The Kentucky General Assembly was called into session by Governor Bevin because quasi-governmental agencies could go bankrupt if relieve is not given on their pension obligations. Here’s the background on the issue:
Who is Affected?
Regional state universities, local health departments, rape crisis centers and many other so-called quasi-governmental groups.
Why Does It Matter?
Their pension costs will skyrocket on July 1st from 49% of their annual payroll to about 83%. Many of the agencies will be unable to make the payment, and some may go bankrupt.
Why Didn’t the Legislature Take Care of It in the General Session?
They did. The General Assembly passed a bill capping the pension hike and allowing the quasi-governmental agencies to buy out of the pension. (To either their credit or blame, this was a Republican led initiative and they did prevent critical agencies from becoming insolvent but at a significant cost.) However, the Governor vetoed it on the stated grounds that it contained an errant effective date and violated the inviolable contract provision.
What’s the Governor’s Plan?
The Lexington Herald-Leader summarized the Governor’s plan like this: “The Republican governor’s plan gives the agencies options: stay with the Kentucky Retirement Systems at full cost; leave the retirement system by paying a lump sum equal to future projected benefits payments; or buy their way out in installment payments over 30 years. It continues a freeze on pension costs for another year.” The Governor’s Bill can be found here, along with the actuarial analysis.
Does the Governor have the votes?
Unknown, but probably. The Governor wouldn’t typically call a session unless he or she believed that they had the votes. Republicans say they need 50, but Democrats say they need 60 because it is an appropriations bill.
How Long Will the Special Session Take?
At least five days. The Constitution requires multiple readings so that the bill could be discussed and vetted by the public.
Have the Democrats Offered an Alternative?
Yes, and the plans (BR 11 & BR 20) can be found here. The actuarial analysis for BR 11 is found here and, for BR 20, here. (These will be the actual analysis that are the basis for my decisions. You are looking at what I am looking at as your state representative.) These bills were voted down when brought before the State Government Committee along partisan lines with the exception of one Republican.
Will the General Assembly members be paid?
Yes, for six days if the session starts July 19. Each member will receive $188 per day plus expenses for staying in Frankfort.
Will you vote for Governor Bevin’s proposal?
I will not. The proposal will likely be challenged on multiple legal grounds and it further erodes the asset base for existing state employees, making a default more likely. Additionally, the actuarial analysis put the cost at $800+ million dollars. The pension contribution rate needs to be capped at the 49% and the issue needs to be dealt with in a budget session. However, I always reserve the right to change my mind if the Governor amends his proposal.
The Republican Governor vetoed the bill that was sent to him by the Republican controlled legislature. The Republicans inability to pass a bill in the special session will surely undermine the public’s confidence in their leadership. This stalemate is occurring in the context of a Governor’s race that is less than 4 months away. The stakes are high and the failure to pass the bill might cost Bevin the Governor’s office and Kentucky citizens critical, life-saving services. Despite Republicans testy relationship with the Governor, it is doubtful that they would put the Governor’s office at risk. Stay tuned.