An IRS change in paycheck calculations will mean less take-home pay for Fayette County school district employees and other state government workers beginning Jan. 1.
To offset that impact, Fayette Superintendent Manny Caulk asked the school board Thursday to spend $1 million on a mid-year raise for the district’s 7,000 employees.
Board members indicated that they are likely to vote for the raise at their Dec. 12 meeting.
A settlement between the state of Kentucky and the IRS mandated the change in how employee paychecks are calculated, Caulk told employees in an email.
“You work hard every day to take care of the children of the Fayette County Public Schools, and it is important that our organization take care of you as well. We did not initiate this mandate, but by giving our employees a raise, we do want to help ensure that it will not have a negative impact on your family finances, “ Caulk said.
Pamela Trautner, spokeswoman for the state Finance & Administration Cabinet, confirmed that the settlement affects all state and local governmental employers in Kentucky. Traunter said a state employee earning $40,500 annually, would typically be paying $6.45 more each pay period. State officials had estimated that the amount could be less for teachers.
If approved, beginning in January, Fayette County school hourly employees would receive a .75 percent salary increase and salaried employees would receive a .5 percent increase.
The district has some remaining money in the budget, and the raise would be paid for with that.
The settlement affects all governmental employers in various retirement plans, including the executive, legislative and judicial branches of state government, eight universities, the community and technical college system, and 1,471 county and city governments and local school districts, district human resources director Jennifer Dyar said.
Trauntner said state officials have been working for over a year to give agencies adequate time to plan for budgeting, make changes to payroll systems, and communicate with all employers and employees.
Employers and employees alike will have to pay the increased amount. The additional annual cost could be approximately $5.7 million for state government agencies alone, school board documents said.
In the past, Social Security and Medicare taxes have been based on a salary after retirement contributions were deducted. However, beginning next month, those taxes will be based on the total salary before retirement contributions come out.