Who do you want to pay for Kentucky’s pension debt?
The Kentucky Legislature met in a special session this summer to give a little relief to government agencies such as public health departments, faced with skyrocketing pension costs that could force a substantial number of them to dramatically scale back services or even close.
The special legislation may have saved some health departments for now, which means vital services for their communities will continue. But it did not solve the bigger problem: Someone has to pay to fix Kentucky’s pensions. Legislators delayed some of that expense last month, but skipping a payment never makes a debt disappear.
As many as 10 health departments have already decided to raise their tax rates this year, and the coming pension costs for their budgets was a major driver in those decisions, according to information released by the Kentucky Department of Public Health and reporting from Kentucky Health News.
We expect many more health departments to follow suit, faced with already expensive pension obligations and the potential for those obligations to jump to 83 percent of salaries in the near future.
But health departments are not the only ones affected. Cities, counties, school districts, sheriff’s offices, jails, universities, libraries — they’re all facing the music sooner or later.
It’s tempting to think there’s some kind of magic fix out there. If we just run things better, or use a few simple tricks, the costs we’ve obligated ourselves to cover — the retirements of every person in the state retirement systems — can somehow be covered without raising taxes, creating new revenue streams or cutting local services.
The reality is someone has got to pay. Right now, local governments and quasi-government agencies are being left with a huge chunk of the bill. Legislators may have provided short-term relief this summer, but it would be a mistake not to hold them responsible if your local health department, or fiscal court or board of education has to raise taxes to pay for their pensions.
By opting against other kinds of action, legislators have chosen this path for paying off our pensions — the path that goes through local governments’ general funds.
There are other choices available. The state could take the political hit and increase its own tax revenues. Kentucky could legalize marijuana or gambling to generate new sources of revenue.
Are those better choices? We’re not sure. There are pros and cons to every choice. But the cons of the current choice look pretty painful: Less health care for low-income families from health departments; fewer government services from cities and fiscal courts; higher and higher property taxes from school boards.
Right now, Kentucky has decided that local taxpayers will be the ones to pay for the pension debt. Choosing a different path doesn’t mean no one pays — it could be gamblers who pay, or medical marijuana users, or state taxpayers (who are also all local taxpayers).
Whoever pays, we should be up front about it. Kentucky should be open about who we choose to pay and why.