- Associated Press - Thursday, November 17, 2016

FRANKFORT, Ky. (AP) - Western Kentucky University thought it had a win-win situation when it hired a private company to take over its facilities and grounds services this year. The company, Sodexo, hired 164 of the university’s employees at higher wages, and the university removed those workers from its books, aiming to stop making monthly payments for their retirements.

But the Kentucky Retirement Systems - one of the worst funded public pension systems in the country - still considers them “common law employees,” and still requires both the university and the employees to make their monthly contributions into the system that covers the retirements of thousands of state workers.

The university sued on Thursday, asking a judge to allow it to stop paying for the pensions of the janitors and grounds workers. A decision could have repercussions across state government, as state agencies have increased the number of contract employees to avoid paying into the troubled system.

“We all are aware of the financial issues surrounding the Kentucky Employees Retirement System, which is probably the reason for KRS to be taking this position,” said attorney Thomas Kerrick, representing university. “On behalf of WKU, we are simply asking the court to declare that WKU has the right to privatize these services.”

Kerrick said the employees are not under control of the university because it does not have the ability to hire, fire or discipline them. But retirement systems spokesman Dick Brown said the school is simply trying to avoid paying their benefits.

“These individuals are employees of WKU and therefore active members of the state pension system,” Brown said in a news release. “Kentucky Retirement Systems remains committed to protecting the retirement earned by its members and looks forward to a decisive resolution in the Franklin Circuit Court.”

The retirement system, which the legislature has underfunded for years, has just 17 percent of the money it needs to pay benefits over the next 30 years because of a combination of causes, including an economic recession that wiped out many of its investments. To catch up, the monthly contributions state agencies must pay have increased significantly, straining budgets.

Compounding the problem, some lawmakers say, is the dwindling pool of state workers that pay into the system. Kentucky had 32,324 state workers at the end of the 2015 fiscal year, down from 41,008 employees in 1996. Democratic state Rep. Brent Yonts, co-chairman of the Public Pension Oversight Board, said many state agencies have outsourced jobs to private companies.

“That is a major component with the problem with the shortfall of the pension system, in my view,” said Yonts, who lost re-election last week and will not return to the legislature next year.

Other agencies have tried to leave. In 2014, a federal bankruptcy judge ruled that Seven Counties - a private community mental health center added to the system decades ago, could stop paying into the system. The state appealed the ruling, which is still pending, fearing that taxpayers would be forced to cover the mental health workers’ pensions.

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