Commonwealth of Kentucky

OFFICE OF THE GOVERNOR

Matthew G. Bevin 700 Capitol Avenue
Governor Suite 100
Frankfort, KY 40601
(502) 564-2611
Fax: (502) 564-2517

February 13, 2019

The Honorable Greg Fischer

Louisville Metro Government
527 West Jefferson Street, 4th Floor
Louisville, KY 40202

Dear Mayor Fischer:

I am writing in regards to the difficult budget decisions facing the City of Louisville that you
recently said were caused by the “increased pension obligation mandated by Frankfort.”

The pension crisis is the biggest fiscal challenge facing the Commonwealth, cities, counties,
school boards, our regional universities and other government and quasi-governmental agencies.

I am determined to get Kentucky’s fiscal house in order and get our pension systems on a path
towards full funding. We have a moral and legal obligation to make sure all our public servants,
including Metro Louisville’s workers, police and firefighters receive the pension checks they have
earned. These men and women deserve the peace of mind that their retirement is secure. For
many, their monthly retirement check represents most, if not all, of their income.

Louisville Metro Government, like other employers in the County Employees Retirement System
(“CERS”), has always paid the full Annual Required Contribution (or “ARC”) set by the Kentucky
Retirement Systems Board (“KRS”) each year. The ARC payment is based on assumptions for
investment returns, payroll growth, inflation and life expectancy of retirees.

If CERS employers have always paid the full pension bill, why isn’t CERS 100% fully funded? Why
does CERS have only about 50% of the assets needed to meet its pension obligations?

It’s a complex problem but there are two main reasons that CERS is severely underfunded. First,
there are structural problems within CERS, especially as it relates to the funding formula. Senate
Bill 2 corrected part of this issue in 2013 by putting all new employees in the cash-hybrid plan.
Senate Bill 151, passed in 2018 but thrown out by the Kentucky Supreme Court in December,
was the most recent legislation addressing plan structure for future employees and designed to
make our pension system both sustainable and stronger.

The second reason for CERS’ underfunding is simple: the ARC payments that Metro Louisville
(and all other CERS employers) paid in the past were significantly less than they should have
been due to gross mismanagement of the actuarial and investment processes by prior KRS Board
members, including former KRS Chairman Tommy Elliott.

KRS Board Members appointed by former Governor Steve Beshear used bogus assumptions to
keep the ARC payments for CERS employers artificially low. This may have seemed like “good

KentuckyUnbridledSpirit.com An Equal Opportunity Employer M/F/D

politics” because it hid and delayed difficult budget questions for CERS employers such as Metro
Louisville Government, but it made the pension crisis significantly worse in the long run.

Mr. Elliott’s tenure as KRS Chairman was a disservice to CERS employers, employees and
retirees. This is the same Tommy Elliot, as you know, who paid a civil penalty to the Kentucky
Registry of Election Finance to settle claims that he illegally raised contributions for your
inaugural committee. Mr. Elliot also reportedly helped you “pick dozens of appointees” for
boards and commissions even though he never served as a member of your administration (see
attached article).

Mr. Elliott’s mismanagement is currently the subject of a lawsuit pending in Franklin Circuit
Court. In a flagrant abuse of fiduciary responsibility, Mr. Elliot took over $50,000 out of state
employee pension funds that was then given to lawyers who wasted it trying, in vain, to get his
seat back on the KRS Board.

Unlike my predecessor, I have appointed only highly qualified individuals to the KRS Board and
they have put the best interest of CERS employees and retirees above political calculations.
These individuals have used honest and realistic assumptions for investments, payroll growth
and inflation. This, of course, has caused the ARC for CERS employers to increase. But if
obligations to CERS retirees are to be met, 100% of the full and “real” ARC must be paid by all
employers every year. Funding for Fiscal Year 2019 resulted in the CERS plans receiving $184
million less than the ARC required. This cannot persist indefinitely into the future or the CERS
pension plan will fail.

