Hopkinsville Mayor Carter Hendricks is sounding the alarm over the state’s pension crisis and its toll on the city's budget.
Hendricks told local business leaders at a Chamber of Commerce State of the Community Eye Opener Breakfast on Tuesday, “Part of leadership is to sound the alarm. Consider this the sounding of the alarm if it hasn’t been already."
“We need the state to work through this pension issue because the local governments are feeling the burden from the financial a pressure of it.” He said it’s the city’s biggest financial issue and acknowledges it is a tough task for legislators do deal with.
He said this coming fiscal year has Hopkinsville at a million dollar deficit of expenses versus revenue. “And that’s primarily because we have a half a million dollar bill - new bill - for the pension alone. That’s new obligation beyond what we already had last year.”
“So here’s what we’re looking at, basically, in this coming fiscal year. There’ll be no cost of living increases for employees, there’ll be no special projects to be funded of to speak of. We’re looking at proposed cuts to our departments. And proposed cuts to our agencies. That’s the only way we can come up with this with the tax revenue we think we can count on.”
He said payroll growth is one percent, which generates about $170,000 a year. Yet every year, the pension bill is $500,000 or more of new expense. And over the next five years, that obligation will have a cumulative increase of $3.3 million.
Fixes are needed, he said, or the city will be forced to make cuts it can’t afford. “I’m stressing that because you’re going to hear us talk about this in the coming months. We have no choice. We owe it to you to make sure you understand the severity of this issue. Because if we don’t find structural fixes for this challenge, next year and the year after and the year after and the year after - we’re not talking agency cuts and small cuts. We will start cutting into personnel. That’s the only choice we have at some point.” A significant portion of the personnel involves police, fire and public works. “We can’t afford to cut,” he said, and added that the city is looking at every option before personnel cuts.
As for possible solutions, Hendricks told WKMS News there are different outcomes of the state's pension crisis the city could live with. He noted that he serves on the executive board of the Kentucky League of Cities and favors the separation of city and county governments from KRS.
“We think that would give us more management oversight, better ability to invest in ways we hope would better generate the returns necessary to sustain our retirement programs and give us greater relief from the issues that the state are pushing to us," he said.
Also, he said, the state should go back and look at revenue measures to help offset the imbalance and not put the pressure on local governments to just have to find the financing themselves.
“We’ve paid every bill that’s ever been sent to us. Our employees have paid every obligation they’ve had. And yet for some reason we’re being told that we have to pay more now," he said.
Hendricks acknowledged that the state has a tough job, but said until lawmakers fix the pension issue, local governments are under pressure and many will find it difficult to provide the same services they have had in the past.
Governor Matt Bevin has said he will call a special session in the coming months.
