Herald-Leader Editorial

Aid, negotiations on city pensions

Unions, pension board at the table

November 13, 2012 

Lexington's annual budget is right at $290 million.

Faced with a local pension system for police and fire workers that is seriously underfunded, the city has in the past few years issued about $137 million in bonds and anted up another $45 million in cash in an effort to reduce that liability.

Even with those contributions, the unfunded liability was put at $258 million two years ago, a figure that's almost certain to increase when new calculations are released in the next few weeks.

Despite this dreary picture — we're down an amount that's almost equal to the city's annual budget — we haven't reached our own fiscal cliff that would push the city into slashing essential services, pursuing mass layoffs or even filing for bankruptcy protection.

That, at least, was the good news from the newly hired consultants who are helping a special task force tackle this huge problem. Two representatives of PFM Group met with the committee Thursday to lay out their approach and schedule and to answer questions.

But, they warned, if we keep kicking this can down the road we could get there.

The task force, which has been at work for months, is charged with devising a set of recommendations that the city and the police and fire workers can agree on and present in a unified fashion to the Kentucky General Assembly early next year.

"We are under absolutely no illusions about how difficult it will be to find consensus," Vijay Kapoor of PFM told the task force.

Indeed, the challenge ranges somewhere between possible and extraordinarily difficult.

Police and fire workers are understandably angry at a city that has failed to make its designated contribution to the fund each year even though they, as employees, have paid in their share.

On the other side are a mayor and council trying to maintain city services that make Lexington livable, while avoiding huge tax increases.

And there are taxpayer/citizens who respect the people who risk their lives to keep us safe but who have also seen many of their own expectations about pay levels, health care and retirement security evaporate.

There were a few slightly hopeful signs of progress.

For one, police and fire union representatives are engaging with the task force and have met with the consultants.

For another, the Pension Board that oversees the fund and is dominated by current and retired police and fire workers, offered its own set of concessions to reduce benefits for future employees (although they estimated their changes would cut the unfunded liability by only $14 million in the first year.)

And, no one is pretending that this matter can be addressed without raising some kind of taxes or fees.

A consensus will mean everyone gives up something. Taxpayers pay more, fire and police get less, elected officials deal with making everyone at least a little unhappy.

But the alternative is even worse: The can gets kicked down the road until Lexington loses the ability to shape its own fate because we simply can't meet our financial obligations to either our citizens or these critical workers.

It's time to pick up this can.

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