FRANKFORT — Kentucky Gov. Matt Bevin's pension-relief proposal won approval from a legislative committee on Saturday, clearing its first hurdle of the mid-summer special session.
The House State Government Committee approved the measure after defeating two Democratic-sponsored proposals during a three-hour hearing. The action sets the stage for a vote Monday in the Republican-dominated House on the GOP governor's proposal.
"It may not pass by a very large margin, but I do anticipate it will pass the House," Republican Rep. James Tipton, sponsor of the Bevin-backed measure, said afterward.
The focus would then shift to the Republican-led Senate, which would take up the bill next. The special session began Friday and is expected to continue until Wednesday. Special sessions cost taxpayers about $66,000 per day from when the session begins to the day lawmakers adjourn.
Bevin called lawmakers back to the statehouse to take up his replacement measure after vetoing a pension bill in April following the conclusion of this year's regular legislative session.
All three bills reviewed during the rare Saturday session aim to deliver relief for regional universities and quasi-governmental entities strapped by surging pension costs. Those agencies include public health departments, community mental health centers and domestic violence shelters.
"If we don't pass legislation in this special session, these quasi entities, many of them are going to go out of business," Tipton told committee members.
The governor's proposal cleared the GOP-led committee on a near-party line vote.
Democrats warned if the measure becomes law, it's likely to draw a court challenge. They said it would violate the "inviolable contract" — language within state law that guarantees employees get the benefits promised when they were hired.
During the committee hearing, Democratic Rep. Derrick Graham condemned the proposal as "immoral," saying it would break that promise for some employees.
"How will they feel when they find out that we passed this piece of legislation and their organization decides to opt out (of the retirement system)?" he said. "And then they find out what they thought they were going to contribute into their retirement plan is no longer going to be that way. I think it's wrong."
Republican Rep. Jason Nemes responded that it was years of chronically underfunding the state's public pension systems that was immoral. He noted that Bevin and the GOP-led legislature have significantly boosted funding of pension plans.
Bevin's plan allows the agencies to stay with the Kentucky Retirement Systems at full cost; leave the retirement system by paying a lump sum equal to future projected benefits payments; or buy their way out in installment payments over 30 years. It extends a freeze on pension costs at the lower rate for another year for the regional universities and quasi-public agencies.
The Democratic alternative proposes a long-term freeze of retirement payments paid by the agencies along with redirecting tens of millions in retiree health insurance payments to pension liabilities for five years. The retiree health insurance fund would be paid back over time through higher annual payments to it. House Minority Floor Leader Rocky Adkins said the plan is actuarially sound and wouldn't affect retirees' health care benefits or premiums.
The alternative plan has drawn sharp criticism from Bevin. But Adkins warned it's the governor's plan that's flawed and would leave the regional universities and quasi-public agencies still saddled with the much-higher pension costs if Bevin's proposal can't survive a legal challenge.
"That bill is going to be litigated if it passes this General Assembly," he told reporters.
The Democratic proposal was defeated in committee along with another Democratic-sponsored bill that would freeze pension costs at the lower rate for another year for the affected agencies, giving lawmakers time to devise another long-term fix to the pension problem. Democrats described it as a "safety net" in case the governor's plan is overturned in court.