Kentucky Rules "Sewer Bill" Unconstitutional

The Kentucky Supreme Court issued yesterday its long awaited decision on the constitutionality of the pension system reform bill (SB 151). The decision was unanimous (7-0) and authored by Justice Daniel J. Venters of the Supreme Court 3rd District with a concurrence in result authored by Justice VanMeter.

Justice Venters resides in the 3rd Supreme Court District. Donald J. Trump won Pulaski County with 81.6% in the 2016 Presidential race.

Justice Venters, the author of the opinion, was appointed in 2008 and lives in Somerset, Kentucky. He was appointed to the Supreme Court by Governor Steve Beshear. It has been reported that he is not seeking reelection.

The 2018 General Assembly Session will be remembered for the teacher protests in response to a bill to reform pensions. SB 1 was introduced on February 20, 2018, and was titled an “AN ACT relating to retirement.” (The title of the bill is important). SB 1’s critics complained that the bill (1) reduced annual cost of living adjustments, (2) replaced a defined benefit plan with a hybrid cash balance plan, and (3) limited the use of sick-leave credit for purposes of enhancing retirement benefits. Thousands of teachers in Kentucky protested at the state capital.

Then on the 57th day of the 60 day session a senate bill known as SB 151 and titled a “AN ACT relating to the local provision of wastewater services” was gutted of the language regarding wastewater and the language regarding pension reform was substituted. (Hence, the reason opponents of pension reform referred to this bill as the “sewer bill”.) Attorney General Beshear filed a lawsuit stating that the new legislation failed to meet the three readings rule in Section 46 of the Kentucky Constitution. Section 46 states as follows:

No bill shall be considered for final passage unless the same has been reported by a committee and printed for the use of the members. Every bill shall be read at length on three different days in each House, but the second and third readings may be dispensed with by a majority of all the members elected to the House in which the bill is pending.

The court additionally stated that the principal issue before it was “whether any of the prior readings of SB 151 in its original form can be counted toward satisfaction of the three-readings requirement of the bill after its transformation from a wastewater bill to a pension reform bill.” The court held that the three readings requirement was met via the procedure in SB 151. However, because the title of the bill mentioned “wastewater” instead of “pensions,” legislators were not given fair notice of what they were voting on.

The concurrence was blistering. Justice VanMeter did not understand why reading the title of the legislation satisfied the constitutional requirement that the bill be “read at length.” He further asked whether the plain provisions of the Kentucky Constitution were “mandatory or not.” Given his comments, it appears that he was more likely to have struck the statute down for failing to meet the three readings portion.

If SB 151 were reenacted in the upcoming session, a number of potential flaws could form the basis for a future challenge. For example, the Court did not address (1) whether the bill constitutes an appropriation triggering the 51 vote majority; (2) whether an actuarial analysis was required pursuant to KRS 6.350; (3) whether the “inviolable” contract was breached; (4) whether the law impaired a contract as proscribed in Ky. Const. Sec 19; or (5) whether the law required, pursuant to KRS 6.995, a study on the impact to local government. Pension reform is a long, long way from completion.