Kentucky Gov. Matt Bevin’s proposed pension relief bill has gained key support from six representatives of local health departments, mental health centers and other quasi-governmental agencies.
“We support passage of this bill during the special session with the understanding that the four issues outlined below will be addressed during the 2020 General Session,” the groups said in a letter sent Thursday to Bevin and legislative leaders.
The letter was signed by Allison Adams with Kentucky Health Departments Association, Ellen Recktenwald with Kentucky Association of Sexual Assault Programs, Sherry Currens with Kentucky Coalition Against Domestic Violence, Caroline Ruschell with Child Advocacy Centers of Kentucky, Steven Shannon with Kentucky Association of Regional Programs and Bart Baldwin with Kentucky Health Resources Alliance.
They join presidents of regional universities, the Council on Postsecondary Education and the Kentucky Community and Technical College System in endorsing the pension proposal drafted by Bevin’s administration.
Bevin, in an email, said of the endorsements, “Over the last several days, our team met with Kentucky’s quasi agencies and universities to present a proposal for addressing the growing financial burden created by Kentucky’s looming pension crisis. I appreciate the support these groups have offered for our proposal. We must now act decisively to provide them all with needed financial relief and to ensure their future ability to provide essential public services.”
Bevin is expected to call a special legislative session in coming days so lawmakers can consider the bill, which replaces a bill he vetoed last month. Unless lawmakers act, universities and quasi-public agencies face a staggering hike in their pension contribution rates when the new fiscal year begins July 1.
The sharpest criticism of the proposal has come from Kentucky Government Retirees and Kentucky Public Pension Coalition. Critics have said the plan could cost the state’s already ailing retirement system an extra $827 million over 30 years.
Lawmakers have said a special session would last at least five days and cost $66,434 a day. Senate President Rober Stivers, R-Manchester, has said he prefers the session start on a Monday and Bevin has said he doubts it will be this coming Monday. During the following week of May 13, the Republican Governors Association is holding “corporate policy” summit in Louisville on May 15 and 16. Bevin’s communications office has not responded to a question on whether Bevin will attend the conference.
Bevin’s plan basically allows the agencies to stay with the Kentucky Retirement Systems at full cost, leave the retirement system by paying a lump sum equal to future projected benefits payments or buying their way out in installment payments over 30 years.
It extends a freeze on pension costs for another year for universities and quasi-pubic agencies, holding them at 49 percent of their payroll instead of 87 percent, which is what the rest of state government pays.
In their letter this week to Bevin and legislative leaders, the representatives of the quasi-public agencies said they appreciate the proposed freeze for this year and “the fact that the proposed legislation does not place retiree benefits at risk if an employer defaults.”
They also said they appreciate recognition of their concerns over previous proposals that would have required the posting of collateral or security for the unfunded liability obligations.
Concerning next year’s regular legislative session, the quasi-public agencies said more must be done to remove barriers that might prevent victim services organizations, such as domestic violence shelters, rape crisis centers and children’s advocacy centers, from using the legislation.
“Unlike a university that receives unrestricted tuition dollars and other sources, these victim services organizations operate on funding which is restricted to victim service activities. In other words, the restricted funding received cannot be used for payments that would be used to buy out of the retirement system,” the agency representatives said.
“The employer options for ceasing participation from KERS (the retirement system) outlined in the proposed legislation are not viable for organizations that do not have access to unrestricted funding that can be used for the purpose of debt payments,” they wrote.
The letter also expressed concern about how a quasi-governmental employer’s share of the unfunded liability should be calculated and that the terms of the 30-year installment payment plan would lead to employer defaults. The annual payment would increase by 1.5% a year and interest rates of 5.25% to 6.25% would be imposed.
“The currently proposed 1.5% escalator in the annual installment payment, and the proposed interest rates of 5.25% and 6.25%, are likely to lead to employer defaults within a relatively short time period,” they said.