The American Interest
Analysis by Walter Russell Mead & Staff
Kentucky Mayors Beg Governor for Pension Reform

Blue states have borne the brunt of the pension crisis sweeping the country, but red states are feeling the pain too. Louisville’s Courier-Journal reports that the mayors of Kentucky’s two largest cities are calling on Frankfort to overhaul their state’s pension system:

Pension costs now eat up about 15 percent of Louisville’s general fund budget—up from 6 percent seven years ago—even as services have been scaled back in recent years, Fischer said. Louisville spends around $72 million on pensions annually.

“This is a real local problem for us all,” he said. “Just put yourself in the position of a business. If a business had a 9 percent increase in its expenses without any basic revenue increase, your ability to survive definitely comes into question.”

As we’ve seen elsewhere, rising pension obligations are quickly crowding out other priorities on distressed city budgets:

Lexington’s pension contributions to Kentucky Retirement Systems have tripled in the last ten years to $16 million annually, even as the city’s workforce has shrunk. When including a separate retirement system for police and fire, pensions in Lexington now total 20 percent of the annual general fund, compared to 6 percent in 2000, according to city officials.

Kentucky may be more successful in addressing its problems than Illinois, where a last-ditch effort at a pension overhaul went down in flames this week despite the full support of the governor. Kentucky’s unions are considerably weaker than those in states like Michigan and Wisconsin, and the two houses of its legislature are split between Republicans and Democrats. If the Governor decides to make pension reform a priority, he could have an easier ride than some of his peers.

But in terms of generational politics, the situation could not be more stark: will Kentucky fire Millennials and cut back on services to the young in order to pay the unrealistic pensions promised to Boomers?

Published on January 10, 2013 3:35 pm