On July 1, Kentucky's pension crisis will hit local health departments. Both Christian County Health Department and Todd County Health Department will be required to increase their pension obligation to 83.4% of payroll -- up from 49.5%.
During the regular legislative session, Governor Matt Bevin vetoed a bill that was meant to give some relief to quasi-government agencies like the local health departments. The governor said he would call a special session for the looming pension crisis, but that has yet to happen.
When the obligation increase happens, the Christian County Health Department will be on the hook for a pension payment increase of $527,442, according to an analysis from Kentucky Health News. That would leave the health department with around 96 months of solvency, or the ability to meet its financial obligations.
The Todd County Health Department will take a harder hit. After July 1, that health department will need to come up with $187,463 to meet the obligation.
"It's created a lot of stress in my life over the past five years," said Jen Harris, public health director at the Todd County Health Department.
She said that in 2012, the health department saw the crisis coming and began working on its efficiency to save money. One of the major cost-saving measures the health department enacted was using contracted employees.
Instead of bringing on an employee's entire salary and benefits, the health department works with a hiring agency to staff its building. The health department pays the hiring agency, which in turn pays the employee.
"That is something that several local health departments across the state have started (to do)," she said. "... The fringe benefit cost is so much more inexpensive than what we are facing through the Kentucky Retirement System."
As of July 2018, the Todd County Health Department has $46,671 in unrestricted reserves, far less than it would need to cover the pension obligation. The Kentucky Health News study found that the health department would only have around three months of financial solvency after the payments.
Harris said she goes out of her way to show that the health department is committed to the employees who come from the hiring agency.
"Our employee handbook and our staff reduction policy would reflect that employees are hired through two different agencies," she said. "But it would be written so that it was fair across the board."
SEE CRISIS/PAGE A6
For example, a discipline action against an employee hired through an agency would be carried out the same was as it would against a health department employee.
Harris said in the worst case scenario, the health department would have to make staff cuts. But she hopes that using the staffing agency model will keep staff cuts away.
"Everyone who is eligible to move to the staffing agency model -- if they all were to move over -- it's going to be a savings of about $257,000 for our health department," she said. "That obviously would give me a lot more comfort in my ability to not have to reduce our workforce."
Harris said the workforce at Kentucky health departments is already low after shrinking in 2008 due to budget cuts. That funding never came back.
Right now, health departments have no choice but to pay their pension obligations. Harris encourages everyone to contact their local legislators and urge them to find relief on the issue.
"Most of the cuts in staff have already happened," she said. "... In order to do the statutory services that are mandated for us to do, we have to have the employees that we have."
Reach Jon Russelburg at 270-887-3241 or email@example.com. Follow him on Twitter @newerajon.