Herald-Leader Editorial

Triumph for compromise; city pension bill a model for state

City pension bill a model for state

February 22, 2013 

It was a moment for celebration this week when House Bill 430 was filed.

That's the bill codifying the deal worked out late last year to fix Lexington's police and fire pensions.

Remarkably, that fix preserves a defined benefit plan for retirees, provides for fully funding the system, requires no new taxes, doesn't bankrupt the city, and was endorsed by 76 percent of active and retired police and fire workers.

It quickly passed unanimously out of committee in the House yesterday. Both the full House and the Senate should move quickly to ratify this proposal, sponsored by Rep. Ruth Ann Palumbo, D-Lexington and co-sponsored by six other local represenatives.

This pension deal is no small thing.

Like the state (where the pension mess is much worse) the primary reason Lexington's pension had fallen on bad times was that the government had not paid in its full share for years while the employees were contributing through every paycheck.

There were other reasons, including generous but unfunded benefits increases granted by the state legislature, and a high rate of early disability pensions.

That all added up to a $296 million unfunded liability, a huge number considering the city's annual budget is less than $500 million. And that was the number even after the city had authorized tens of millions in bonds in recent years to help make up the shortfall.

The huge numbers, the divided responsibility (the legislature can change benefits, the mayor and council must find the money) — and the fact that beleaguered workers and retirees felt, understandably, as if they'd kept up their end of the bargain while the city hadn't — all combined to make this a tough problem to solve.

But Mayor Jim Gray took the initiative, engaged the police and fire unions, appointed a citizen-led task force to examine the problem thoroughly and dispassionately, and kept at it. Much to their credit, negotiators for the unions came to the table and stayed there.

The deal reduces some benefits for current and future employees but it also protects retirees who live on the smallest pensions and those who were severely injured or killed on the job. The city is obligated to pay $20 million a year into the fund until the shortfall is paid down.

Easy for no one, good for everyone.

It would be great if legislators in Frankfort would take Lexington's example to heart, give up on political posturing, crunch the numbers hard, and work out a deal that both respects the service of state employees and preserves the state's financial integrity.

That is a long shot, we know. But a good first step would be acknowledging the excellent work done here by quickly ratifying Lexington's plan.

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