It is also worth noting that the General Assembly last year passed House Bill 362 to phase-in the
increased pension contributions for Metro Louisville Government and all CERS employers. I
supported a phase-in to give CERS employers time to absorb the increased pension costs without
drastic cuts to government services or significant tax increases.

You should be aware (or perhaps, concerned) that House Bill 362 was passed in an identical
manner to Senate Bill 151, which was struck down by the Supreme Court based purely on
procedural grounds.

It has been reported that several Louisville Metro Council members last week expressed concern
that they were only recently made aware of these increased pension costs and the burdens
placed on your budget. How could you and your administration have been so oblivious to what
has been going on with the pensions?

I am attaching various newspaper articles going back to February 2017 – two years ago - that
explain in greater detail what I have briefly outlined in this letter. I am also attaching the board
minutes from the July 12, 2017 KRS Board meeting that set the new rates. The increased
pension contributions were also communicated to all CERS employers in a letter sent to each of
them by our State Budget Director and dated September 7, 2017.

I understand the strain that these increased pension contributions place on your budget because
we are experiencing the same challenges with the state budget. Whereas CERS employers like
Louisville must pay approximately 30% of payroll for employees (the actual rate is 21.48% for
non-hazardous and 35.34% for hazardous), the state must pay 83.4% of payroll for non-
hazardous employees in KERS, 36.85% for hazardous and 146.3% of payroll for state police.
Despite the challenges you will face in adjusting your budget, these cuts can and should be made
without jeopardizing public safety, or cutting any police officers.

Since I became Governor, we have imposed several budget cuts on our state agencies in order to
meet our pension obligations. We have also instructed our Cabinet Secretaries to be very
judicious in replacing employees who have resigned or retired to ensure that our agencies are
operating at a high level of efficiency. In addition, we have carefully scrutinized the funds we
spend on outside consultants, lawyers and other contractors to ensure that we are not wasting
precious taxpayer money. These actions have been necessary for us to fully fund the ARC of the
Kentucky Employees Retirement System. We did not make cuts to law enforcement. In fact, we
invested millions in higher salaries and better equipment.

In closing, I recognize the fiscal challenge that you face as the Mayor of Metro Louisville. Based
upon my experience as Governor, there are no easy solutions to this problem that has been
allowed to develop due to financial incompetence and mismanagement over the past 20 years.
Previous governors and legislatures have put off the hard decisions for decades. These decisions
cannot be deferred any longer. It is critical that all public officials, including yourself, report the
facts as they exist and not as you would wish them to be. In this regard, the funding required to
meet the retirement obligations of CERS is not simply a mandate of Frankfort, as has been
widely and falsely reported. Instead, it is a fiscal and moral imperative that must be met by
cities, counties and school boards across Kentucky, including Metro Louisville, the largest
community in the Commonwealth.

The days of blindly kicking the can down the road are over. Our public employees and retirees
deserve better.

Sincerely,

Matthew G. Bevin
Governor

Attachments

CC: Louisville Metro Council Members

Jefferson County Members of the Kentucky General Assembly
Tommy Elliott agrees to pay $500 civil penalty in Fischer
campaign funding controversy
By CURTIS MORRISON | December 4, 2012 9:00 am

Tommy Elliott

Tommy Elliott has agreed to pay a $500 civil penalty to comply with a conciliation agreement
with the Kentucky Registry of Election Finance (KREF).

The conciliation agreement arose from a sworn complaint filed by me nearly a year ago against
Metro Mayor Greg Fischer and others, concerning what I believed then were illicit dealings of the
Campaign Fund of Greg Fischer for Mayor, and the Greg Fischer Mayoral Inauguration
Committee.

Elliott was not listed in my complaint as a respondent.

But in January, Louisville-based businessman Ed Hart provided KREF General Counsel Emily
Dennis with copies of emails from Elliott.

