Health departments and their employees making tough choices now that the General Assembly has passed Bevin’s pension bill

Bevin at bill signing (Lexington Herald-Leader photo by Alex Slitz)
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Kentucky’s health departments and their employees face some difficult decisions in the wake of the pension legislation passed in the recent special session of the General Assembly.

The law written and signed by Gov. Matt Bevin freezes the pension costs of health departments for another year, at 49 percent of payroll, avoiding an increase to 83 percent, which would have forced layoffs and program cuts, and could have put some of them out of business.

But now the health departments must choose whether to stay in the Kentucky Retirement System “at full cost, leave the retirement system by paying a lump sum equal to future projected benefits payments, or buy their way out in installment payments over 30 years,” writes David Zoeller of The Paducah Sun.

Marshall County (Wikipedia map)

Zoeller notes that the Marshall County Health Department “has already been making tough decisions,” such as ending its school-nurse program and cutting its staff by almost 30 percent.

John Cheves of the Lexington Herald-Leader notes, “Public employers that quit KRS will be encouraged through financial incentives to freeze their employees’ pensions so they accrue no further benefits. Instead of a pension, employees will be transferred into a riskier defined-contribution retirement plan, such as a 401(k), with a balance that rises and falls with the stock market, and that retirees can outlive if their money runs dry. . . . Some could lose hundreds of thousands of dollars in anticipated retirement benefits if their pensions are frozen.”

Cheves’s object example is the Garrard County Health Department, which has seven employees, some of whom are less than 10 years from retirement. “Under the state pension formula, the final decade on the job is crucial to maximizing their monthly retirement checks,” he notes, and gives a specific example:

“Cathy Stapleton, a nurse at the health department, is 55 with plans to retire at 62. She doesn’t want her pension to be frozen and replaced with a 401(k) account that would have seven years — not the usual 30 to 40 — to build wealth through compound interest. One ill-timed market crash could sink her.” She told Cheves, “It means a lot when you come into a pension. It means you have a retirement where you can count on having that income every month.” Getting a new 401(k) plan at age 55 “would be a lot different.”

Garrard County (Wikipedia map)

Department Director J Smith told Cheves he will recommend to the Garrard County Board of Health that it stick with KRS and pay the 83 percent. “Telling middle-aged people who devoted their lives to public service that they’re suddenly going to risk financial insecurity in their senior years is not a viable choice, he said,” Cheves reports, quoting him directly: “We’re not going to opt out. If we opt out, to me, we’re screwing our employees here. Some of my people have got just a few years left. We expect to get what we were promised. We were promised a pension.”

The department has already eliminated family-planning services, cut health education, “laid off its emergency-preparedness coordinator and a front-desk clerk, and officially eliminated a third position, Smith’s old job, which he still does in addition to being director,” Cheves reports. “That means he splits his time between inspecting schools, businesses, septic tanks and the like for safety and cleanliness, and managing the department.”

“I’ll admit, our response time is slower now because of it,” Smith told Cheves. “When people used to call in for a site evaluation, we usually could get out there the same day. Now it might take us a week. It’s just — I’m sorry, we don’t have the people we used to. . . . 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.”

Kentucky River District Health Department service area: Wolfe, Lee, Owsley, Leslie, Perry, Knott and Letcher counties (KRDHD map)

Using 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.