FRANKFORT — Gov. Matt Bevin on Wednesday sent a three-page letter to all state legislators, trying to ease their concerns about the pension bill he unveiled last week and warning of the dire consequences of inaction.
The bill would give relief to quasi-governmental agencies and regional universities that face a sharp hike in pension costs on July 1.
Still lacking enough votes to pass the bill, the governor’s letter says unless the bill is passed by July 1, the state will suffer “discontinuation of many vital services” and many state employees will lose their jobs.
Agencies seeking relief include many county health departments, regional mental health centers, spouse abuse shelters and rape crisis centers.
Lawmakers passed a bill during the regular session in March granting the groups a one-year reprieve from the higher pension rates, and also giving each group an option for paying up its liabilities and getting out of the troubled Kentucky Retirement Systems.
But Bevin said he had to veto it for several reasons, including that it would allow pension benefits to be suspended to retirees of a group that opted to leave the retirement system but later defaulted on installment payments on its liabilities.
He said he would call a special legislative session to pass a different version of the bill, and last week proposed that bill.
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While that proposal seems likely to pass the 38-member Senate, it still has yet to win sufficient support in the 100-member House. Because of that, Bevin has not yet set a date for the special session.
Bevin’s fellow Republicans hold large majorities in both the House and Senate.
Bevin’s new proposal would also delay the higher rates for one year. It fixes his concerns that prompted the veto and sets different rules under which the agencies could opt to pay up their liabilities and exit the state pension plan.
His letter zeroes-in on concerns of some House members of both parties that the proposed bill gives strong financial incentives to agencies that opt to leave the state system to freeze the accrued pensions of veteran employees. These employees would draw future benefits from a new 401(k)-like plan.
This move may violate contractual rights of such employees who would see a sharp reduction in the pension benefits they have been anticipating, critics have said.
But Bevin argues in his letter that any bill that lets a quasi-governmental agency leave the state pension plan but allows its current employees to decide to remain in the system “is wrought with legal issues, a heavy financial cost and a crippling administrative burden.”
Bevin’s letter states, “We cannot support a provision that would allow individual employees of a nearly bankrupt employer to dictate higher costs by opting to remain in this system. Many employees would be let go because the employer could no longer meet payroll due to increased pension costs. This would make any discussion of benefits irrelevant, since the employees would no longer have a job.”
Bevin also wrote that he “will not support” legislation that would merely postpone for one year the much higher pension costs they face July 1. “The days of ‘kicking the pension can down the road’ are over,” he wrote.
The governor gave no indication in his letter Wednesday of exactly when he plans to call the special session. He said he will call it “as soon as enough members of the House and Senate are publicly on the record stating they are prepared to take the action necessary to prevent the financial ruin of Kentucky’s 118 quasi-governmental organizations and universities.”
House Democratic leaders later released a statement saying the minority party stands ready to address the problem. “However, this isn’t the solution we or Kentuckians were promised. We continue to believe the pension problem is too large to be solved by the governor and a few people in closed door meetings,” the statement said.
Reporter Tom Loftus can be reached at 502-875-5136 or firstname.lastname@example.org. Twitter: @TomLoftus_CJ. Support strong local journalism by subscribing today: courier-journal.com/toml.