Kentucky Senator Honored at Shelbyville Meeting as Council Supports CERS Separation

Posted on October 17, 2017

     Cities across Kentucky continue to pass resolutions in support of separating the County Employees Retirement System (CERS) from the Kentucky Retirement Systems (KRS) as lawmakers in Frankfort work to finalize a pension plan. Shelbyville became one of the latest cities to pass a resolution when the city council met late last week. Kentucky League of Cities (KLC) Deputy Executive Director J.D. Chaney also presented Senator Paul Hornback (R-Shelbyville) with a 2017 “Friend of Kentucky Cities” award at the council meeting.

     Senator Hornback sponsored Senate Bill 188 in the 2017 Regular Session of the General Assembly to protect cities from the costs of unfunded mandates. Chaney advised the council KLC plans to pursue the legislation again in 2018. “It’s a prohibition on the state handing down those unfunded mandates,” said Chaney. Hornback informed the group Governor Bevin confirmed he would sign the bill if the House and Senate passed it next year. Hornback said the bill goes to his basic belief in how government should function. “I’ve always been for smaller government and local control. That’s what I’m going to fight for all the time.”

     Shelbyville Mayor Tom Hardesty thanked Senator Hornback for his effort to control unfunded mandates. “This is a major bill that, when we get it passed, will be a big help for local governments,” predicted Mayor Hardesty. “I don’t think people realize these unfunded mandates can be a budget buster for local governments.” The Kentucky League of Cities Board of Directors has made controlling unfunded mandates one of its top priorities for the 2018 legislative session.

     After Senator Hornback was presented the award the council took a unanimous vote to pass a resolution in support of CERS separation. Chaney told the council the resolutions passed by roughly 150 cities in Kentucky send the legislators an important message. “Essentially, we are saying it’s time to terminate the failed management.”

     CERS pays KRS nearly $22 million per year to manage the retirement system. That’s a much higher per person fee than similar systems in the state that function outside of KRS. Decisions made by the KRS Board of Trustees have been focused on the Kentucky Employees Retirement System (KERS), despite CERS being 63 percent of the employees in the system and 73 percent of the assets in KRS. CERS only has six of 17 representatives on the KRS Board of Trustees.

     Separating CERS from KRS would create a new nine-member CERS Board of Trustees that would be fully focused on CERS. Separation also isolates CERS from politics and any future administration changes, as there would be no gubernatorial appointees on the Board. The CERS Board would have three people with 10 or more years of retirement management experience, three people with 10 or more years of investment experience and three people who would be elected by the CERS membership.

     Chaney told those in attendance at the Shelbyville council meeting separation is the best way to protect the local tax dollars that go into CERS. Employers within CERS have always paid 100 percent of what was required, unlike the state which rarely made the actuarially required contribution (ARC) to KERS. The state does not directly appropriate any money to the CERS ARC. The Kentucky League of Cities is one of 25 employer and employee groups in a coalition supporting separation. Members of the coalition believe a new CERS Board of Trustees could do a better job overseeing CERS funds.

     CERS is also on an upward trajectory. It was unstable prior to the passage of Senate Bill 2 in 2013 but reforms in that bill, like ending automatic cost of living adjustments and creating a tier 3 hybrid cash balance system, stopped the digging of liabilities. Now CERS is 59 percent funded and will continue to fully-funded status. Separating CERS addresses the other part of the hole, the state’s management of the system. “We believe local governments can do it better,” asserted Chaney.

     Shelbyville Mayor Tom Hardesty said it’s easy to see why separation makes good sense for CERS. “The facts and figures speak for themselves,” he told members of the Shelbyville City Council.