A leader in Kentucky’s House of Representatives says Gov. Matt Bevin’s special legislative session on pensions will have to start on July 19, or else regional universities, health departments and others will have to wait until after a critical deadline to receive relief from a massive increase in their pension costs.
Since July 1, Kentucky’s regional universities and “quasi” state agencies like health departments and rape crisis centers have racked up larger pension costs than they did previously, leading to worries about cuts in services and closures.
Bevin has promised to call a special legislative session to address the issue, but has had trouble securing enough votes to pass his proposed solution — partly because many lawmakers have been traveling to conferences or on vacation during the summer and partly because all Democrats and a handful of Republicans don’t like Bevin’s proposal.
House Majority Leader John “Bam” Carney, a Republican from Campbellsville, said in an interview on Wednesday that there is a narrow window — starting July 19 — when there will be enough supportive lawmakers available to vote.
“It appears that the votes are there by a narrow margin. It wouldn’t take but just a couple members to change their mind in either chamber to affect the outcome,” Carney said.
“With the margins as close as they are on the matter, it’s important that every member’s there.”
A Tight Time Frame
The amount that regional universities and the “quasi” agencies have to pay into the pension systems increased from 49 percent of employee payroll to 84 percent on July 1st.
The spike is happening because in 2017, the board that manages the pensions of most state workers, adopted more pessimistic assumptions for investments and payroll growth. As a result, government employers have to kick in more money to keep the system going.
Regional universities and the “quasi” agencies were granted a one-year reprieve from the increase. That reprieve expired on July 1.
Bevin’s office recently said that the larger pension payments won’t be due until the end of July and that agencies will be spared if a bill addressing the situation passes before mid-August.
Carney says that if the session doesn’t start on July 19th, then too many lawmakers will be out of town for conferences and vacation until late August.
“I know the governor is aware of that time frame, but only he would be the one to decide that’s the time that he chooses to call it. We have put members on notice that’s the time frame that could be very likely to occur,” Carney said.
Lawmakers passed a bill earlier this year that would have allowed the agencies to avoid the massive increase if they exited the pension system and either paid a lump sum or made gradually larger payments over the next 30 years.
Bevin vetoed the measure, saying that parts of the bill were illegal and that the measure would be financially harmful to the state’s cash-strapped pension funds.
Since then, Bevin has been trying to rally support for a similar proposal that would allow the agencies to “buy out” of the pension fund, while encouraging them to freeze pension benefits for employees and move them into less-generous 401k-type retirement plans.
House Minority Whip Joni Jenkins, a Democrat from Louisville, argues that the governor’s proposal would be illegal because it would alter benefits for state employees.
“The draft that I have seen does change potentially benefits for tier one and tier two employees, which I think and I think others would think would violate the inviolable contract,” Jenkins said.
Some Republicans have also expressed concerns about the bill, pushing for protections for workers who could have their pension benefits frozen under Bevin’s proposal.
House Democrats are planning to unveil a proposal on Thursday that would scale back the pension board’s more-conservative assumptions in order to offset the pension contributions for state employers.
House Majority Leader Carney said that if a special session is called, lawmakers will only consider the proposal that Bevin has shopped to lawmakers.
“There’s a lot of members who would like to see some different things. Frankly, I’d like to see a little different myself,” Carney said. “But at this point in time I think if we start changing a lot of things you could see maybe some significant sways in the votes.”
