Today’s blog post was contributed by Andrew Collier, Communications Director at NPPC.
Kentucky legislators have a habit of passing legislation at the very last second, bypassing the democratic process by waiving readings and stifling input from the public. Just like they did last year, lawmakers did it again at the end of this year’s legislative session.
A couple of weeks ago, we wrote about HB358, which passed both the state House and Senate as different versions. The Senate’s version of legislation was a clear violation of the inviolable contract public employees have with the state. Since the Senate refused to recede, a conference committee was appointed. Bear in mind, this all occurred on the very last day of session.
Although several members of the conference committee raised red flags on the bill, it eventually passed out of said committee that evening and both chambers before the evening concluded.
The conference committee version of HB358 only pertains to quasi-government agencies and regional universities that participate in the Kentucky Retirement System (KRS) Non-Hazardous plan. The bill freezes employee contribution rates for one more year, but during that year, an employer (quasi-government agencies/regional universities) wishing to stay in KRS must opt-in by the end of 2019. If the agency opts in, the legislature is going to force them to pay the full ARC payment, which is almost double what they owe now. These agencies are seeing a spike in their ARC payments because the state shifting the burden from their budget onto the agencies. Those agencies not opting in will leave KRS on July 1st, while continuing to pay their KRS liabilities.
Now for the interesting part – what happens to the employees? Employees of an agency or regional university that is leaving KRS and were, who were hired before 2014, can opt to stay in KRS or move to a defined contribution plan. Employees who were hired after 2014 will be forced into a defined contribution plan. This move doesn’t just hurt the overall funding of KRS by taking out employees paying in, it also violates the inviolable contract those employees hired after 2014 have with the state.
As our state coalition, the Kentucky Public Pension Coalition (KPPC), has pointed out, quasi-government agencies and regional universities are in a tough spot. They either find the money to pay the full ARC payments, which could result in cuts to jobs and vital services throughout the state, or be on the hook for paying liabilities and conversion costs of employees leaving the system. If the employer fails to come up with the burdensome additional provision that allows the state to take over these agencies if they are delinquent on their payments.
HB358 was put together with very little thought as to how it will have a drastic effect on the already underfunded KRS Non-Hazardous plan. We just have to marvel at how some Kentucky lawmakers continue to push bad legislation that hurts public employees and the systems that provide their much deserved pensions.