Over the past several years, almost every college or university in Kentucky had to alter and reassess its respective financial status in order to meet budget cuts, performance funding and pension obligations. This trend is especially concerning for schools that participate in the state-sponsored Kentucky Employee Retirement System (KERS).
At Eastern Kentucky University, the defined actuarial contribution rate for employees in the KERS system is projected to balloon to nearly 85% in the next fiscal year. In layman’s terms, EKU must pay 85% of each participating employee’s salary into KERS. The estimated obligation for EKU is a staggering $22.8 million — $9.6 million higher than last year.
For EKU, this is an unsustainable situation that has required us to think collectively about finding a solution.
To do so, colleagues at other regional institutions and I have discussed retirement solutions for our universities. The goal was to help us become more flexible in our ability to offer optional retirement benefits to our employees, while honoring the obligations with the state system. What emanated from these deliberations were the fundamental pillars of House Bill 358.
The salient points of our efforts among the regional university presidents centered around the following:
- A shared concern about the sustainability of the KERS system within higher education and a desire to address the skyrocketing contribution rate while still honoring our obligation to the state system.
- A consensus to preserve programmatic dollars for our mutual primary concern — the education of our students who will become the backbone to our economy and prosperity.
- A desire to offer our employees in the KERS system flexible options for retirement, such as a university-defined benefit plan.
With the core tenets in place, we began the long journey toward presenting our ideas to Frankfort, crafting them into a bill, finding a sponsor and championing that bill in hopes that it would become law.
As a lifelong enthusiast for history — including the political process — I still marvel at the sheer number of people and processes it takes to create legislation and laws, and HB 358 was no exception. It was critically reviewed and fine-tuned into a compromise piece of legislation. On the last evening of the legislative session, the bill gained enough support in both chambers to move forward to the governor’s desk.
Once HB 358 was put through the legislative process and passed both chambers of the legislature, the final bill was ultimately vetoed by the governor. I recognize that no bill is perfect due to the input of so many stakeholders, and Gov. Matt Bevin was within his rights to veto the bill. He has promised to call a special session in order to have the legislature pass an improved bill, telling the Courier Journal, “I truly do appreciate the good intentions of the General Assembly in enacting HB 358. However, it, and we, can do better.”
For EKU, other regional higher education institutions and dozens of quasi-governmental agencies that participate in KERS, we are now faced with a looming deadline of a new fiscal year on the horizon and time is of the utmost importance. On July 1, we must have a balanced operating budget in place to ensure our university is financially solvent.
I urge the governor and legislature to act quickly and with resolve to make the necessary changes to HB 358 and get it signed into law. It is imperative for EKU, other universities and quasi-governmental agencies. We must have the certainty and flexibility afforded by HB 358 in order to perform our core functions of educating, protecting and caring for those in our communities.
Without pension reform, funds will have to be swept from already beleaguered areas of the university. If HB 358 were in place, we could meet our contractual responsibilities to the system without removing resources from our faculty, staff and, most importantly, our students.
EKU’s student body is comprised of nearly 90% Kentuckians. Three out of four students who graduate from EKU return to Kentucky communities to work and live. These are the first responders, business leaders, teachers, nurses and other citizens that make up the very fabric of our Kentucky communities. Fostering our ability to continue providing a workforce that powers Kentucky’s communities deserves attention.
I applaud the higher education community, our government relations team, stakeholders and lawmakers for working together to solve important issues that could pave the way for enhanced learning at EKU. Our, employees, students and citizens deserve nothing less.
The budgeting process is underway, and we need information in order to create a plan for the future. It is imperative to arrive at a resolution so our universities and state agencies can get back to focusing on the citizens of our state and continue working to provide the best service possible.
Michael T. Benson is the President of Eastern Kentucky University, and co-author of College for the Commonwealth: A Case for Higher Education in American Democracy (University Press of Kentucky)