Health departments get another year before pension hikes kick in, but some are already raising taxes in anticipation

By Melissa Patrick
Kentucky Health News

While local health departments are more than grateful that legislation passed in the recent special legislative session gives them another year to manage their looming pension crisis, several counties have already asked for a tax increase as a way to help pay for it.

The Kentucky Department of Public Health said in an email last week that it had received 63 of this year’s 113 county tax resolutions and so far 10 counties have asked for a higher rate. Of those, the department said board minutes show that Boone, Boyd, Campbell and Kenton discussed the increase in the Kentucky Retirement System cost prior to voting on the tax rate.

“However, the other six counties mentioned in their board minutes there was a discussion, but did not mention in the minutes details of the discussion,” the email said. They are Leslie, Muhlenberg, Ohio, Union, Wayne and Webster counties.

The new law, written and signed by Gov. Matt Bevin, freezes the pension cost of health departments for another year, at 49 percent of payroll, avoiding an increase to 83 percent.

That gives them one more year to decide whether to stay in the state retirement system, with an increase in their pension contribution to 83% of payroll, or leave it — and either pay a lump sum equal to their projected pension liabilities, or pay it off over the next 30 years in installments.

Allison Adams, director of the Buffalo Trace District Health Department,which includes Mason and Robertson counties, explained that the state has a cap of 10 cents per $100 property value for health taxing districts, and some counties have set this cap even lower through referenda.

Adams, who is also the president of the Kentucky Public Health Association, said it is a fallacy to believe that health departments can simply double their tax rate to pay for their pension obligations, as some legislators have suggested.

Using Robertson County as an example, she said the tax rate there is already set at 8 cents per $100 property value, which would allow it to request 2 more cents per $100 property value, which she said would bring in about $90,000.

But that’s not enough to make any real difference, since the cost of one clerk and one nurse in that department, figuring 83% of payroll for their pension, is $175.207 — an amount that does not include any other costs for required programs and services, Adams said.

“For those who have the tax base, it would help them,” she said. “But for those who don’t, it wouldn’t help.”

And for those counties that are levying the maximum tax rate and still don’t have enough resources, even after whittling down their staff, to deliver only core and statutorily required services, Adams said, “The next thing to do is to cut services.”

The Anderson County Health Department  increased its tax rate in June to help pay for the pension increase that was set to kick in on July 1, but has since been delayed until next year. But the county Board of Health rescinded a portion of the requested 75% increase, reducing it from 52.5 cents per $1,000 in assessed property value to 47.5 cents, which represents a 58% increase from the original rate of 30 cents per $1,000, Ben Carlson reported on June 19 for The Anderson News.

Public Health Director Tim Wright made the request to lower the rate at a specially called meeting after discovering he had made a mistake in his request, explaining that he was unaware that the spreadsheet he used to build his annual budget already included the increase for pension costs, so when he computed his figures the pension had been added in twice, Carlson reported.

The new rate will keep the department from tapping into its reserves to pay the looming pension costs. The new rate will generate about $230,000, and $140,000 of that will go into pension funding, according to documents provided by Wright, Carson reports. Wright said that this is the county’s first rate increase in about 20 years.

J Smith, the public health director of Garrard County Health Department, toldJohn Cheves at the Lexington Herald-Leader: “The only reason we came in under budget this year is because of all the cuts we made. But we can’t keep doing that, we’ve done all we can do there,” Smith said. “I told our Board of Health that if we want to keep the services we have left, we’re going to have to have a tax increase.

Chris Crum, public health director at Greenup Health Department, told Rachel Adkins of The Daily Independent in Ashland that because Greenup County raised its health tax last year, it was no longer at risk of closing because of the looming pension costs.

Another challenge is that some counties don’t have a separate taxing district to finance their health departments, Melinda J. Overstreet reports for the Glasgow Daily Times.

Barren County Judge-Executive Micheal Hale told Overstreet that Barren is one of three counties in the eight-county Barren River District Health Department that does not have a separate taxing district for health, and without that the county is fiscally responsible for its funding. The county’s health department is one that the state health department put on a list that were at risk of closing within 12 months if they didn’t get a reprieve from the bigger pension obligation.

Hale told Overstreet that an overnight jump to an 83% contribution would require the county to contribute well over $1 million, which he said would be “catastrophic” for the county’s budget. He added that after the final budget is decided, he would ask the committee to look into the possibility of a health taxing district.

Depending on local tax dollars to fund public health would result in huge inequities, said Scott Lockard, director of the Kentucky River District Health Department, which covers some of the state’s poorest and unhealthiest counties.

“Communities that need public-health services the most, that have the highest poverty rate, that have the poorest health outcomes, also have the least ability to raise local revenue,” Lockard told Kentucky Health News in June.

Adams pointed out  that counties with high property values could raise their tax by 0.5 cents and generate more revenue than a county with low property values that double their rates.