The News Enterprise
Jim DuPlessis accepted a huge challenge when he agreed to be part of the Public Pension Oversight Board.
The mounting burden of unmet state pension obligations is a crisis of the legislature’s own creation. Chartering a path out is a massive undertaking.
DuPlessis, the 25th District state representative, serves as co-chairman of the oversight panel and sponsored House Bill 171, one of the board’s first ideas to offer relief to organization’s threatened by the debt obligations resulting from the underfunded pension accounts.
The measure aimed at helping quasi-governmental agencies unanimously passed the state House and awaits Senate action where it was assigned last week to the State and Local Government Committee.
As DuPlessis explained, these agencies would be switched to what is known as a “level-dollar” payment based on the amount due from the agency and no longer tied to variables such as its payroll.
It would result in a fixed, steady payment for the next 27 years. The agencies impacted said this system establishes a steady, predictable budget. For some agencies, officials said, it protects vital services and even could be the difference in their economic survival.
Not surprisingly, leadership of these groups praised the bill and DuPlessis’ work.
Jillian Carden, director of Silverleaf Sexual Trauma Recovery Services in Elizabethtown, said the organization fully supports House Bill 171. She said Silverleaf could remain financially sustainable thanks to these legislative efforts.
“If House Bill 171 doesn’t pass then we will go into survival mode and I feel like all the progress we’ve made over the past two years will come to a halt,” Carden said.
The Lincoln Trail District Health Department has trimmed public health services and faces more impact without relief from public pension budget pressures.
“It is critical that this bill provide assistance to health departments that cannot take the increase,” said Sara Jo Best, public health director.
Tanya Thomas, director of SpringHaven domestic violence shelter, also praised HB 171.
“This bill is a ‘saving grace’ for many programs and will allow us to continue to provide the best possible services to those that need us the most,” Thomas said.
DuPlessis, the bill’s co-sponsor Rep. Joe Graviss of Versailles and the entire House understand the crisis at hand and are responding. The bill has been crafted to meet the need.
Their praise is well deserved and these agencies provide important community services.
But taxpayers also should recognize that providing this relief does not come without increasing pressure in other areas. This could be called a zero sum initiative – meaning if there are winners, there also will be losers.
HB 171 stretches the current amortization period by three years to 27 years of making these fixed payments.
It’s not unlike refinancing a bank loan by extending the term. In the long run, when you accept more time to pay, you pay more. It has a smaller impact on your immediate bank account, but more pain in real dollars.
And real dollars are what taxpayers use to pay.
An actuarial analysis performed by GRS Retirement Consulting regarding the impact of HB 171 on the Kentucky Employees Retirement System non-hazardous retirement and insurance funds provides a detailed look at the impact of extending the amortization period.
The research says, in part: “The proposed legislation decreases the employer’s near-term contribution effort, which may result in some increased risk of plan assets being exhausted.”
The bill does not make the pension plan more stable. It does ensure the pain will last longer.
The GRS analysis does praise this technique as being “more transparent and responsible” that other ways of providing relief for the agencies. In the past, the state has reduced payments by accepting more optimistic projects about investments. That’s a form of denial that consistently made the problem worse.
It took a long time to dig this hole. This bill indicates it’s going to take at least 27 years to climb out – and that’s assuming legislators continue to appropriately meet annual pension obligations and similar relief measures in future bills don’t slow contributions.