Today’s blog post was written by NPPC Communications Director Andrew Collier.
If you’ve been a reader of Defined Benefit since we started this blog, you’d know that some lawmakers in Kentucky have tried to dismantle public pensions several times. Last year, lawmakers pushed through SB1 – a bill that created a cash balance system for newly hired teachers, among other provisions. During the last day of session, lawmakers pushed through a bill containing the language of SB1 in the span of 12 hours. These type of bills are called “shell bills.”
Until last year, Kentucky lawmakers used these “shell bills” to pass dubious legislation at the very last minute of legislative sessions. That way, they could avoid the protest of groups they might actually be hurting. The “shell bill” that contained SB1’s language was SB151and dealt with wastewater treatment in the state, aptly deemed the “sewer bill.”
Fast forward to the end of 2018, the Kentucky Supreme Court ruled the bill unconstitutional on the grounds that SB151 was not passed with proper legislative procedures. In typical Governor Matt Bevin fashion, he declared a special session of the legislature near the holiday season. Without a consensus, the legislature ended the special session after just 23 hours, unable to come up with appropriate legislation.
So where does that leave us now? This year, the Kentucky Public Pension Coalition (KPPC) has fought back against several bills that have threatened the retirement of our hard-working public sector employees: bills such as HB525, which sought to change up the board of the Teachers Retirement System (TRS) and award seats to political appointees. This bill caused major teacher “sickouts” across the state, closing several school districts for days. After all of the hard work by current and retired public employees and the general public, bills like HB525 are likely dead. But there’s one more bill that would hurt current public employees the most.
A few weeks back, the House passed HB358. This bill would move future university employees from the Kentucky Retirement System (KRS) into a defined contribution plan as well as freeze the contribution amount quasi-government agencies such as health centers put into KRS for one more year. KPPC fought the bill, but was unable to stop it from passing the House. In the Senate, lawmakers took the bill a step further – an illegal step at that. Not only did they keep the same provisions from the House bill, but they have proposed closing off all quasi-government agencies from putting new employees into KRS, doubling their contributions to KRS, and freezing current employees pension benefits. This version of the bill ended up passing the Senate.
If passed by the House and signed by Governor Bevin, then the reality would be dire for many Kentuckians. Let’s say you have 20 years on the job at a county health center. If this legislation were to pass, your future benefits would be frozen now. If you work for another 10 years, none of that time would be counted toward your retirement. This is a flagrant violation of the inviolable contract public employees have with the state. If passed in its current form, the bill would surely end up in court, costing the state millions of dollars for an eventual loss. Second, the bill doubles the contribution rate for quasi-government agencies, throwing them into a precarious financial situation – meaning vital health centers in the state could shut down. Finally, removing employees from the KRS system would grow KRS’ unfunded liability.
Right now, since the Senate and House versions are different, leadership is meeting to figure out a compromise. The bill has until March 28th to pass.
Kentucky lawmakers should be focused on one thing: fully funding the pension systems each and every year. Bills like HB358 only harm the state’s pension systems because they remove future employees and their funding stream. Legislation like this needs to be defeated and KPPC is doing its best to do just that.