By James Mayse
Messenger-Inquirer
OWENSBORO, Ky. — Steve Mitchell, chief of the Owensboro Fire Department, was one of several local officials and department heads who went to the Owensboro Convention Center on Tuesday to hear Gov. Matt Bevin make his case for why the state’s public pension systems need change.
Bevin, who is expected to call a special legislative session this year for lawmakers to consider pension reform, said the public employee and teacher pensions are running deficits, which Bevin believes are $60 billion or higher. The pensions, Bevin said, don’t have enough money to make required payments to retirees into the future, and legislators have said previously there are more retirees drawing a pension than there are state workers.
Mitchell also had a concern that he would have several fewer firefighters if the pension bill, as its written, becomes law.
“We will have nine retire when this passes,” Mitchell said Tuesday. If the bill does not pass, Mitchell anticipates only two retirements next year.
Officials at Owensboro Municipal Utilities and the Owensboro Police Department shared Mitchell’s concerns about how the pension plan might affect their ability to keep, or hire, workers. City Police Chief Art Ealum said he agrees the pension deficit must be addressed, but his fear is it will be difficult to replace the officers who could retire in July, when the bill, if passed, will go into law.
“Right now, we have 10 people who will be eligible to leave on July 1,” Ealum said. "... A lot of those will leave if this bill passes.”
The plan outline includes keeping current retirees in their pensions, while teachers and state workers in nonhazardous jobs would keep their current plans until they reached retirement eligibility. After that, their plans would be converted to 401(k)-style plans if they chose to stay in government work or education.
New teachers and nonhazardous state workers hired after July would receive 401(k)-style “defined contribution” plans, while law enforcement and hazardous duty workers would retain their “hybrid cash balance” plans that offer a guaranteed annual return of 4 percent.
Workers would also pay 3 percent of their paychecks toward retiree health care.
Estimates place the state’s pension liability between $40 billion and $80 billion, based on differing assessments of the various pension systems.
Ealum said he has concerns about a proposal to limit the amount a time a retiree who is rehired could work while retaining their pension benefits. The plan Republicans in Frankfort laid out last month would prevent a retiree from working more than 100 hours a month in a state job, or a retired teacher from teaching more than 100 days a month, while retaining their pension benefits.
“I think the current administration is misinformed about hiring and the (amount of) applications we get,” Ealum said. While OPD once received multiple applications for every open officer job, “at our last hiring process, 10 people showed up to take the test” for 10 vacancies, Ealum said.
“We usually weed several (job candidates) out, sometimes down to one” during the lengthy application process, he said.
Other law enforcement agencies statewide are experiencing similar challenges in hiring, he said.
“I think the only (law enforcement) agency that isn’t suffering is Lexington, because they have their own public safety pension program” and collective bargaining, he said.
Owensboro City Manager Bill Parrish said he is waiting to see what the final bill looks like before taking a position. Lawmakers did release a draft version of the bill last week, but it is likely to change as it goes through the legislative process during the special session.
“Just as an observer of the process, I’m not sure the votes are there yet” to pass the bill, Parrish said.
Some legislators have criticized the bill. One Republican, Rep. Wesley Morgan, of Richmond, has said he will not support it.
Daviess County Judge-Executive Al Mattingly said he has not heard from county workers concerned about how they’ll be affected if the pension bill passes.
“I think most are still waiting to see,” Mattingly said. “I think most of them have faith in the General Assembly’s sincerity in dealing with this issue.”
Mattingly said he respects Bevin’s willingness “to tackle something that has been hanging over our heads like the sword of Damocles for years.”
Terry Naulty, general manager of Owensboro Municipal Utilities, said, “it’s a little too early to know what the answers are and what is going to get passed,” but the utility has several licensed employees that will likely retire if the bill passes.
Those workers can’t easily be replaced, because it take a worker several years to get a license, Naulty said. While a retired worker could be rehired until another licensed worker is hired, that won’t be possible if the plan retains restrictions on retirees taking full-time employment in state jobs, he said.
“If you become full-time, you forfeit your pension payments,” Naulty said. “It’s not very common, but the contractual positions, like water plant operator that require a license, I can’t go out on the street and hire someone” to replace them, he said.
“There’s no question in my mind we are going to lose some of our most senior people as a result of this, and those are people who are not ready to retire,” Naulty said.
At Tuesday’s meeting, Bevin said the 3 percent from salaries that will go toward employee health care is not a pay cut.
But he agreed that state government has to do something to shore up the underfunded pensions.
“If it fails ... people who retired years ago will be affected,” Ealum said. “Nobody wants to see that happen.”
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