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Despite governor’s changes to the legislation, lawmakers still lack votes for pension reform

By Tom Latek
Kentucky Today

It appears lawmakers still lack the number of votes needed to pass a bill to reform the pension system affecting the regional public universities and 118 quasi-governmental agencies.

Gov. Matt Bevin, who has made four changes to his original proposal, has said he wants to call a special session to enact that legislation by July 1, the start of the state’s new fiscal year.

Senate Majority Leader Damon Thayer, R-Georgetown, told reporters on Wednesday that they are still a couple of votes away from being able to pass the bill. “I think the Governor has done exactly what we asked him to do. After he vetoed the bill, (he) came up with his own bill and it’s a good bill.”

Gov. Matt Bevin still lacks the needed votes to pass a pension reform bill. He has made four changes to his proposal. (Photo by Tom Latek, Kentucky Today)

Bevin said the reason he vetoed House Bill 358 was because of errors in dates and it would have illegally stopped benefits to retirees if the agency defaulted on payments to the Kentucky Employees Retirement System.

“I’m going to vote for it,” Thayer said. “I’ve been a ‘yes’ vote since I was briefed on it. I would say to people who are reluctant to vote for it, ‘Don’t give up the good for the sake of the perfect,’ because the sun, the moon and the stars are not going to align on this issue. But I think ‘Two Out of Three Ain’t Bad,’ to quote Meatloaf, and I think we ought to come in and pass the bill.”

House Speaker Pro Tem David Meade said whenever the governor makes the call, they’ll be ready to go into a special session.

However, when asked if there are enough votes to pass the House, Meade said, “I don’t know that we have the votes, I’m not saying that, I’m just saying when he makes the call, we’re ready to do the work. It’s our job.”

Meade added he didn’t know the exact count of those favoring the bill.

Bevin sent a letter to lawmakers Wednesday evening, saying he has listened to their concerns and has made four changes. They are as follows:

• Section 7 of the bill will be replaced with a non-severability clause. Because the freeze of the pension contribution rates only works when combined with an agreed upon path forward for these entities, it is critical that the bill stand as a comprehensive solution, rather than a piecemeal approach.

• In order to provide additional protection for the Kentucky Retirement System in the case of a default, language is added requiring any entity that voluntarily ceases participation to pledge real estate and other assets as collateral in the event of a default. This is a restoration of similar language that was included in HB 358.

• Additional language is added to ensure that employees of any entity that ceases participation and subsequently defaults will no longer accrue additional service credit while the entity is in default.

• Finally, and most significantly, language is added to ensure the General Assembly has the entirety of the 2020 Regular Session to address any issues that may arise and provide any funding it deems necessary before any “quasi” makes a decision. The window for making a decision will be April 1, 2020 to April 30, 2020. A budget will presumably be prepared before the Session must adjourn sine die on April 15, 2020. No decision by any entity will be final before April 30, 2020, giving them at least 15 days after the full 60-day session to make a decision.

The governor’s letter continued, “Kentucky needs you to take action to protect these valuable services and the individuals who provide them. I ask each of you to consider several important points as you decide how you will vote on this proposal with the changes noted above:

• No employer is forced out of the pension system under this proposal. Each employer will stay in if they choose to do nothing and each employer is given a full year to financially plan for the best option for the organization and its employees.

• No employer must take any action before April of next year, the effective conclusion of the 2020 session of the General Assembly. This allows any modifications or appropriations deemed necessary to take place before any decision is made.

• This is a comprehensive strategy that retains options for employers to remain viable and avoid interruptions in services and job losses. Simply freezing the rate for another year underfunds the pension system by more than $120 million. Without a sustainable path forward, Kentucky will only make this problem more expensive in the future. We must stop kicking the can down the road.

• Only the General Assembly can put this solution in place. This bill will provide the immediate relief necessary and will give you the entire interim to study and consider revisions. Again, no changes for any employee will take place before you return for the 2020 regular session.”

The governor’s letter went on to say, “I ask every single member of the General Assembly to support this legislation so that we can prevent the completely avoidable loss of services, loss of jobs and loss of funding for our pension system. I am confident we can step up and solve this problem. United we stand. Divided we fall.”

Bevin said he was there to answer questions and that “now is the time for action.”

“My team and I stand ready and willing to discuss this legislation, answer questions and provide any available information that you may need,” he said. “I stand ready to call an extraordinary session when you are ready to pass the legislation necessary.”

This bill would address only the state’s regional universities and quasi-governmental agencies such as local health departments, mental health and rape crisis centers, which total nearly 120 agencies, who face a doubling of pension costs if nothing is done, which could cause them to close their doors.

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