would have to approve a CERS split from the KRS.
– Daily News reporter Aaron Mudd contributed to this report.