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Time is running out before Kentucky’s regional universities and “quasi” agencies like health departments have to pay steeper public pension costs, raising concerns about possible cuts in services and closures. Gov. Matt Bevin says he will call a special legislative session to address the issue, but finding a consensus has been hard to come by, with lawmakers disagreeing on a solution.
Kentucky’s pension systems are among the worst-funded in the nation due to years of underfunding, demographic changes and poor returns on investments. And the situation has forced the state to dedicate more and more money towards pensions, which now account for about 14 percent of all state spending.
The amount that regional universities and “quasi” state agencies have to contribute to the pension systems is set to increase from 49 percent of every employees' salary to about 84 percent on July 1. The agencies worry that the spike in costs will lead to bankruptcies, layoffs and cuts in services.
Bevin has proposed addressing the issue by allowing the agencies to “buy out” of the pension system — either by paying a lump sum of their share of the state’s pension debt or by making payments that increase over the next 30 years.
The proposal would also allow agencies to freeze pension benefits of their workers and move them into less generous 401k-style retirement plans, raising concerns from some lawmakers and employee groups.
Bevin’s office says they have enough support from lawmakers to pass his bill during a special session, but he has misjudged support in the past — late last year, Bevin called a surprise legislative session to address the pension issue, but lawmakers voted to end the session without passing anything after a little less than 24 hours.
Bevin’s office says the governor will call the session sometime in July or August.
This week on In Conversation, guest host and Capitol Reporter Ryland Barton talks with lawmakers and other officials about the pension and how it could soon affect the state.
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