Gov. Matt Bevin lauds passing of pension bill to address quasi-governmental agencies
Kentucky Gov. Matt Bevin signed into law Wednesday a plan to deal with a huge increase in pension costs for regional universities and quasi-governmental agencies, such as health departments and rape crisis centers, calling it “remarkably responsible.”
He signed the bill two hours after a 27-to-11 vote in the Senate sent House Bill 1 to his desk and concluded the special legislative session that started last Friday. The session cost taxpayers about $65,500 a day, or about $396,000 over the six-day run.
The law took effect immediately. It is retroactive to July 1, the day more expensive pension bills were sent out to regional universities and 118 other agencies.
During a bill-signing ceremony attended by lawmakers and state officials, Bevin hailed the bill as a step toward ensuring the state’s ailing pension system would continue giving retirees their pension checks.
“This bill doesn’t by any stretch resolve the pension crisis in Kentucky, no one has presented it as doing so,” Bevin said. “But it is a remarkably responsible and appropriate next step in moving toward financial solvency.”
Democrats contend the controversial measure, which delays higher pension rates for the agencies for a year, will force many of the approximately 7,000 employees at affected agencies into less attractive 401(k)-style retirement plans in violation of the “inviolable contract” that promises state employees will get the pension benefits promised when hired.
Democrats and Republicans have said they expect a legal challenge to the bill. Senate President Robert Stivers, R-Manchester, however, said he believes the new law is constitutional.
Jim Carroll, president of Kentucky Government Retirees, hinted at a lawsuit.
“We are bitterly disappointed that a bill that assaults the contract rights of dedicated public employees has passed the General Assembly,” he said . “We will stand in solidarity with affected employees when guaranteed benefits are terminated next year and this matter is litigated.”
“We will expect the Kentucky Retirement Systems board of trustees to fulfill its fiduciary duty to its members by joining in any such litigation,” he said.
Ron Richmond, spokesman for Kentucky Public Pension Coalition, called Bevin’s law “irresponsible.”
“Supporters of HB 1 have held these quasi-governmental agencies hostage, unnecessarily forcing these employers into a false choice between keeping their doors open and the retirement security of their employees,” said Richmond.
Bevin said he was unconcerned about any potential lawsuits against the bill.
“There’s no basis for any of it,” he said. “It’s the kind of political theater that would come out of the attorney general’s office, perhaps.”
Kentucky Retirement Systems faces unfunded pension liabilities of $23.5 billion, and employer contribution rates have soared. State government is paying the equivalent of 84 percent of its payroll into KRS for pensions. The rate for the regional universities and other quasi-governmental agencies had been capped at 49 percent until the new fiscal year began July 1.
HB 1 allows the agency employers to decide next year whether to stay in the state retirement systems and face a big increase in their contribution rates or agree to leave. It offers several incentives to the employers if they agree to freeze their employees’ pensions and transfer them into a 401(k)-style plan.
Bevin called the special session after he vetoed the legislature’s first attempt to deal with the issue earlier this year, causing Republican leaders to shift the onus of drafting a new bill and herding enough votes to pass it to the governor’s office.
House Speaker David Osborne, R-Prospect, was ambivalent about which of the two bills was a better solution.
“Certainly there were some technical issues with it that could have been addressed when we came back into session,” Osborne said of the first bill. “I don’t know that it (HB 1) is better, I think it accomplishes most of the same objectives and those are objectives that these entities ask us to do.”
Debate in the Senate focused on concern that some agencies could go out of business and concern for employees’ pensions.
Two Senate Republicans voted against the bill — Tom Buford of Nicholasville and C.B. Embry Jr. of Morgantown — after the nearly two-hour debate in the Senate grew a bit contentious but it was the Democrats who raised the most opposition to the bill.
“This bill says you may not get the pension you worked for,” said Senate Democratic Leader Morgan McGarvey of Louisville in speaking against it.
Senate Democrats offered three amendments to the bill but all three were voted down on 9-28 votes.
“We are ending the state’s partnership with employers,” McGarvey said after the third Democratic amendment was shot down.
He added: “For employees in the other system, they are coming for you next.”
That did not sit well with several Republicans.
Bevin said McGarvey was “childish, actually, to be that kind of a fear-monger. What, are they afraid that someone’s going to save their pension, too?”
“They should be as excited as they’ve ever been,” Bevin said of the affected employees. “It’s the first time in years that they’ve been told the truth.”
Majority Floor Leader Damon Thayer of Georgetown noted that agencies involved in the legislation requested it. “These employees are not state employees,” he said.
Sen. Julie Raque Adams, R-Louisville, criticized “reckless statements” by Democrats. She said Republicans were trying to stabilize the finances of the agencies “so many people can keep their job.”
Bevin said the bill is just one step in the process of overhauling Kentucky’s pension systems. The Republican-led legislature’s previous attempt at reforming the state’s pension systems was struck down last year by the Kentucky Supreme Court.
“This is one step in the journey. We aren’t even close,” Bevin said. “This is one step toward financial solvency, but there will have to be more steps. We don’t even know fully what they will be.”