Those emails suggested that Hart and others including former U.S. Senate candidate Bruce
Lunsford, Hart’s business partner, could have been misled into believing their contributions to
Fischer’s campaign fund would be used for inaugural festivities.

Funds raised expressly for the inaugural cannot be used to pay off campaign debt under Kentucky
campaign law.

After reviewing the evidence provided by Hart, Dennis named Elliott as a respondent, although
the charge that finally stuck is somewhat unrelated to any of the allegations made by Hart or by
me.

After all the findings, briefs and hours billed by at least four different law firms (call me a job-
creator), Elliott’s the only one of quite a few respondent to suffer legal consequences of the
complaint.
And here’s what he did to cause that:

Elliott did not list himself as chairperson of the Fischer Inauguration Committee when he
registered it on November 15, 2010. Yet, he proceeded to solicit contributions identifying himself
as such beginning within four days of the registration and lasting throughout the campaign.

That’s it.

The conciliation agreement is careful to point out that Elliott’s violation of law was done
“inadvertently” and “not committed knowingly.”

The agreement was signed just last Wednesday by KREF Chairman Craig C. Dilger, Executive
Director Sarah M. Jackson, and General Counsel Dennis following its approval by the Registry.

Elliott had already signed the agreement on October 1, 2012.

Elliott is chairman of Board of Trustees for Kentucky Retirement Systems (KRS), a board he was
appointed to by Gov. Steve Beshear in April 2011.

Elliott uses his full legal name, Thomas K. Elliott, for business related to his service on that board.

And that’s the end of that.

The back story:

In late 2011, Hart and Lunsford charged that $10,000 in contributions they and five other people
gave to sponsor a table at Fischer’s Inaugural Gala was instead used to pay off a loan Fischer had
made to his campaign, a campaign run by Elliott. Fischer ultimately ended up distancing himself
from Elliott after the Courier-Journal reported Elliott helped Fischer pick dozens of appointees to
board and commissions even though Elliott was never an official member of the Fischer
Administration.
Kentucky pensions chair wants more
conservative assumptions
Tom Loftus, @TomLoftus_CJ Published 6:31 p.m. ET April 20, 2017 | Updated 6:49 a.m. ET April 21, 2017

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FRANKFORT, Ky. – The newly elected chairman of the Kentucky Retirement Systems Board
of Trustees says look for the board to make certain conservative assumptions next month that
will paint an even grimmer – but realistic – outlook of the systems' financial condition.

"What I think you'll see is we're going to be more conservative..." John Farris said in an
interview after a KRS board meeting Thursday. "I've taken a deep dive into the numbers and I
would say that I have to call into question the numbers that were approved in prior years."

Farris questioned key assumptions used by the board in the past, such as that
the government's payroll would grow at a rate of about 4 percent – a key factor in projecting
how much money the systems will get in the future from the contributions of employees. "But
actually payroll growth has been flat or negative," Farris said.

He also said that the rate assumed that would be earned on investments, now at 6.75 or 7.5
percent for the various plans in KRS, is too high. Actual returns for the last three years have
been about 5 percent, he said. "And I think at our May meeting you'll see a number closer to 5
percent," adopted as the new assumed rate of return, Farris said.
Such assumptions are key in calculating how much more money KRS will need from future
state budgets to continue honoring its commitments to 364,710 members of KRS.

Farris said he remains open to review additional information, and stressed that the entire
board would make the final decisions on these assumptions at the May 18 meeting after
listening to the systems' actuary.

Kentucky Retirement Systems is currently staggering under more than $18 billion in unfunded
liabilities. The separate Kentucky Teachers' Retirement System reports an unfunded liability of
$14.5 billion in its pension plan. But Gov. Matt Bevin has warned – partly due to inaccurate
and optimistic assumptions – the outlook is actually much worse.

Bevin has said the pension crisis is the most significant financial challenge facing Kentucky
and has said he will call a special legislative session later this year for the General
Assembly to address both pension reforms and to overhaul the state tax code in a way that will
generate more revenue.

