The state House passed a bill on Monday by a 52-46 vote to address the rising pension costs of regional universities and quasi-governmental agencies, over the objections of Democrats who said it could violate the inviolable contract of public workers and underfund the state pension system.
House Bill 1 now moves to the Republican-controlled state Senate, which is expected to pass the legislation on Wednesday and send it to the governor for his signature.
All Democratic members present voted against the bill, along with nine Republican members. The bill needed 51 votes to pass, and all 52 House members who voted for it were Republican.
The bill passed by the House on Monday matched the plan that was unveiled by Gov. Matt Bevin this summer, freezing the pension contribution rate of those 118 quasi-governmental agencies and universities at 49% this year and giving them the ability to pay their way out of the Kentucky Retirement Systems plan.
Those employer contribution rates spiked to 83% on July 1, as legislation passed by the General Assembly in this year’s session to freeze that rate for a year was vetoed by the governor, who said the bill was illegal.
Bevin formally called for a special session of the General Assembly on Thursday, issuing a narrow proclamation that limited them to considering legislation explicitly matching 12 provisions in his bill, thus excluding consideration of two alternative bills that were proposed by Democrats. The proclamation also referenced a provision in the bill that would deem the entire statute void if any portion of the passed bill is passed is overturned in a legal challenge.
Attorney General Beshear said on Saturday that the governor’s narrow special session call could make the passage of HB 1 subject to a legal challenge, as the governor can determine the subject of a special session but not the exact terms it must pass. The governor’s office countered that his call did not undermine legislative independence, as legislators could still choose not to pass the governor’s bill and adjourn the session.
The House State Government Committee passed HB 1 on Saturday by an 11-8 vote, with only one Republican member voting against it.
Rep. Joe Graviss, D-Versailles, spoke against the bill on the House floor Monday, arguing that it could violate the inviolable contract and cut the benefits of thousands of public workers if quasi groups are incentivized to leave KRS and switch those employees to a 401(k)-style plan. He also pointed to an actuarial analysis of the plan stating that KRS would be shorted $827 million in employer payments.
Graviss filed several floor amendments to HB 1 — including one to take out the clause that would strike down the entire bill if any provision of it is struck down in the courts — but House Speaker David Osborne ruled they were out of order due to the narrow proclamation for the special session that was signed by the governor.
Rep. Angie Hatton, D-Whitesburg, also attempted to pass her floor amendment that would only freeze the quasi groups’ contribution rate for the rest of the fiscal year, but Osborne also ruled it out of order for not containing 11 of the provisions identified in Bevin’s special session proclamation.
Several Democrats spoke on the floor to call for freezing the rate and tackling the future of quasi groups on a bipartisan basis in the General Assembly session that begins in January, noting that no organizations under HB 1 can leave KRS until April of next year.
Rep. James Tipton, R-Taylorsville, the sponsor of HB 1, said the bill would not break the inviolable contract of workers, citing groups like the Kentucky Bar Association that have previously withdrawn from KRS and moved employees to 401(k)-style plans. He and Republican supporters of the bill also said that Democrats’ proposals to aid quasi groups would simply shift $3 billion of future pension costs toward state cabinets.
Rep. Jerry Miller, R-Louisville, accused Democrats of “fear mongering” in their opposition to HB 1 for political purposes.
While several Democratic members framed HB 1 as a precursor to future efforts by Republicans to slash the pension benefits of teachers and other public workers, Osborne told reporters after the vote such assertions amount to “irresponsible pandering.”
Asked if he is concerned that about HB 1 facing a legal challenge, Osborne replied that “you’ll have to ask whoever might be a potential litigator.” He added that if the legislation was to be struck down in the courts, “there’s potential for a lot of people lose their jobs.”
As for the nine Republicans who voted against HB 1 on Monday, Osborne said that leadership did not pressure its members to vote for the bill.
“We never asked anybody to make a vote they were uncomfortable with,” said Osborne. “We asked them to consider their districts and individual situations as thoroughly and thoughtfully as they possibly could and make the decision that they thought was best for them.”
House Minority Leader Rocky Adkins told reporters that the Republican defectors and narrow margin of the vote showed just how much concern for the bill that there was among legislators.
Besides the uncertainty that the bill would stand up to a legal challenge — noting his belief that HB 1 as an appropriations bill that required 60 votes, not 51, to pass — Adkins said that the Democratic alternative bills would have provided more stability, freezing the contribution rate of quasi groups for 24 years and paying down the unfunded liability of the state pension plan four years faster than Bevin’s bill.
Adkins said that his Democratic members were not fear mongering, but laying out the facts of the bill and their alternative proposals. He added his belief that Bevin wants to privatize public pensions and accused the board he installed at KRS of improperly lowering investment return assumptions that have so dramatically increased local governments’ and agencies’ contribution rates.
“I think he wants to privatize public pensions,” said Adkins. “I think he’s proven that over the last two and a half years and I think he’s done everything he can to try and bring that crisis all across the Commonwealth of Kentucky.”
Olivia Krauth contributed to this story, which has been updated.