Kentucky Capitol building

The Capitol building in Frankfort | Photo by Olivia Krauth

The state Senate followed the lead of the state House on Wednesday by passing the bill to address the rising pension costs of regional universities and quasi-governmental agencies, which was signed into law two hours later by Gov. Matt Bevin.

House Bill 1 passed by a 27-11 vote in the Senate, with every Democratic member and two Republicans voting against it. On Monday, the House passed the same legislation by a much more narrow 52-46 margin, with nine Republicans voting against the bill.

Both chambers adjourned from the special session Wednesday afternoon, which was called by Bevin to address the rising pension costs of quasi groups — including local health departments, rape crisis centers and domestic violence shelters — and allow those groups to buy their way out of pension plans within the Kentucky Retirement Systems.

The governor’s proclamation calling for the special session last week was narrowly worded to limit the General Assembly to only consider legislation explicitly matching 12 provisions of the bill his office crafted and endorsed, thus excluding consideration of two alternative pension bills that were proposed by Democrats.

The bill will freeze the state pension contribution rate of the 118 quasi groups to 49% of their payroll costs for the rest of this fiscal year, which was the rate last year before it spiked to 83% on July 1. It also incentivizes quasi groups to buy their way out of KRS through either a lump-sum payment or installments and switch their employees to a 401(k)-style plan.

House Bill 1 also includes a provision in which the entire statute would be declared void if any portion of the bill was struck down in a legal challenge, which would immediately kick those agencies’ contribution rates back up to 83%.

Democrats have criticized the bill as allowing these agencies to kick employees off their KRS pension plan and creating a possible violation of those workers’ inviolable contract that could be challenged in a lawsuit. They also cited an independent actuarial analysis that found the bill would short KRS $827 million in employer payments.

Two alternative bills filed by Democratic members of the House would have frozen the quasi groups’ contribution rate for the rest of the fiscal year, with one of them freezing that rate for 24 years and paying down the unfunded liability of the state pension plan four years faster than Bevin’s bill, according to an actuarial analysis.

Those Democratic bills, as well as floor amendments containing elements of those bills, were blocked from consideration in the House due to being outside of the scope of Bevin’s special session proclamation. Three more Democratic floor amendments were allowed a vote in the Senate on Wednesday, but each was voted down in a party-line vote.

Senate Minority Leader Morgan McGarvey, D-Louisville, said that regional universities and quasi-governmental agencies were being held “hostage” by the limited legislation of the special session, calling HB 1 “a sell-out of our responsibility” to their workers and the state pension system. He added that HB 1 was not a fix for the larger issue, and quasi groups will come right back to the General Assembly in next year’s session for another freeze to their contribution rate.

Senate Majority Floor Leader Damon Thayer, R-Georgetown, countered that “I don’t see any hostages,” calling such rhetoric “beyond the pale.” He added that the employees of regional universities and quasi-governmental organizations are “not state employees.”

Sen. Robin Webb, R-Grayson, said that the narrow bill pushed by Republicans’ was just a “trial run” for slashing the benefits of other public employees in future sessions, calling this an ideological move. Sen. Julie Raque Adams, R-Louisville, countered that such comments were “reckless,” as there was no agenda to do so for other state workers.

After signing the bill into law, Bevin released a statement thanking the legislators for their work to deliver “much-needed financial relief” for the quasi-governmental agencies and regional universities.

“While we have much work yet to do in addressing our $60 billion public pension crisis, HB 1 represents a positive step forward,” stated Bevin. “I am confident that with continued collaboration and hard work, we can save our pension system and preserve it for the thousands of hardworking men and women whose financial futures depend on it.”

Attorney General Beshear said on Saturday that Bevin’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 this did not undermine legislative independence, as the General Assembly could still choose not to pass the governor’s bill and adjourn the session.

This story has been updated.