Personnel Cabinet and Budget Appropriations in Kentucky

Personnel Cabinet and Personnel Board Overview JEREMY SIMPSON LRC OFFICE OF BUDGET REVIEW JUNE 2024

Personnel Cabinet (Approximately 150 Employees) Provides human resources management, policy, guidance, and administrative support for state agencies of the Commonwealth. Operates the Kentucky Employees Health Plan (KEHP) and the Workers Compensation program. Provides services to every agency of state government, including school districts, many quasi-governmental entities, and some counties. 2 LRC OFFICE OF BUDGET REVIEW

Budget Appropriation Units General Operations Public Employees Deferred Compensation Authority Workers Compensation Benefits and Reserve Fixed Allocation Non-Hazardous Pension Fund State Salary and Compensation Fund 3 LRC OFFICE OF BUDGET REVIEW

Personnel Appropriations FY25 Source of Funds Restricted Funds $68,118,500 47% General Fund $75,657,300 53% $143.8 Million Source: 2024 Budget of the Commonwealth 4 LRC OFFICE OF BUDGET REVIEW

Personnel Appropriations FY25 Appropriation Unit State Salary and Compensation Fund $1,500,000 1% Fixed Allocation Non- Hazardous Pension Fund $75,657,300 53% General Operations $33,776,000 23% Public Employees Deferred Compensation Authority $8,462,900 6% Workers' Compensation Benefits and Reserve $24,379,600 17% $143.8 Million Source: 2024 Budget of the Commonwealth 5 LRC OFFICE OF BUDGET REVIEW

Personnel Appropriations FY26 Source of Funds Restricted Funds $67,721,400 49% General Fund $69,750,400 51% $137.5 Million Source: 2024 Budget of the Commonwealth 6 LRC OFFICE OF BUDGET REVIEW

Personnel Appropriations FY26 Appropriation Unit State Salary and Compensation Fund $1,500,000 1% General Operations $33,296,500 9% Public Employees Deferred Compensation Authority $8,520,000 2% Fixed Allocation Non- Hazardous Pension Fund $69,750,400 20% Workers' Compensation Benefits and Reserve $24,404,900 68% $137.5 Million Source: 2024 Budget of the Commonwealth 7 LRC OFFICE OF BUDGET REVIEW

Total of five budgetary programs: General Administration Governmental Services Center Employee Relations Employee Insurance Personnel Administration General Operations (130 Employees) Budget Detail: Appropriation Restricted Fund revenues for this unit consist primarily of fees from other state agencies, which include pro-rata assessment for use of KHRIS systems, Employee Benefit Assessment charges, and life insurance program fees paid to the Cabinet. FY 25 33,776,000 33,776,000 FY 26 33,296,500 33,296,500 RSTD Total Historically, restricted funds were transferred to the General Fund to support KHRIS debt service (pro rata assessment). These bonds retired in 2021, requiring no further transfers. 8 LRC OFFICE OF BUDGET REVIEW

Kentucky Employees Health Plan Plan Overview: KEHP is the Commonwealth s self-insured employees health insurance plan and flexible spending account program. KEHP covers nearly 300,000 people in Kentucky. The KEHP Trust Fund provides reserves for increases in health care costs and to keep premiums low for state employees. 9 LRC OFFICE OF BUDGET REVIEW

KEHP Membership Quasi Groups 4% State Agencies 19% School Boards 57% Retirement Systems 20% Source: Kentucky Employees Twenty-second Health Plan Annual Report of the Kentucky Group Health Insurance Board - 2022 10 LRC OFFICE OF BUDGET REVIEW

Public Employees Deferred Compensation Authority (14 Employees) Self-funded voluntary* supplemental retirement benefits program for Kentucky public employees. Receipt Reconciliation Branch Member Services Center Administrative Services Branch Marketing and Communications Branch Deposits and Records Branch Appropriation FY 25 8,462,900 8,462,900 FY 26 8,520,000 8,520,000 RSTD Total *RS 2019 SB 107 requires enrollment of new state employees into KDC, for which the Cabinet reports 95% are retained. 11 LRC OFFICE OF BUDGET REVIEW

Self-insured Workers Compensation Program for the Commonwealth, including: Workers Compensation Benefits and Reserve (6 Employees) - KCTCS, - Murray State University, - Various quasi-governmental organizations, - Volunteer firefighters and ambulance workers, Appropriation - Employees of some county clerk s or sheriff s offices when the county s population is 70,000 or more. Transportation has its own risk management program. Coverage currently provided for over 60,000 employees and volunteers. FY 25 24,379,600 24,379,600 FY 26 24,404,900 24,404,900 RSTD Total 12 LRC OFFICE OF BUDGET REVIEW

Comprised of seven members: - Five Governor appointed - Two elected by peers Personnel Board (5 Employees & 10 Contract Hearing Officers) Board meets monthly. Funded by assessments Serves in a quasi-judicial capacity and assists the Personnel Cabinet in the development of administrative regulations pertaining to classified service. Appropriation FY 25 255,000 1,022,700 1,033,400 1,277,700 1,278,700 FY 26 245,300 GNRL RSTD Total Conducts hearings for any non-probationary employee who is dismissed, demoted, suspended, or otherwise penalized for cause. 13 LRC OFFICE OF BUDGET REVIEW

General fund is provided for a statewide pool in each fiscal year for quasi-state agencies to continue the baseline subsidy for employer contributions and provide the additional funds necessary to finance the increased costs attributable to shift to a fixed allocation for the unfunded liability of the nonhazardous retirement plan s employer contributions. Fixed Allocation Non-Hazardous Pension Fund 2021 legislation made a significant change in the method of funding the unfunded actuarially accrued liability by assigning a fixed dollar allocation to each participating entity instead of a contribution rate against actual payroll amounts. Appropriation FY 25 75,657,300 75,657,300 FY 26 69,750,400 69,750,400 GNRL Total This legislation reform addresses the longstanding trend of quasi-governmental entities purposefully reducing participation of their workers in the nonhazardous retirement system and avoiding those costs. 14 LRC OFFICE OF BUDGET REVIEW

The State Salary and Compensation Fund is a statewide pool to provide the additional funds necessary for 2025-2026 Information Technology job classification raises. State Salary and Compensation Fund Appropriation FY 25 1,500,000 1,500,000 1,500,000 1,500,000 FY 26 RSTD Total 15 LRC OFFICE OF BUDGET REVIEW

Questions? Jeremy.Simpson@lrc.ky.gov (502) 564-8100 Ext. 59153 16 LRC OFFICE OF BUDGET REVIEW