Politics & Government

GOP lawmakers may drop Bevin’s pension bills in favor of version tossed by high court

KEA president: ‘Still not governing the way we should be governing’

KEA president Stephanie Winkler responds after hearing a reading of House Bills 1 and 2 Tuesday afternoon at the State Capitol Annex in Frankfort.
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KEA president Stephanie Winkler responds after hearing a reading of House Bills 1 and 2 Tuesday afternoon at the State Capitol Annex in Frankfort.

Republican lawmakers might replace GOP Gov. Matt Bevin’s pension bills with their own during the special law-making session that Bevin called late Monday.

State Rep. Jerry Miller, chairman of the House State Government Committee, said Tuesday that he has drafted substitutes for newly filed House Bills 1 and 2 that would reflect the language of last winter’s Senate Bill 151, which the Kentucky Supreme Court struck down last week because of the rushed manner in which it was passed.

“It is on the table to put it back in,” said Miller, R-Louisville.

Miller told his committee at a hearing that although he is legislative sponsor of the current House bills, they were written by Bevin’s office and he did not read them until Monday night. The House bills are similar to SB 151 but with a few key differences, including the absence of “level dollar funding,” a strategy that would require Kentucky to front-load its payments on its $37 billion public pension shortfall.

Level dollar funding is popular among conservative leaders who say it will force fiscal discipline on a state that has under-funded its pensions for two decades. Currently, the pensions are funded based on a set percentage of payroll.

But critics, including the Kentucky Center for Economic Policy in Berea, argue that level dollar is an artifice intended to starve state government. Level dollar would require an additional $250 million in 2024 for the Teachers’ Retirement System of Kentucky, which is three times what the state spends on preschool for children, the center’s analysts said.

In a letter to lawmakers, Bevin’s general counsel, Stephen Pitt, said the governor’s office deliberately removed sections of SB 151 that it believed might be seen as violating the “inviolable contract” rights of public workers to avoid another lengthy court battle. Two credit agencies have contacted the state with questions about last week’s Supreme Court decision, leading to concerns about Kentucky’s credit rating, Pitt said.

“In the final analysis, the decision, as always, is yours,” Pitt told lawmakers.

State Rep. Jerry Miller, R-Louisville, explains pension overhaul bills Tuesday during a meeting of the House State Government Committee. Gov. Matt Bevin called a special legislative session late Monday to deal with the pension issue. Marcus Dorsey mdorsey@herald-leader.com

Miller told reporters that he suspects critics of the legislature’s pension changes are likely to sue regardless. He and other Republicans on the House committee traded barbed comments during Monday’s hearing with school teachers in the audience. The Kentucky Education Association was one of several plaintiffs who successfully sued to block SB 151.

“There are members of our caucus that defended 151 throughout the campaign,” Miller said. “They want to stand on their record, that 151 was a good idea. That’s why it’s a proposed House substitute.”

Both the governor’s bills and Miller’s proposed substitutes would place Kentucky teachers hired after Jan. 1 into less generous hybrid cash balance accounts rather than traditional defined-benefits pensions.

Both would cap the accumulated sick leave that teachers could count toward enhancing their retirement benefits. And both would limit to 12 percent the annual growth in pension contributions for local governments and related entities, such as health departments and libraries.

Miller said his proposed substitutes would restore conflict-of-interest language, dropped from Bevin’s bills, that would prohibit lawmakers, state officials and members of the Kentucky Retirement Systems board of trustees from financially benefiting from KRS investments.

Prodded by Democratic members of the committee, Miller acknowledged that there is no fiscal impact statement or actuarial analysis of the pension bills to explain what they would cost or save. Such statements are commonly prepared for bills that will affect the state treasury.

Republican House and Senate leaders are discussing the proposed changes, Miller said. A second House State Government Committee hearing is likely to be held Wednesday for further action, he added.

Teachers have not been consulted or kept updated about the bills, although their retirement benefits are the focus of this week’s special session, KEA President Stephanie Winkler told reporters. Republican legislative leaders seem determined to shove sweeping changes through the legislative process just as they did last winter when they passed SB 151, Winkler said.

“They are still not allowing transparency,” Winkler said. “They are not allowing people time to read things before they vote on them and represent the Republicans, Democrats and independents in their own district. That is not the way we should be governing in Kentucky.”

Winkler said Bevin and the legislature deserve credit for fully funding the pensions in this two-year budget for teachers and state employees, and adding several hundred million dollars on top of that to address the shortfall. If the state would continue with full funding for a while, it might find that structural changes, such as retirement benefits cuts, are not necessary, she said.

“We need to remember that we’re in this for the long game,” she said. “We’re in here making these short little fixes that may not make an impact. And we’ve not truly tested the longevity of what an influx of money each year, and paying for our pension each year as we are required to do by law, how much change that will glean.”

Kentucky Gov. Matt Bevin announced Monday afternoon that he will call a special legislative session to deal with Kentucky's struggling pension systems.

A group gathers inside the Kentucky Capitol to sing Christmas carols with a twist in protest of Gov. Matt Bevin's surprise legislative session on pensions.