Kentucky’s public colleges and universities face massive pension payment increases come fiscal year 2019 as the state struggles to address its pension crisis, according to a new state memo obtained by the Daily Independent.
In the Tri-State region, Morehead State University faces an approximate $3.2 million increase in its pension obligations for the Kentucky Employees Retirement System (KERS). The figure represents an approximate 70 percent jump in the amount of money the university will have to pay for the KERS contributions. The memo from state budget Director John Chilton indicates the university is expected to pay $4.68 million in fiscal year 2018, then almost 8 million in fiscal year 2019.
Dr. Jay Morgan, president of Morehead State, said the numbers apply to staff covered by KERS and the university is also preparing for a spike of an additional couple of hundred thousand dollars in pension payment increases for faculty contributions.
“We think our new pension numbers will increase by 3.7 or 3.8 million,” Morgan said.
The increases require extreme efficiency on expenses but Morgan said the university will be able to handle the increases.
“We are looking closely at a lot of our expenses,” Morgan said. “Four million (more) will not cripple us but we will have to pay very special attention to new hires.”
Morgan added “we will be okay in the long run. We won’t like it but we will be okay.”
The proposed increases for the Kentucky Community and Technical College System are even more staggering. The memo from Chilton said KCTCS faces a nearly $8 million increase in pension contributions for a single year. KCTCS is expected to pay $11.5 million in pension contributions in 2018, and that number is expected to skyrocket to $19.5 million in fiscal year 2019, representing a 70 percent increase for one year.
KCTCS President Jay Box??? said the pension increases are coming in the face of proposed significant cuts to all of education.
“We’ve had 10 budget cuts in the last eight years,” Box said. “Our board of regents has mandated reserves for that very purpose because we are concerned there will be budget cuts at any time.”
Box said the pension costs are a significant concern.
“What I make of it is the governor and general assembly need to resolve the pension crisis. They need to address it and they need to do it soon,” Box said.
“For every dollar we are paying in salary we are paying another 50 cents in benefits,” he said. “If they go to 84 cents on a dollar next year and you include in there the increase we will see in insurance costs, and other required benefits, we are almost a dollar for dollar. So every dollar we pay in salary we will pay a dollar in benefits.”
Box said the proposed increases in pension costs are shocking.
“On one side they are talking about potential cuts of 17.5 percent in the next fiscal year for everybody including higher education and k through 12,” he said. “So that’s 17.5 percent less money and on top of that we are going to have a pension increase that is going to result in another 8.2 million. We also have fixed cross increases we can’t control, utility costs, insurance costs, That is about another 8 million give or take. That 16 million in new costs without doing anything and then 17.5 percent cuts. Our operating from the state is about 182 million. It is a double whammy.”
Similarly huge increases are expected at Murray State, Northern Kentucky, Western Kentucky and Eastern Kentucky.
State legislators locally said they want to keep the promises made to those who have been in the system.
“I hope this kind of information doesn’t isolate the state employees and those people who were promised and paid into the system,” said state Sen. Robin Webb, adding she doesn’t support a special session unless there is a general consensus on a solution.
“I think there are solutions we are going to be talking about and discussing,” Webb said. “I hate to see the tax reform question discounted and set aside at this point as far as trying to identify a revenue funding stream.”
Rep. Kevin Sinnette said “I believe a promise made is a promise kept.”
Sinnette also believes that switching to some kind of 401-K system could negatively impact hiring and retention in the public sector.
“We need to take care of this unfunded liability and we also need to step back and look to the future,” he said.