, Corbin, KY

February 4, 2007

Groups warn of crisis for state plans

By John Whitlock / KPA News Bureau

Calling the spiraling cost of health and retirement benefits for public workers a “pending crisis,” a group representing business, city governments and education has called for action by the General Assembly and Gov. Ernie Fletcher.

Sylvia Lovely, executive director of the Kentucky League of Cities, Dave Adkisson, president and CEO of the Kentucky Chamber of Commerce and Robert Sexton, executive director of the Prichard Committee, said the cost of coverage and retirement benefits for workers has become the most difficult issue for public agencies, including local school districts, to deal with during the budget process.

Lovely said almost every community in the state is dealing with big jumps in health-care costs and retirement benefits.

With a big increase in local government’s required contribution to the state’s County Employees Retirement System expected in 2008, Lovely said cities could be facing cuts in services or staffing of police and fire departments.

“Cities don’t really have a way to expand their options in meeting these financial obligations other than reducing the number of employees and thereby the services that they provide,” Lovely said.

When the 2008 increase comes, it will have a huge impact on already tight municipal budgets, Lovely said.

“It’s clear that some layoffs are already taking place,” Lovely said. “Our cities are crying out for attention to this crisis of epic proportions.”

Fletcher has said he will appoint a task force to study the future of the retirement system.

At a new conference Feb. 1, the groups called on the governor to ensure that at least half of the task force be made of experts in employee benefits or at least work in the field of benefit programs.

The group is also asking that:

• the task force review public employee health insurance programs because of the impact on cost.

• the review includes all state retirement systems including those for local government employees and teachers.

• the task force makes recommendations that address the core problems of rising costs and not just the effects.

• the General Assembly earmark part of the state’s budget surplus for the state retirement system.

Without a new direction, Adkisson said taxpayers will end up seeing the results and the three groups hope to avoid cutbacks in services and staffing.

“Increasing benefit costs are threatening basic services,” Adkisson said. “We plan to be a voice that advocates balance, affordability and sustainability of benefits for public employees. We are advocating a deliberate, thoughtful approach to addressing these problems before they become a crisis of unmanageable proportions.”

The state’s retirement program is already facing an estimated $12 billion shortfall.

Despite increases in funding for education, Sexton said the rising cost of benefits has far outpaced what the state has contributed.

During a six-year period from 1999 to 2005, retirement and health insurance costs for teachers totaled about $182 million, over $104 million more than the spending increases approved by the state during that time.

“A few years ago, health-insurance costs started eating up dollars in the education budget,” Sexton said. “Their spiraling increase continues and each year will take more and more dollars out of the classroom ... There are several ways to look at the numbers on this. They’re all bad.”