BRADENTON, Fla. - A bill containing union-backed pension concessions for the city of Lexington, Ky., is headed to the desk of Gov. Steve Beshear.
Beshear has indicated that he will sign the measure to comprehensively reform Lexington’s police and fire pension fund.
The bill passed by the Senate with only one “no” vote on Thursday. It passed the House unanimously on Feb. 25
“Once the governor signs this legislation, we’ve solved the biggest fiscal problem facing the city,” said Lexington Mayor Jim Gray. “Our city’s financial health will be restored for the long-term.”
The city struggled for years to agree on pension reform measures, he said, adding that it was ultimately possible because police and fire unions and retirees were willing to compromise.
Some 76% of active and retired officers and firefighters approved the massive overhaul of the 40-year-old pension system in late January.
The new plan requires lower annual cost-of-living adjustments, increased contributions from active and future employees, and institutes a remodeled pension plan for new employees.
The city agreed to increase its payments to the retirement fund and bind itself through state legislation to paying down the unfunded liability over 30 years. Lexington’s annual required contribution will not be lower than $20 million, though it may go up over the years as the plan’s liabilities are reviewed.
The plan cuts the pension fund’s $296 million unfunded liability to $161 million, and eliminates the need for the city to issue $34 million of pension obligation bonds this year to cover the minimum required payment.
Lexington had issued $136 million of POBs since 2009 to cover annual required contributions, but officials said that didn’t work because the plan required fundamental changes.
Though union members said they were not happy about the reduced benefits, they agreed changes were necessary.
“This compromise on our pension came out of necessity to protect our pension,” said Capt. Chris Bartley, president of Local 526 of the International Association of Firefighters. “Our firefighters and police officers have earned and paid large sums of their own money into the fund, and this bill provides a defined benefit and a dignified retirement since we do not get Social Security like the rest of the general public.”
Det. Robert Sarrantonio, vice president of Bluegrass Lodge No. 4, said the bill strengthens the retirement system “in a responsible way that is built to last.”