Gov. Matt Bevin’s proposal to allow regional state universities and other state agencies to buy out of Kentucky’s struggling pension system has passed a legislative panel.
The measure would allow the agencies to avoid a massive spike in pension costs. It would also incentivize them to freeze pension benefits for their employees and move them into 401k-type retirement plans.
About 7,000 employees of regional universities and “quasi” state agencies could be affected.
Rep. Jim Tipton, a Republican from Taylorsville tasked with shepherding Bevin’s bill through the legislature, said there are “no good answers” to the situation.
“I don’t say that I like everything in this bill. I haven’t seen a bill that I particularly like in totality in all this situation,” Tipton said. “We’re trying to work our way through this.”
House Bill 1 ended up passing out of the House State Government Committee with a vote of 12-7. All Democrats on the committee and one Republican—Rep. Tommy Turner of Somerset—voted against the measure.
Agencies are facing the massive surge in pension costs because of a change in assumptions about the health of the state’s pension system.
Lawmakers passed a bill that would have provided some relief to the agencies during this year’s legislative session, but Bevin vetoed it, saying parts of the measure were illegal.
Bevin has been trying to rally support for a new solution and has summoned lawmakers back to Frankfort for a special legislative session to consider his proposal.
Rep. Derrick Graham, a Democrat from Frankfort, criticized Bevin’s proposal because it would move employees out of the state’s pension system even if they don’t want to be.
“How will they feel when they find out we passed this piece of legislation and their organization decides to opt out,” Graham said. “And then they find out what they thought we were going to contribute into their retirement plan is no longer going to be that way.”
Democrats proposed their own version of the pension bill that would keep the agencies’ pension costs down while not moving employees out of the system.
The Republican-led committee voted down the Democratic proposal amid concerns that it would shift costs onto other agencies in the pension system.
Rep. Kevin Bratcher, a Republican from Louisville, said the state needs to focus its resources on other parts of the pension system.
“We’ve got public school teachers, we got state employees, firefighters, policemen. Those, to me, are the number one to take care of here,” Bratcher said. “Quasis do a wonderful job, but they’re not state employees.”
“Quasi” public agencies contract with the state to do official state business. They include local health departments, mental health agencies, domestic violence shelters and rape crisis centers.
Employees at the state’s regional universities and community colleges would also be affected by Bevin’s bill.
Republican leaders say the measure could pass out of the legislature by Wednesday. The full House of Representatives will consider Bevin’s bill on Monday.