Farris was among new members appointed to the board last summer by Bevin. In his
executive orders, Bevin also designated Farris as the chairman. But legislation passed in the
recent session of the General Assembly required that the board elect its chairman.

On Thursday Farris was the only member nominated as chair, and he was elected in a
unanimous voice vote. Likewise, David Harris was elected by unanimous voice vote as the
vice chairman.

"Our first big challenge is to make sure we get correct numbers for these actuarial
assumptions to give to the legislature," Farris said.
 BOARD OF TRUSTEES # 411
KENTUCKY RETIREMENT SYSTEMS
SPECIAL CALLED MEETING JULY 12, 2017 AT 10:00 A.M.
1270 LOUISVILLE ROAD, FRANKFORT, KENTUCKY 40601

At the Special Called Meeting of the Board of Trustees held on July 12, 2017, the following
members were present: John Farris (Chair), David Adams, Wilburn Joe Brothers, John
Chilton, William Cook, Kelly Downard, Thomas Elliott (non-voting), JT Fulkerson, David
Harris, Vince Lang, Keith Peercy, Betty Pendergrass, Mary Helen Peter, Jerry Powell, Neil
Ramsey, David Rich, and Secretary Thomas Stephens. In addition, Staff members present
were David Eager, Karen Roggenkamp, Rebecca Stephens, Connie Davis, Mark Blackwell,
Shawn Sparks, Kathy Rupinen, Joe Bowman, Ann Case, Shaun Case, Erin Surratt, Joe
Gilbert, and Leigh Taylor. Also present we_re Danny White and Joe Newton of Gabriel
Roeder Smith, Rebecca Heckler, Russ Wright, Jim Carroll, Chris Biddle, Jim Waters, Aaron
Ammerman, Michael Kurtsinger, Joe Baer, William F. Smith, Steve Starkweather, Larry
Totten, Bo Cracraft, Collin Johnson, Frank Willey, Brianna Canoll, J.D. Chaney, C. Bartley,
G. Kennedy, Teresa Sanders, Jodi Whitaker, Shellie Hampton, Steve Barger, Nick Jilek,
Representative Jerry Miller, Michile Hill, Johnathan Eakin, Alfred Miller, Penny Downs,
and Tom Loftus.

***
Mr. Farris called the meeting to order and introduced the agenda item New Trustee Oath of Office
-Mr. Joe Brothers and Mr. Downard were introduced to the Board and provided a brief
personal introduction. Ms. Leigh Taylor, as Notary, administered the Oath Office to Mr.
Brothers and Mr. Fulkerson (re-appointment), Mr. Downard was previously sworn in at the
June 20, 2017 Investment Committee Meeting.

Mr. Fan·is introduced the agenda item Approval of Minutes-May 18, 2017.· Mr. Eager noted
that portions of the recording were inaudible with regard to the KERS Hazardous Plan 2.3%
inflation rate. A motion to approve the minutes was made by Mr. Powell and seconded by
Sec. Stephens. Mr. Downard and Mr. Brothers abstained from voting on that motion. The
motion passed unanimously. Sec. Stephens made a motion to adopt the 2.3% inflation rate
for KERS Hazardous Plan and was seconded by Mr. Lang. The motion passed unanimously.
 ***
Mr. Farris introduced the agenda item Setting the Economic Assumptions and Actuarial
Rates: KERS Hazardous Pension Fund; CERS Non-Hazardous and CERS Hazardous Pension
Funds; All KRS Insurance Funds. Ms.·Pendergrass addressed the asset allocation policy
recommendation. Mr. Harris offered an analysis of the asset allocation policy and a
discussion was held. Sec. Stephens made a motion to accept the 6.25% rate of return for the
CERS Non-Hazardous and CERS Hazardous, KERS Hazardous and all Insurance Funds and
was seconded by Mr. Cook. There was fmther discussion on the motion and then a roll call
vote was taken. Mr. Farris (yes), Mr. Adams (yes), Mr. Brothers (yes), Mr. Chilton (yes), Mr.
Cook (yes), Mr. Downard (yes), Mr. Fulkerson (no), Mr. Harris (yes), Mr. Lang (no), Mr.
Peercy (yes), Ms. Pendergrass (no), Ms. Peter (no), Mr. Powell (no), Mr. Ramsey (yes), Mr.
Rich (yes), and Sec. Stephens (yes). The motion passed with eleven in favor and five
opposed. A motion was made to accept the Asset Allocation policy recommendation of the
investment committee by Sec. Stephens and seconded by Mr. Fulkerson. A roll call vote was
taken. Mr. Farris (yes), Mr. Adams (yes), Mr. Brothers (yes), Mr. Chilton (yes), Mr. Cook
(yes), Mr. Downard (yes), Mr. Fulkerson (yes), Mr. Harris (yes), Mr. Lang (no), Mr. Peercy
(yes), Ms. Pendergrass (no), Ms. Peter (yes), Mr. Powell (yes), Mr. Ramsey (yes), Mr. Rich
(yes), and Sec. Stephens (yes). The motion passed with fomteen (14) in favor and two
(2) opposed.

