Times are tough at city hall. In late August, the Kentucky Supreme Court handed city taxpayers a huge bill with their ruling regarding overtime on a state supplement intended to incentivize firefighter training. The ruling found that several city governments, including Nicholasville, owed back pay to firefighters that will collectively amount to $25 million statewide. The exact amount that our city must pay is currently under evaluation, but it is certain that this unanticipated expense will be a huge blow to our city’s budget.
The city did everything right — we took advantage of a state-funded program to make sure firefighters received adequate training and some additional pay. Directions from the Kentucky Labor Cabinet on how to distribute funds from the state were followed carefully. After 20 years of following those directions, the courts found that the state agency responsible for the administration of wage and hour laws provided bad advice. We support our employees receiving what is owed to them, but our city and citizens are paying the price to rectifying the labor cabinet’s error.
Additionally, the Kentucky Retirement Systems Board of Trustees announced last winter that the firefighter overtime calculation has resulted in a shortfall in retirement contributions for those firefighters who receive back pay. To add insult to injury, the board decided that the employer contributions made as a result of this change would be treated as delinquent and would charge cities 8 percent interest compounded annually on those contributions.
Is any of this fair? No. It has become far too common for cities to foot the bill for expenses that cannot be predicted or controlled by local officials. These financial blows couldn’t come at a worse time. Nearly half of the city governments in Kentucky saw a decline in revenue from fiscal-year 2009 to fiscal-year 2010.
You probably have read headlines related to the increasing retirement burdens for our state and local governments. The Kentucky Retirement System Board of Trustees determines how much cities and other employers in the system must pay for their employee’s retirement. City governments have no control over what health or pension benefits are offered and, unlike the state, we have to pay the amount the board says we owe.
In 2005, Nicholasville paid approximately $1 million for retirement benefits for city employees. Today, Nicholasville pays $2.4 million to the Kentucky retirement system, even though we have fewer employees. This increas of more than $1 million in what we are required to pay doesn’t include current benefits, such as health insurance for employees — it only pays for future pension benefits. It is only going to get worse. Non-hazardous-duty retirement contribution rates are projected to increase another 33 percent by 2020.
Even with these fiscal strains, the city must find a way to provide basic services that affect your quality of life daily. Our city has been forced to tap rainy-day funds, cut funding for important services and programs, reduce personnel through attrition, put off large projects, and eliminate raises to cover the tab. Unfortunately, the firefighter overtime ruling means we will likely be forced to make even more difficult decisions. When these mandates are forced down on cities, your elected city officials have no choice but to comply, and it’s the local taxpayer who ultimately suffers the consequences.
