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Clock Is Ticking For Bevin To Call Special Session On Pensions

Gov. Matt Bevin and state Republicans on Election Night 2016.
Gov. Matt Bevin and state Republicans on Election Night 2016.

Gov. Matt Bevin still doesn’t have enough support for his version of a pension bill that would provide relief to some state universities and small agencies that are facing massive increases in the amount they have to contribute to the pension systems.

Bevin still says that he will call a special legislative session for lawmakers to vote on the bill before July 1, when the spike in pension contributions is set to begin.

But legislators say that without changes, the governor is still short the number of votes needed to pass his proposal out of the state House of Representatives, even though the chamber is controlled by Republicans by a wide margin. Bevin appears to have support for the proposal in the state Senate.

House Majority Leader Bam Carney said that the vote count on Bevin’s proposal is “fairly close,” but that time is running out and some lawmakers are scheduled to be out of the state or country before the deadline.

“The dates are kind of becoming very restricted due to schedules and calendars, just based purely on people’s availability,” Carney said.

Carney said that it was still possible a special session could be called as soon as next week — many lawmakers will already be in Frankfort for interim committee hearings — but said that "it's a fluid situation."

Reprieve For Some Regional Universities And 'Quasi' Agencies

Lawmakers passed an earlier version of the pension bill during this year’s legislative session, but Bevin vetoed it, citing concerns that it would draw a legal challenge.

That measure would have allowed regional universities and “quasi” state agencies like health departments, rape crisis centers and domestic violence shelters to exit the pension system in exchange for either a lump sum payout or slowly-increasing contribution rate.

It would have also allowed the state to totally suspend benefits of employees and retirees if the agencies they work for default on pension payments.

Earlier this month, Bevin proposed a new version that did not include the benefit suspension, but instead encourages agencies to exit the pension system, freeze pension benefits of their employees and move them into 401k-type retirement plans.

Rep. Travis Brenda of Cartersville is one of the Republicans who doesn’t support Bevin’s proposal. He said it would violate employees’ contract rights.

“It’s just a continued move to move the pension systems into the private sector. It’s not going to save the pension systems,” Brenda said.

The freeze would affect "Tier 1 and Tier 2" employees — those who were hired before 2014. Employees hired since then already don't receive conventional pensions.

The earlier version of the pension bill would have allowed employees to remain in the state’s pension system if they wanted to.

House Minority Whip Joni Jenkins said with agencies facing a massive increase in pension costs, the legislature shouldn't consider a bill if it's questionably legal.

"We felt it broke the inviolable contract for employees whose employer was going to choose to get out of the system," Jenkins said. "Having a bill that passed the special session that would go right to court would be really problematic."

Even some lawmakers who support Bevin's proposal have said they would like to see more protections for employees who would have their pension benefits frozen.

House Majority Leader Bam Carney is one such lawmaker.

"I frankly would like to see movement towards employee protections for Tier 1 and 2, " Carney said. "But if given no alternative, myself personally, I would vote for the bill."

The spike in how much regional universities and “quasi” agencies have to contribute to the pension system dates back to 2017, when the Kentucky Retirement Systems board adopted pessimistic assumptions for investment returns and payroll increases.

The decision meant that state employers had to increase the amount they contribute to the pension systems — moving from 49 percent to 83 percent of their total payrolls.

Most state agencies started paying the increased rate last year, but the legislature granted a one year reprieve to regional universities and “quasi” agencies. That reprieve ends July 1.

If the reprieve isn’t extended, some of the agencies say they might have to lay off employees, cut services or close.

Senate Majority Leader Damon Thayer said that agencies should start bracing themselves for financial hardship.

“My recommendation is that everyone affected by the bill probably should start preparing for increased contribution rates on July 1 in the event that a special session doesn’t happen or if there’s not enough votes to pass a bill,” Thayer said.

Friction Despite Republican Majority

Republicans control 61 seats in the 100-member state House of Representatives, but Bevin has had a hard time cobbling together support for his proposal, with some lawmakers outright opposing the policy and others who were angered by his veto.

At an event in Richmond on Wednesday, Bevin reiterated his intention to call a special session.

“It has to happen by July first or there will be a lot of pain and suffering for a lot of our communities including this one,” Bevin said. “We’ll get it done when it gets done.”

Late last year, Bevin called lawmakers to Frankfort for a surprise legislative session, after the state Supreme Court struck down a different pension bill, with hopes of passing a similar measure.

The legislature ended up adjourning a little less than a day later without passing anything. Leaders of the legislature said that Bevin hadn’t counted votes ahead of time.

The Legislative Research Commission estimates that it costs more than $66,000 every day the legislature is in session.

Bevin's budget director John Chilton sent a letter to lawmakers last week encouraging them to support the governor's proposal and then make further changes during next year's legislative session.

"This bill simply starts the process for each entity to gather the necessary information and provides paths for sustainability. It does not preclude legislators from making adjustments if needed before these decisions are implemented," Chilton wrote.

Rep. Adam Koenig, a Republican from Erlanger, said he's not in favor of the governor's proposal and would rather consider the version that Bevin vetoed.

"We passed a bill I liked better and I don't like having my vote contingent on other action in the future that I may or may not like," Koenig said.

Rep. Mark Hart, a Republican from Falmouth, supports Bevin's proposal, but said that the governor shouldn’t call a special session if he doesn’t have the votes.

“I wouldn’t if I was him,” Hart said. “He’s in an election this year and if I was him, I wouldn’t take the chance of calling it unless I was 100 percent sure of passing it.”

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