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Beshear offers ‘pension plan’




FRANKFORT

Gov. Steve Beshear called for changes to the state pension system this week, which he said are aimed at easing the financial burden on local governments across Kentucky facing mounting economic pressures.

Beshear, a Democrat, proposed a plan Tuesday that could save local governments a combined $37 million on pensions in the fiscal year starting July 1. The plan would allow city and county governments to take advantage of immediate short-term savings and instead face higher payments later.

“Our local governments are finding it increasingly difficult to pay their bills in this era of declining revenues. As a result, programs and services are being cut and legal obligations are being jeopardized,” Beshear said. “We must give them a hand.”

Kentucky lawmakers met in a special session this summer to pass legislation aimed at shoring up the state’s financially troubled pension system for public employees. Local cities and counties were given 5 years to fully fund their employees’ pensions, but now would be given 10 years under Beshear’s plan.

Kentucky’s economy has sagged along with the nation’s. Because of declining tax revenues, the state is facing a $456.1 million budget shortfall by June 30.

Beshear has proposed offsetting the state’s budget hole by increasing the state cigarette tax — currently 30 cents per pack — by 70 cents to $1 and cutting most government agencies’ budgets by 4 percent. Still, local governments also need help, Beshear said.

Louisville Mayor Jerry Abramson said the governor’s pension plan would save his city about $5 million next year. That money could go to fund other valuable government programs or services, Abramson said.

“This recommendation is right on target,” Abramson said.

Sylvia Lovely, executive director of the Kentucky League of Cities, said cities’ combined share of the savings would total about $11 million in short-term relief. Counties and school districts would see the rest of the estimated $37 million savings.

“The backs of local governments are against the wall and every fraction of a percent that can be reduced from employer contribution rates really counts in financially trying times like these,” Lovely said.

Mike Burnside, executive director of the Kentucky Retirement Systems, said the board chose in November to give local governments five years rather than 10 to meet the recommended contributions because it would save money overall. The board is scheduled to meet again in February, Burnside said.

“The board understands the issue,” Burnside said. “It’s a very difficult issue for the cities and counties.”

Rep. Mike Cherry, DPrinceton, said he’s planning to sponsor a proposal that would make the changes become law during the 2009 General Assembly session if the retirement board doesn’t authorize them.


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