FRANKFORT — The House passed its version of a state pension overhaul bill Wednesday, along with a proposal to help fund the ailing pension system by expanding the Kentucky Lottery and instant racing at horse racetracks.
The funding measure — House Bill 416 — received 52 "yes" votes and 47 "no" votes, falling shy of the 60 votes needed for a revenue-generating bill to become law in this year's 30-workday legislative session.
Senate President Robert Stivers, R-Manchester, said Wednesday that the Senate will not accept the bill because it did not get 60 votes.
"It is my position that this action would submit the entire process to a legal challenge based on constitutional grounds," Stivers said. "Revenue bills in odd-year sessions must be passed with a three-fifths majority vote. Based on that, the Senate cannot accept the bill due to its being unconstitutional and therefore out of order."
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House Speaker Greg Stumbo, D-Prestonsburg, argued that HB 416 would need 60 votes only when it is returned to the House for final approval after passing the Senate. Stumbo cited a court case that defined "final passage" of a bill as the last vote it receives.
Stumbo urged the House on Wednesday to approve the funding bill because it would provide more than $100 million needed to help stabilize the state's underfunded pension system. The pension overhaul bill approved by the Republican-controlled Senate this month did not contain additional funding.
"All I'm asking you to do today is to move this process forward and help avoid a special session," Stumbo said before the vote on HB 416. "How many times have you heard the taxpayers complain that you have had to come back for a special session?"
Stumbo said the Senate does not have the authority to deem the funding bill unconstitutional. The House and Senate have never refused to receive a bill from the other chamber, he said.
"I didn't know they elected him judge," Stumbo said of Stivers. "We've never ruled on the constitutionality, that's not our purview."
The Senate version of the pension overhaul bill, Senate Bill 2, included moving future new state workers to a hybrid 401(k)-style plan and nixing annual cost of living increase for retirees. That plan was based on the recommendations of a task force that examined Kentucky's underfunded pension system, which has roughly half the money it needs to pay all current and future retirees.
Additional money needed to fund the pension system can be found in 2014, when the legislature writes the state's two-year budget, Senate Republicans have argued.
In the House's version of SB 2, which was approved Wednesday on a 55-45 vote along party lines, future state workers would remain in a defined-benefit pension plan. Cost-of-living increases could be given when money is available.
Rep. Brent Yonts, R-Greenville, said the Senate's proposal does little to fix the pension system because it provides no new money. Republicans have argued that economic growth in Kentucky will produce more tax revenue in future years that can be used to fund the pension system.
"Senate Bill 2 is fatally flawed," Yonts said. "Future growth does not exist except on paper."
Meanwhile, House Minority Leader Jeff Hoover, R-Jamestown, tried unsuccessfully to table the House version of SB 2 on Wednesday because an actuarial analysis of its costs has not been completed, as required by state law.
Stumbo and Yonts argued that the Senate also passed its version of SB 2 before an analysis of its impact on the pension system had been completed. The House ultimately voted 53-45 against tabling the bill.
After approving SB 2, the House went on to debate and approve its companion funding bill, HB 416.
Stumbo said the funding bill would generate additional money for the pension system by expanding lottery games and instant racing — a slots-type game where people bet on historical horse races.
"If you don't have the money, you can't solve this problem," Stumbo said.
Stumbo told House members that HB 416 is a starting point and that the bill would likely be changed in the Republican-led Senate.
"What I am asking you to do today is to move the process forward," Stumbo said. "We ought to do the job that we're paid to do right now."
Hoover proposed an amendment to HB 416 that would cut spending on private contracts and reduce the number of state employees over the next three years to generate an additional $197 million for the pension system.
Stumbo said the state already has cut more than $40 million in private contracts. Hoover's one-time cuts would not generate the additional funding needed for the pension system over time, he said.