Gov. Matt Bevin’s proposal for how Kentucky should spend public money over the next two years would eliminate the state’s share of funding for health insurance used by retired teachers.
Bevin’s budget would also do away with subsidies that about 3,500 employees use to pay for health insurance of dependents.
During a meeting of the Public Pension Oversight Board, budget director John Chilton said the state can’t afford the programs.
“There’s just not enough funding to satisfy all of the needs and desires that people might project into the budget,” Chilton said. “We knew that was not subject to the inviolable contract, so funding was reduced to zero for that purpose.”
Employees’ pension benefits are protected by a so-called “inviolable contract” that guarantees benefits as promised when they were hired.
Lawmakers and officials say that health insurance is not protected, but state law only requires the pension systems to provide access to group health insurance coverage.
Beau Barnes, executive director of Kentucky Teacher Retirement Systems, said the pension agency is only required to provide coverage “if funding is available.”
“The [Kentucky Teacher Retirement Systems] board would be in control of deciding what type of insurance is provided and how much is charged to the individual member,” Barnes said.
Bevin’s budget would eliminate $145.5 million in funding for retired teacher health insurance for the next two years.
The Republican chairs of the Public Pension Oversight Board both said they had received calls from constituents protesting the proposed changes.
Rep. Jerry Miller, a Republican from Louisville, said the pension systems needed to do more to tell state workers that health insurance is not a protected benefit.
“They have the impression that health care is in the inviolable contract, or at least that’s their perception,” Miller said. “Has there been anything to educate teachers on that fact?”
Sen. Joe Bowen, a Republican from Owensboro, said teachers should be supportive of Bevin’s budget proposal because it sets aside more money to fund the pension systems.
“I’m overwhelmed with the emails requesting that we do not support the executive branch budget as requested,” Bowen said.
Bevin’s budget proposal would contribute $3.3 billion to the pension systems — about 15 percent of the entire state budget.
Rep. James Kay, a Democrat from Versailles, said the state should provide health insurance to workers and retirees, even if it’s not required to do so.
“Teachers are not going to be happy when you don’t fund their health insurance,”
Kay said. “Any employee in this commonwealth hopes for a job where you have medical insurance.”
Bevin’s budget is just a proposal. Next, the state House of Representatives will come up with its own version of the spending plan, then the state Senate.
A final version has to pass the legislature by April 13 and then be signed by the governor.