Covington’s employer contribution rates toward the pensions of its public employees have been increasing 12 percent year over year due to a state mandate.
Sen. McDaniel’s ‘freeze’ saves Covington taxpayers $1MM
COVINGTON, Ky. - Kentucky Gov. Andy Beshear recently signed into law two pieces of legislation that will throw the City of Covington a $1 million lifeline in the coming fiscal year and, theoretically, could help future budgets as well.
Both bills - Senate Bill 249 and House Bill 484 - address public pensions for local governments and were approved in the recent session of the Kentucky General Assembly.
SB 249, sponsored by state Sen. Chris McDaniel, Covington’s representative in the state Senate, freezes for one year the rising employer contribution rates billed to local governments and other local quasi-governmental agencies.
Those rates were increasing by 12 percent year over year, and the freeze will save Covington about $1 million, give or take, in the fiscal year that begins July 1 of this year, said Muhammed Owusu, Covington’s Finance Director.
“Gov. Beshear’s decision to sign these bills provides us with immediate, tangible, and significant financial relief,” Owusu said. “It was the single-best thing he could have done for us.”
HB 484, also known as the #FreeCERS bill, creates a separate nine-member board of trustees whose singular fiduciary duty is to the County Employees Retirement System, or CERS, to which Covington’s police officers, firefighters, and other employees belong.
Currently, CERS is part of the larger Kentucky Retirement Systems, or KRS. Local governments have long complained that drastic increases in Cities’ contribution rates were prompted by the poor financial condition of the overall KRS system and ignored the fact that CERS was in better financial shape.
In addition, unlike state government, Cities have always been required to pay their full contribution rates, Owusu said.
“Because of lack of say at the table, Cities have been forced to pay the cost of the solution when they weren’t really the reason for the problem,” Owusu said.
The provisions of SB 249 and HB 484 were supported by two resolutions passed by the Covington Board of Commissioners earlier this year, one of which bemoaned that decisions by the KRS board were “forcing cities to make the choice between future growth, public services and the increased pension contributions.”
In Fiscal Year 2018 - just two years ago - Covington paid $6.32 million into the state-run retirement system for the City’s employees. In the current fiscal year, that number has grown to $8.3 million, and by Fiscal Year 2025 - less than five years from now - that figure is projected to more than double to $13 million, even if salaries and staffing levels are frozen during that five-year period.
The impact was similar in Cities across the state, many of whom reported being forced to cut spending on services for their taxpayers.
Covington Mayor Joe Meyer sent a letter to the newly elected Gov. Beshear in January outlining the City’s plight, and held several conversations with the Governor and Sen. McDaniel on the pension issue.
He also traveled with Erlanger Mayor Jessica Fette and Independence Mayor Chris Reinersman to Frankfort earlier this session to lobby legislators, including Sen. Damon Thayer, whose district includes southern Kenton County.
“We really appreciate the responsiveness of Sens. McDaniel and Thayer to the concerns of Kentucky cities,” Meyer said. “This relief was even more important in the context of the COVID-19 pandemic and the tremendous financial pressures that local governments are facing.”
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