Lexington, KY - In a Friday morning ceremonial signing, Governor Steve Beshear made law the pension reform agreed to by city leaders and members of its police and fire unions.
House Bill 430 will immediately cut the city’s unfunded liability by approximately 45 percent, down to $296 million, a sum that will be paid over the next three decades, according to Mayor Jim Gray.
“Let me be clear about this, no more bonding to cover our pension,” Gray to a press conference previous to the governor signing the legislation.
“For the first time in a generation our police officers and firefighters can sleep better knowing their retirement system is strong,” Gray said. “For years the pension system was moving along like the Titanic. Our annual payments were ballooning beyond what the city could afford, but we have avoided the iceberg.”
Fire Capt. Chris Bartley, President of Local 526, International Association of Fire Fighters, lauded the work done by negotiators during the process. “When given a chance, labor and management can work together to solve issues and sit-down collectively and come out with a plan that is sustainable, provides and dignified retirement and is good for the taxpayers,” he said.
Police Det. Mike Sweeny, head of the Bluegrass Fraternal Order of Police, said the deal they reach must have been good given it was approved by more than three-quarters of Lexington’s police and fire personnel.
“It was a plan that no one liked in terms of every aspect… but it was one that everyone could live with. And that’s really the definition of compromise,” Gov. Beshear said before the bill signing.
Under the new plan, the city’s annual payments would be $20 million per year, up from the $11 million per year it had been contributing supplemented by pension-obligation bonds. The new payment schedule and methodology shifts the city’s payment plan from interest-only to paying down the principal. Paying down the unfunded liability over 30 years without the benefit changes would have cost the city $34 million a year.