Mr. Danny White of Gabriel Roeder Smith gave a brief discussion on the payroll growth
assumption. A motion was made by Mr. Powell to approve KERS Hazardous payroll growth
assumption rate at 0% and seconded by Mr. Lang. The motion passed unanimously. A motion
was made to approve the recommendation of the CERS Hazardous and Non-Hazardous
payroll growth rate assumption of 2.0% by Mr. Lang and seconded by Mr. Powell. The
motion carried with one opposed (Trustee Cook).

***

Mr. Farris introduced the agenda item KRS Bylaws. Mr. Mark Blackwell reviewed the
changes and a discussion was held. Mr. Farris encouraged Mr. Rich and Mr. Blackwell to
meet regarding review of the Bylaws'. This agenda item was tabled pending further review of
the Bylaws, no action was taken.
 Mr. Chilton exited the meeting

***

Mr. Farris introduced the agenda item Review and Approval of the Investment Procurement
Policy. Mr. Blackwell gave an overview of the procurement policy and timeline for
completion in collaboration with the Finance and Administration Cabinet. Mr. Robben
provided an overview of the procurement policy. A motion was made to approve the
investment procurement policy preliminary draft by Sec. Stephens and seconded by Mr.
Powell. The motion carried unanimously.

***

Mr. Farris introduced the agenda item Review and Approval of the Investment Policy
Statement. Mr. Rich Robben reviewed the changes to the Investment Policy Statement. Mr.
Eager provided fmiher commentary. Sec. Stephens made a motion to approve the proposed
changes to the Investment Policy Statement and was seconded by Mr. Fulkerson. The
motion passed unanimously.

***

Mr. Farris introduced the agenda item Public Comment. Mr. Carroll voiced an objection to
public comment during this special called meeting. Mr. Farris noted Mr. Carroll's objection
for the record but stated that the Board would err on the side of allowing public comment. Mr.
Farris introduced Mr. J.D. Chaney, Deputy Executive Director with Kentucky League of
Cities. Mr. Chaney spoke briefly on the actuarial rates and impact. Mr. Farris then
introduced Mr. Bill Smith, Mr. Aaron Ammerman, and Mr. Jim Waters with the Bluegrass
Institute, Mr. Smith, Mr. Ammerman, and Mr. Waters spoke about the unfunded liability
and the defined benefit plans.

Mr. Lang made a motion to enter into closed session to discuss litigation. The motion was
seconded by Mr. Powell; the motion passed unanimously. Mr. Farris Read the following
statement: A motion having been made in open session to move into closed session for a
specific purpose, and such motion having carried by majority vote in open, public session, the
Board shall now enter closed session to discuss litigation, pursuant to KRS 61.810(1)(c),
because of the necessity of protecting the confidentiality of the Systems' litigation strategy
and preserving any available attorney-client privilege. The meeting moved into closed
session.

