A nonprofit publication of the Kentucky Center for Public Service Journalism

House Republicans say additional language is still needed in Governor’s proposed pension plan

By Tom Latek
Kentucky Today

Despite a letter Gov. Matt Bevin sent to lawmakers Wednesday evening with changes to his proposed pension bill for the regional public universities, House Republicans said on Thursday more work is needed.

House Speaker David Osborne, R-Prospect, says the plan appears to lack the votes needed without a provision that allows Tier 1 and Tier 2 employees, those who have been in the system the longest, the option to remain in the traditional pension plan.

House Speaker David Osborne, R-Prospect, said on Thursday more changes need to be made to Gov. Matt Bevin’s pension proposal (Photo by Tom Latek, Kentucky Today)

Osborne said this is one of the most closely studied proposals put before the legislature.

“Obviously, the governor and his staff have done a good job communicating the provisions of this bill,” Osborne said. “However, the very fact that members have vetted it so thoroughly should signal the very real and very well-founded concerns members have regarding Tier 1 and Tier 2 employees.”

Osborne added the governor is aware of the need for this language.

“We have shared with him that there is significant support for his plan,” he said. “Allowing these individuals to choose whether or not they will remain in the defined contribution plan remains critically important to others. He has made some concessions, but the bill still does not address the concerns some of our members have for employees in Tier 1 and Tier 2. We have offered proposed changes that we believe would give him sufficient votes to pass the measure.”

According to the Speaker, while majority leadership and governor have been actively engaged in reaching resolution, House Democrats have been silent. No proposals have come from the minority and there has been no public support for the Governor’s plan from any House Democrats.

Only one House Democrat supported House Bill 358, which Bevin said he vetoed because of errors and it would illegally cut off benefits to retirees whose agencies defaulted on pension payments.

“When we became the majority in 2017, we recognized immediately that the pension plan was teetering on the edge of disaster,” Osborne said. “For decades, Kentucky’s political leadership failed to fund the public pension plan or provide proper oversight. Without a doubt this negligence has created the problems we face today. We can’t afford to continue ignoring this problem.”

House Minority Leader Rocky Adkins, D-Sandy Hook, responded to Osborne’s comments.

“The House Democratic Caucus has been very clear on this issue from the start, and as the Speaker surely recalls, our members joined with his during the regular session to vote unanimously for a second one-year freeze in payments,” Adkins said. “That would give us time to come up with potential solutions to enact in 2020, which is exactly what our caucus has been working on in recent weeks. That course of action was the best and responsible path forward when the House voted for it in the spring, and it remains the best path forward now.”

Changes the governor said he made to the bill include:

• 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.

Bevin has said he wants to call a special session to pass a pension bill before July 1, the start of the fiscal year.

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