FRANKFORT — Whether the Supreme Court affirms a lower court ruling that a pension reform bill violates the state constitution or not, one key lawmaker says the court’s ruling won’t alter the financial stress of the state’s public pension problems or the need to do something about it.
“The legislature will recognize the reasons we passed the bill still exist,” said Rep. Jerry Miller, R-Louisville, co-chairman of the Public Pension Oversight Board. “We’ll still have that need and I believe the legislature will muster the will to get that done.”
Senate Bill 151 was originally a waste water measure but, after the state Senate was unable to pass a more ambitious pension reform in the face of teacher and state worker protests, the House stripped the language of SB 151 and inserted a much more limited version of the original pension bill.
House Republicans did so, however, without prior notice in a hastily called committee meeting and the bill then passed both chambers in the same afternoon. When it came up for discussion in the House, it was read by title only, referring still to a waste water bill.
Critics harshly criticized the move, claiming it was slipped through without an opportunity for lawmakers to read it or for the public to know what was in the bill.
Once Gov. Matt Bevin signed the bill into law, Attorney General Andy Beshear, the Kentucky Education Association and the state lodge of the Fraternal Order of Police sued in Franklin Circuit Court. Last week, Judge Phillip Shepherd said the bill violates the Kentucky Constitution because the amended bill did not receive three readings on three separate days in each chamber.
The measure primarily affects future teachers by placing them into a hybrid cash balance plan which mixes some features of a 401-K style plans with the more traditional defined benefit plans. Most state workers hired after Jan. 1, 2014 have been enrolled in such plans.
So far, Bevin has not filed an appeal but he’s expected to do so and all parties have said they expect the state Supreme Court to settle the question ultimately.
Bevin and Republican lawmakers argue the ruling puts in jeopardy many other pieces of legislation which were passed in a similar matter — although Shepherd wrote in his ruling applied only to the bill before his court.
Miller was asked Monday after a meeting of the Public Pension Oversight Board if the legislature couldn’t easily remedy the problem by passing the bill next January after three readings in each chamber. Most of the bill does not go into effect until January.
Miller said he hopes the Supreme Court will overturn Shepherd’s ruling and won’t interfere with the legislature’s prerogative to establish its own rules of procedures, but if the court affirms Shepherd, then “Theoretically, sure, you could come back and do that at that time.”
Courts are generally reluctant to infringe on legislative procedures and rules, but Shepherd drew a distinction in his written opinion between a legislative procedural rule and “a constitutional mandate.”
The PPOB heard from representatives of the Kentucky Retirement System and the Kentucky Teachers Retirement System regarding their performance and their actuarial assumptions going forward.
The KRS board last year lowered its payroll growth and investment return assumptions which increased the unfunded liability calculation of the system. While KTRS also lowered some assumptions, it continues to assume some payroll growth based on past history and performance.
That troubles Sen. Joe Bowen, R-Owensboro, and Miller’s co-chair on the board. He said those sorts of assumptions led to the present pension crisis in the first place.
The board asked Beau Barnes, Deputy Executive Director and General Counsel, to come back to its August meeting to discuss and explain those assumptions in greater detail and length.
The lowered KRS assumptions also led to higher employer contribution rates, something which hits local governments and school districts hard, many of which face annual increases of 50 percent or more. (The legislature passed a bill allowing the local entities to phase in their contributions, limiting annual increases to 12 percent over 10 years.
But both systems are currently outperforming their assumptions, and Rep. Arnold Simpson, D-Covington, asked KRS Executive Director David Eager if the board might reconsider or adjust its assumptions in light of that performance.
Eager said he understands the burden on local governments but said it’s necessary to shore up the systems over 20 to 30 years. He also noted the impact is felt by KRS itself, saying he must pay 84 cents of every $1 of salary toward pension costs.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort; follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.