Auditors: Corbin leaders must deal with pension fund shortage

Though receiving encouraging financial news Monday with through its annual audit, members of the Corbin City Commission may have to deal with an aging and chronically under funded pension fund for policeman and firefighters sooner than they’d like.
In the 2006 annual audit, auditors noted that the pension trust fund for some retirees of the fire and police departments is in dire need of a funds infusion. The most recent “actuarial,” or study of the fund in July 2005 showed it under funded by about $6.1 million. At the time, it was only funded at an 11 percent ration. Last year, the cost of the pension fund was $489,303.
Corbin City Manager Bill Ed Cannon said cities across the state of Kentucky are battling similar problems with pension funds for their emergency and law enforcement personnel.
“Go to Lexington and you are in about $200 million,” he said. “It’s a huge problem that every city that has one of these is facing right now.”
Cannon said the fund only affects “a small group” of officers and fireman who could potentially retire and begin drawing from it instead of contributing to it. Most firemen and police officers, and all new hires, are placed on the state retirement system. A potential pitfall could be the sudden retirement, all at once, of many eligible to draw from the fund – a move Cannon says would wreck it.
“It would immediately be in a hell of a shape,” he said. “There’s really no danger right now, but it all depends on who is drawing.”
City leaders will meet today to try to hash out strategies for dealing with the problem. Cannon said the pension fund has about $750,000 banked right now.
Earlier this year, Commissioners met with state officials regarding a potential takeover of the fund, but negotiations fell through.
City Commissioner Bruce Farris said an increase in property taxes allocated to the fund has helped to some extent, but that officials will be taking a look at a more permanent solution.
“Under funding is a growing problem with every municipal government that has a P&F Pension Fund. Local government officials throughout the Commonwealth are hopeful that the State legislature will address this issue and make adequate financial provisions.,” he said. “The property tax rates that were set at the October 2006 meeting of the Corbin City Commission were not increased, however, the portion allocated to the P&F Pension Fund was increased, with less money going to the General Fund. The budget committee will discuss the City’s options of dealing with the P&F Pension Fund under funding and their recommendation will be voted upon by the City Commission.”
Former City Manager Dave Hudson said the fund was created in the 1960s and that employees had a one-time choice in the 1980s to stay on the fund or to accept a state retirement plan.
Cannon said the city has a legal obligation to pay any pensions being drawn from the fund.