Pension plans could cost District more money
The McCreary County Board of Education adopted the compensating tax rate Thursday, meaning property taxes to the School District will decrease by 0.5 cents per $100 of value.
The move marks the second year in a row where the Board opted to take the lower tax rate, decreasing taxes in 2016 by 0.3 cents per $100.
The tax rate adopted by the School Board will lower property tax rates to 41.1 cents per $100 of assessed value, down from 41.6 cents. The tax rate on motor vehicles will remain the same at 46.7 cents per $100 and the utility tax of three percent also remains unchanged.
The compensating rate, determined by the state, means the District will earn about the same in property taxes as the previous year. Since the overall property assessment of the county increased, the tax rate is adjusted down.
The Board could have had the option to implement the four percent increase, which would increase revenues to the District by that amount, but they would have had to hold a public hearing before that increase.
Last year the Board did hold a public hearing on the possibility of a four percent increase, but ultimately opted to go with the compensating rate. The Board did increase the vehicle tax at that time, however.
Earlier this month a county wide election was held to determine the fate of a proposed “nickel” tax, which would have raised additional funding for construction projects in the District. That vote did not go the way the Board of Education had hoped, failing by more than a 2-1 margin.
While the tax rate is good news for McCreary County, there are signs that the School District could be facing some difficult financial questions in the next few months.
The Board heard an update from Management Consultant Bill Boyd where he presented some not-so-pleasant news.
Firstly, Boyd noted that expected revenue from the payments in lieu of taxes from the federal government had decreased sharply due to the Secure Rural Schools program failing to get reauthorized this past year.
While the revenue, which is generated through federal forestry receipts, has been diminishing each year for the past several years, the lack of reauthorization drastically impacted local funding last month.
The funding, which is divided by the County and School District, amounted to only $12,000 this year. Boyd noted the District received about $105,000 last year, which was already significantly less than 2010 when nearly $400,000 was received.
Superintendent Mike Cash implored those in attendance at the meeting to contact their legislators to work on getting the SRS back in to active status.
Secondly, Boyd stated the School District could see an increase in their required match to the County Employee Retirement System that would have a significant impact on finances going forward.
Boyd stated projections indicate the District’s contribution to the program could increase to 26.4 cents, up from 19.2 cents on the dollar, which could cost the School District nearly $500,000 in the coming year alone. The CERS affects certified staff members, not classified, who are part of a different retirement system.
The County Employee Retirement System is part of a larger issue that is plaguing Kentucky and the ongoing debates over the pension crisis.
The pension problem could affect state retirees, current teachers and government employees if changes are made to how the programs are funded.
Kentucky’s eight pension plans have been listed as the worst in the United States with the state government severely underfunding pension plans for the past several years.
Governor Matt Bevin plans to call a special session of Congress this fall to work on resolving what he claims is a $70 billion shortfall in the program.
Cash stated that between the payment in lieu of taxes and the additional retirement costs, the District could see the potential for about $600,000 loss of revenue in the coming year.
He praised the Board for adopting the five percent contingency, which provides a $1.5 million “rainy day fund” for the District, noting they could be facing severe budget cuts if that higher percentage was not in place.
The McCreary County Board of Education is scheduled to have a working session on the budget on September 19, with their next scheduled regular meeting on September 21 at 6:30 P.m. in the Central Office.