The police and fire pension system, with its mounting unfunded liability, poses a looming financial problem for the city, Mayor Jim Gray said Tuesday, and he asked Lexington's legislative delegation to "please step up and help fix our system."
Lexington is the only city in Kentucky that has its own pension system for police and fire, although the legislature sets the rules that the pension system must follow. All other fire and police departments are covered by the state's pension fund.
Lexington's fund was set up during the 1970s when legislation was approved to create the Lexington-Fayette County's merged government, the first in the state. "Lexington taxpayers have to pay for it," Gray said of the pensions.
Lexington's system leads to abuse, he said. About 8 percent of state police take disability pensions. "In Lexington, 38 percent of our police and fire officers take disability pensions," he said.
In 2008, the legislature started addressing state pension problems but left Lexington's system untouched. Gray asked the legislature to recognize and address the problem. "Please don't bypass Lexington's growing crisis," he said.
The city is not legally empowered to change disability qualifications, payouts and other pension issues, even though those issues affect every Lexington taxpayer.
Earlier this year, Gray appointed a task force to find solutions to submit to the General Assembly. "We know the problem wasn't created in a day or a year, and it will take time to correct, but we must stay focused on it," he said.
Here are other highlights of Gray's State of the Merged Government speech:
■ His focus for the next year remains creating jobs, running government efficiently and building a great American city. "It's an interlocking puzzle," he said.
■ At the height of the recession in 2009, the metro area had 25,000 unemployed workers, almost 10 percent of the region's work force of 265,000. "We've recovered 10,000 of those jobs, but that's because some people have stopped looking," Gray said. "We still need jobs. ... We must create more high-paying, working-class, middle-class jobs."
■ Gray's administration inherited a $9 million deficit in the 2011 fiscal year budget. The city is facing a $25 million deficit in the 2012 budget year.
■ The 2012 budget included no new taxes. Commissioners and the mayor's senior staff are taking two-week unpaid furloughs and Gray is investing half his salary in economic development and quality of life improvements for the city.
■ Tough changes were made in the employee health insurance plan, costing employees substantially more to be covered. To offset some of those expenses, the city opened a free health clinic and soon will have a pharmacy with reduced costs for prescriptions.
■ Gray thanked employees for their sacrifices, especially general government employees whose last raise was 1 percent in 2009.