Possibility of annual increases poses threat down the road, officials say

Boyle County and Danville are both saving hundreds of thousands of dollars and avoiding any drastic moves with their next budgets thanks in part to the Kentucky legislature’s decision to cap pension contribution increases.

Boyle County’s pension load will be more than $410,000 lighter than previously thought next fiscal year.

Magistrates voted unanimously Tuesday to incorporate new, lower pension contribution rates being required by the state into the county’s 2018-19 draft budget.

Boyle County must still pay more to fund its employees’ pensions than in previous years — an estimated $134,771.60 more, according to data provided by Boyle County Treasurer Mary Conley. But that’s less than a fourth of the original estimated increase of $547,940.91.

Boyle and Danville weren’t alone in facing skyrocketing pension contribution requirements. Cities, counties and school districts across the state began pondering huge new pension bills in December, when the Kentucky Retirement Systems Board of Directors approved new pension contribution rates that would have required employers to increase their contributions for non-hazardous employees by about 46 percent and for hazardous employees by more than 51 percent.

The rate hikes were made to address apparent underfunding of the County Employees Retirement System, which is used by counties, cities and school districts (for non-teachers).

But during this year’s General Assembly, the Kentucky legislature passed legislation capping contribution increases at no more than 12 percent annually.

The City of Danville, like Boyle County, was facing a huge cost spike under the original increase. City Manager Ron Scott said it could have cost around $700,000. But under the 12-percent increase, Danville’s total new cost is “probably closer to $300,000,” Scott said during presentation of Danville’s draft budget in late April.

While smaller increases may have made things a little easier this year, both Scott and Conley have warned the legislation leaves the door open for the state pension board to continue with 12-percent increases every year.

Conley said Tuesday she thinks it would be wise to start planning for those further increases now, perhaps by putting some of the funds Boyle would have spent on the larger increase into a savings account.

Scott said in April the threat of continual increases seriously impacts Danville’s “ability to continue to provide services.”

“It might stretch us in future years unless we have new revenue sources available,” he said at the time. “… It’s a step up and it’s not devastating (this year), but each year, it will be kind of a tightening of the noose, if you will.”

SO YOU KNOW

Boyle County’s total pension contributions to the County Employees Retirement System this fiscal year are projected to be about $1.12 million, according to data from Boyle County Treasurer Mary Conley. Danville City Manager Ron Scott has previously estimated that Danville will contribute around $1.38 million to CERS this fiscal year.