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Bevin Signs Pension Bill, Ending Kentucky Legislature's Special Session

Kentucky State Capitol

Gov. Matt Bevin has signed a bill into law that allows Kentucky’s regional universities and “quasi” state agencies to avoid a massive spike in pension costs in exchange for exiting the state’s ailing pension systems.

The measure allows the 118 agencies to buy out of Kentucky’s ailing pension system and incentivizes them to move their employees into 401k-type retirement plans, preventing them from earning future pension benefits.

The bill could affect up to 7,000 employees and is also expected to add $827 million in state pension costs.

Bevin acknowledged that the measure doesn’t help lower Kentucky’s retirement debt, which is already among the worst in the nation, but said the bill will help struggling state agencies stay open.

“This bill doesn’t by any stretch resolve the pension crisis in Kentucky, nobody has presented it as doing so, but it is a remarkably responsible and appropriate next step in moving toward financial solvency,” Bevin said

Bevin called a special legislative session last week for lawmakers to address the issue after spending months hammering out the pension bill with Republican leaders of the legislature.

The bill narrowly passed out of the state House of Representatives on Saturday, but easily passed the Senate on Wednesday with a vote of 27-11.

Democrats criticize the bill, saying it illegally freezes retirement benefits for state workers.

Senate Minority Leader Morgan McGarvey, a Democrat from Louisville, said the bill represents the “beginning of the end for state pensions in this state.”

“These are people who worked at rape crisis centers making $35,000 a year. The only hope of a life when they’re old enough is a pension. We’re going to cut that off today,” McGarvey said.

The measure won’t eliminate pension benefits for workers, but will encourage agencies that exit the system to cap employees’ benefits and move them into 401k-type plans on a going forward basis. It does not require employers to make contributions to 401ks.

Senate Majority Leader Damon Thayer, a Republican from Georgetown, accused Democrats of spreading rumors about destroying the pension system in order to rally up opponents.

“It’s a red herring, a ruse. Something to get the attention of groups not even affected by this bill and to attempt to fire them up here in the middle of the summer against this bill,” Thayer said.

Republicans say that the state is allowed to alter pension benefits for workers on a going-forward basis.

Bevin said Wednesday afternoon that the measure is the first step towards more sweeping pension reform.

“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. Some of them will be determined by the impact of the steps taken thus far,” Bevin said.

Jim Carroll, president of the Kentucky Government Employees advocacy group, said the bill “assaults the contract rights of dedicated public employees.”

“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,” Carroll said.

Democratic Attorney General Andy Beshear has also threatened to sue over the legislation, saying that Bevin’s proclamation that called the special session prevented lawmakers from considering other proposals.

This story has been updated.

Ryland Barton is the Managing Editor for Collaboratives. Email Ryland at rbarton@lpm.org.