All public attendees exited the meeting.

Mr. Farris called the meeting back into open session. No action was taken. There being no
further business, the meeting adjourned at 12:00 p.m. to meet on September 14, 2017 or
upon call of the Interim Executive Director or the Chair of the Board of Trustees.

***
Copies of all documents presented are incorporated as part of the Minutes of the Board of
Trustees as of 7/12/17.

The remainder of this page is intentionally blank.

***
 CERTIFICATION

I do certify that I was present at this meeting, and I have recorded the above actions of
the Trustees on the various items considered by it at this meeting. Further, I certify
that all requirements of KRS 61.805-61.850 were met in conjunction with this
meeting.

We, the Chair of the Board of Trustees of the Kentucky Retirement Systems and
Executive Director of the Kentucky Retirement Systems, do certify that the Minutes
of Meeting Number 411, held on July 12, 2017, were approved on September 14,
2017.

I, , have reviewed the Minutes of the July 12, 2017,

Board of Trustees Special Called Meeting for content, form, and legality.
 Kentucky pension crisis: Local
governments face 50 to 60%
increase in pension costs
Tom Loftus, @TomLoftus_CJ Published 3:52 p.m. ET Sept. 7, 2017 | Updated 8:50 p.m. ET Sept. 7, 2017

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A quick look at the figures behind the Commonwealth's pension shortfall. Mary Ann Gerth/Courier-Journal/USA
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(Photo: Kentucky Chamber of Commerce)

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FRANKFORT, Ky. — Pension costs could jump 50 to 60 percent next year for local
governments across the state, according to a letter sent to them Thursday by state
Budget Director John Chilton.

To pay its share, Louisville Metro Government's cost of its employees' pensions
would jump from $76.5 million this year to $120 million next year. For Jefferson
County Public Schools, the pension tab for non-teachers would go from $36.4 million
this year to $54.8 million.

Chilton's letter notified hundreds of local government employers across the

commonwealth of the specific dollar amount of increased pension costs each can
expect when their new fiscal year begins next July 1.
Chilton's letter noted that local governments are confronting the same dilemma faced
by state government in addressing the pension crisis. "The obvious problem is most
employers cannot afford the additional pension contributions, ..." Chilton wrote. "The
pension plans are in a crisis but so are employer budgets."

The increased cost to all local governments combined would be about $345.5 million
next year, the letter says.

The letter went to local government employers who have employees in the County
Employees Retirement Systems, or CERS, pension plans. JCPS is affected because,
while its teachers are in the separate Teachers' Retirement System, its many non-
teaching employees like cooks and bus drivers are in the CERS plans.

Spokespersons for JCPS and metro government said later Thursday that they had
received the letter and were still reviewing what impact it would have.

These big estimated increases could be affected by reforms that the General
Assembly may adopt later this year at a special legislative session that Gov. Matt
Bevin says he will call to deal with the pension crisis.

The increases result from new, more conservative assumptions adopted in July by
the Kentucky Retirement System's board for the future of the CERS plans.

Those assumptions called for reducing the assumed rate of return CERS will get on
its investments from 7.5 percent to 6.25 percent, and reducing the assumed annual
rate of payroll growth of the local governments from 4 percent to 2 percent.

The assumptions result in less anticipated revenue to the CERS from interest and
payroll growth than previously assumed, and will require the local governments to
increase their contributions to keep these pension plans afloat.

"It's a significant increase, but is not a shock today because we estimated what the
impact would be after the new assumptions were made in July," said J.D. Chaney,
deputy executive director of the Kentucky League of Cities.

The League of Cities, Kentucky School Boards Association and Kentucky Association
of Counties had unsuccessfully urged the Kentucky Retirement System board to not
drop its assumptions so much, or at least phase in the new assumptions so local
governments would not face such suddenly higher costs next year.
"These numbers are what we've anticipated - sudden and substantial increases," said
Eric Kennedy, director of governmental relations for the Kentucky School Boards
Association.

