In mid-July, Gov. Matt Bevin called a special session to address the crippling pension crisis, which left many quasi-government agencies and the state's regional universities, including Eastern Kentucky University, wondering if it would be another repeat of House Bill 358.
HB 358 would have provided temporary relief from skyrocketing pension costs had it not been vetoed by Bevin in late April, as he stated it violated "both the moral and legal obligation to retirees."
Many local lawmakers were disappointed in the governor's decision as it left agencies in limbo as they tried to create budgets for the coming fiscal year.
If it wasn't for the signing of HB 1 as a result of the July special session, which froze employer contributions at 49.4%, EKU was looking at an increase in contribution payments from $13.2 million to $22.8.
But EKU decided to go with the best case scenario when creating its fiscal year budget during its June Board of Regents meeting.
"That was our most immediate concern. Our board passed the budget, our $355 million-plus budget, which was passed based on the assumption that there would be some legislative fix to the problem," EKU President Michael Benson said. "I commend legislators and the governor for coming up with a solution. Now, is it the best solution? Maybe not. But in a long spectrum of options, I think it was the best option we had."
Benson noted it was and still is important to EKU to be on top of the pension issue because of the fact that regional comprehensive universities are the ones impacted the most profoundly, he said.
"We owe it to our employees to give them some semblance of security and confidence that what they've been promised, we will make good on," Benson said.
In 2010, more than 1,000 employees made up the Kentucky Employee Retirement System (KERS) population at EKU. As of July, that number has dropped significantly to 377.
The freeze is meant to only be a temporary fix with an expiration date of April 1, 2020, when universities and quasi-governmental agencies have to make a decision about their participation in the KERS.
That could mean one of several options. Employers can keep their employees in the KERS non-hazardous plan at increased costs, or move all or a portion of their employees to an alternative retirement program. Agencies that leave the KERS would have to pay their unfunded liabilities, which are earned, but yet unfunded benefits, in either a lump sum or in installments, according to a previous Register story.
"What was our nuclear option -- how much would we have to raise tuition to cover a $10-and-a-half million shortfall, how many positions would need to be cut, how many programs would you have to close, how many athletic teams would we have to axe, how many more regional campuses would we have to shutter?" Benson said. "All of those things were on the table that we had to consider, but thankfully we've been able to tap the breaks and don't have to go down that path."
In early 2018, Benson and the board of regents made a tough decision to eliminate at least 200 positions as well as suspending several academic programs as a measure to find more than $25 million in savings in response to increasing pension contributions and cuts to state funding.
Making budgets cuts again for 2019-20 fiscal year was something Benson wanted to avoid.
"We've gone through the process, just in April of 2018 of cutting $25 million out of the budget, and that was tough," Benson said. "I don't want to have to repeat that again any time soon. There was a lot of people impacted by that, and at the end of the day, I'm responsible for our employees, and I take that very seriously."
After Bevin signed HB 1, Benson sent a letter to faculty and staff, giving them an update on the pension situation. He noted that he wanted to keep them in the loop, preferring to be over-communicative than under, and will continue to do so in the coming months as they receive more information regarding an estimate of current liability to the KERS, which will provide information regarding the cost of ceasing participation and the amount of the existing liability.
Moving forward, Benson said the board of regents will work diligently to determine the best course of action for EKU, keeping in mind the university's core principles and mission of providing a top-notch education for students as well as a productive work environment for employees.
"Something has to give, if you just do the math. I'm no mathematician, but you have fewer and fewer people paying into the system and more and more people retiring. … This issue in many ways has sucked the oxygen out the room and forced us to focus on this, and we've got to get it fixed. It's going to take a lot of consultation with our board, discussion with our employees, discussion with the KERS," Benson said. "We've demonstrated our willingness to make sure we're open to all options. I won't say one way or the other because everything is on the table. … This is not going to go away."
Reach Kaitlyn Brooks at 624-6608; follow her on Twitter @kaitlynsbrooks.