Despite protests from Democratic members, the House State Government Committee on Saturday approved Gov. Matt Bevin’s plan to offer financial relief to regional universities and quasi-governmental agencies facing huge pension costs on an 11-8 vote and sent it to the full House for its consideration.
The sponsor of House Bill 1, Rep. James Tipton, R-Shelbyville, said he expects the House to pass the measure Monday “but maybe not by a very large margin.” Republicans claim the bill needs 51 votes to emerge from the 100-member chamber, while Democrats contend that it is a revenue bill that needs 60 votes in an odd-numbered year session.
House Democratic Leader Rocky Adkins, D-Sandy Hook, said he is not sure how the bill will fare in the House, noting that one Republican on the committee — Rep. Tommy Turner of Somerset — voted against it.
“It will be interesting to see how many more of the Republican members have the same concerns about this bill that our House Democratic caucus has and the affected groups have,” he said.
Republicans outnumber Democrats in the House 61-39. The bill appears to have stronger support in the GOP-led Senate.
If Bevin’s measure eventually becomes law, Adkins said, he predicted that it will face a legal challenge.
Bevin’s plan would replace a bill he vetoed in April after the GOP-led legislature had ended its regular session.
Concern has been expressed that no legislative action would lead to bankruptcies, elimination of staff and loss of critical services for the agencies involved. Bevin called a special law-making session, which began Friday, to consider his plan.
The Republican governor’s plan gives the agencies options: 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 buy their way out in installment payments over 30 years. It continues a freeze on pension costs for another year.
Some legislators want to make sure employees of the affected groups keep the option to retain their current benefits if they have been in the state plan since 2013 and argue that Bevin’s plan violates the so-called “inviolable contract” that guarantees state workers get the pension benefits promised when they were hired.
Before approving Bevin’s plan, the House committee voted down two Democratic proposals along party lines.
Rep. Joe Graviss, D-Frankfort, presented House Bill 2. It would allow everyone currently enrolled in the state pension system to continue accruing benefits and freeze the agencies at the 49 percent contribution rate for the next 25 years.
This would require higher contribution rates for the rest of state government, at least in the near future, to offset the loss to Kentucky Retirement Systems of about $121 million.
Also, for the next five years, the Democratic plan would shift about $130 million in “excess” retiree health insurance fund payments at the Kentucky Retirement Systems into its pension funds, which needs it more.
Bevin dismissed the plan, saying it was risky and made too many questionable assumptions.
Graviss argued the Democratic plan was cheaper and legal. He unsuccessfully urged committee members to at least vote it out so all 100 House members could consider it.
The committee also defeated House Bill 3, sponsored by Rep. Angie Hatton, D-Whitesburg, along party lines. It simply would have frozen the pension contribution rates for the agencies.
She touted it as a fallback in case House Bill 1 is killed in the courts.
Before the committee met Saturday, Attorney General Andy Beshear, in a letter to all state lawmakers, said the wording Bevin used in his formal call for a special session to consider pension legislation might legally endanger any resulting legislation.
Beshear, the state’s chief law-enforcement official and Democratic nominee to run against Bevin in the Nov. 5 general election, said Bevin’s session proclamation issued Thursday “goes far beyond listing ‘the subjects to be considered’ for the session, and instead includes specific and mandatory terms of any legislation to be considered.”
The proclamation “exceeds the governor’s authority in calling the session and encroaches on your exclusive lawmaking power,” Beshear said to the lawmakers.
“I am concerned that Governor Bevin has endangered any legislation that will come out of this session.”
Beshear said Bevin should amend his call by removing all the subjects he listed to reflect his desired legislation to alter the pension system for regional universities and quasi-governmental agencies.
Republican legislative leaders have said it is disingenuous for anyone to criticize Bevin’s call. They say the Kentucky Constitution says only the governor can call a special session and set its agenda.
Beshear said he agrees with that but the Constitution does not mean a governor can dictate the final terms of the law.
Shortly after Beshear’s media availability, Bevin’s deputy chief of staff and legislative director Bryan Sunderland told reporters in front of the governor’s office that the governor “has quite capable legal representation and so do members of the General Assembly that we work with very closely on a regular basis.
“The idea that the governor’s call is too restrictive is absurd considering the nature of the call of the governor.”
Sunderland noted that an entire bill was attached to then-Gov. Steve Beshear’s call in 2008 for a special session on pension reform. The former governor is the attorney general’s father.
Beshear had said earlier that the 2008 call had an attachment.
Bevin’s call is “far less restrictive” than the 2008 call, said Sunderland.
Sunderland also commented on Beshear’s warning to lawmakers that “any final legislation coming out of this or any session must recognize and protect the inviolable contract rights of the public pension system from universities, colleges and quasi-governmental agencies.”
Sunderland said three organizations have opted out of the state pension system and put their employees under a defined-contribution plan under a 2015 law signed by Gov. Beshear. The latest was the Kentucky Bar Association, he said, joining the Commonwealth Credit Union and Kentucky Employers’ Mutual Insurance.