Chilton's letter said the new assumptions provide a "realistic" outlook for the plans as
opposed to prior rosy assumptions which contributed to past underfunding adding to
the state's overall public pension debt. "No more pretending that everything is just
fine," he said.

Chilton said, "Priorities must be set and choices must be made. Unfortunately, the
choices are not happy choices – make structural changes to the pension plans and/or
reduce other spending.”

Officially, the CERS plans have nearly 60 percent of the money they need to pay
future obligations. As low as that is, it is far better than the main pension plan for
Kentucky state government employees that is only about 15 percent funded.

But Chilton said CERS funding levels are actually much lower than 60 percent and
are so poorly funded that if they were subject to federal standards for single-employer
pension plans, they would be terminated.

Kennedy, of the school boards association, said that single-employer private pension
plans can not be fairly compared to multi-employer public plans.

Betty Pendergrass, a member of the Kentucky Retirement System board elected by

CERS members, said she voted against the new assumptions in July because she
said they were too conservative. Pendergrass said that even state government's
pension consultant PFM Group, which made a raft of controversial pension reform
recommendations last week, suggested that contribution increases from local
governments could be capped at 5 to 10 percent a year.

But she said the letter shows that local governments starting next year "will come
under a great deal of stress - stress that I believe may not be warranted."
Louisville's pension costs to go up a
whopping $38M, threatening to wipe
out new revenue
Phillip M. Bailey, Louisville Courier Journal Published 10:57 a.m. ET Dec. 8, 2017 | Updated 11:10 a.m. ET Dec. 8,
2017

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A quick look at the figures behind the Commonwealth's pension shortfall. Mary Ann Gerth/Courier-Journal/USA
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Louisville's pension bill will go up by $38 million next year, an amount that could wipe
out any revenue growth in Mayor Greg Fischer's next budget.

The Kentucky Retirement Systems board of trustees announced this week that it
needs almost $800 million more to make state and local government retirement plans
solvent. That breaks down to about $317 million for local governments and school
districts alone.

The Fischer administration said that will result in the city spending about $115 million
on pensions next year, compared to $76.5 million this fiscal year. The 50 percent
increase would be the largest single-year jump metro government has ever faced.

"We have not yet projected for the new fiscal year, but I can assure you it won't be
$38 million in new revenue," Fischer spokesman Chris Poynter said.

Daniel Frockt, the city's chief financial officer, told members of the Metro Council
Budget Committee on Thursday that the increase will "more than absorb all the
growth that we had."

Fischer said in April that the city was projecting $23 million in revenue growth for the
current fiscal year.

Council members suggested the administration seek some sort of reprieve with the
state retirement board, given the increase.

"While we want some form of reform, we also need time to implement something like
this," said Councilwoman Marianne Butler, chairwoman of the budget panel. "A $38
million hit is much more than what our growth was last year."
Some council members asked if Louisville has the option to pay the retiree
obligations in phases rather than immediately on July 1.

Frockt said the rate adopted by the retirement board is normally an obligation
that local governments are required to pay in full. "But we also haven’t had a rate that
has increased by 50 percent," he said.

Background: Pension plans will need nearly $800 million more next year
Paying for retirees’ benefits has eaten up an increasing amount of the city’s budget
over the years.

In the 2003-04 fiscal year — the first year after city and county governments merged
— Louisville's contribution to the to the County Employees Retirement System was
$31 million. But in 2010-11, Louisville’s contribution was about $67 million.

The amounts that Louisville will be required to pay toward retiree benefits could
change depending on whether state lawmakers adopt a pension reform plan before
the next fiscal year begins.

But what that legislation will look like remains unclear.

Gov. Matt Bevin has promised he will call a special legislative session this year, but
House Republicans have asked that he not do so. Instead, GOP lawmakers
said they want to tackle the issue when the regular legislative session begins next
month.