Louisville Metro Council unanimously passed a resolution Thursday evening calling for the state legislature to separate the pension plan of 230,000 city and county employees and retirees from the troubled Kentucky Retirement Systems (KRS) that it is currently housed under — joining over 100 other city and county governments to make such a plea that local pensions should be independently managed.
This non-binding resolution by Metro Council comes as Gov. Matt Bevin is expected to call a special session of the Kentucky General Assembly in October to address the state’s public pension crisis, as the plans altogether have an unfunded liability of at least $33 billion and one of the worst funding ratios of any state in the country.
Bevin lauded a consultant’s report in August that recommended dramatic changes to the benefits within each plan in order keep them afloat financially, though, it remains unclear what types of reforms could gain majority support in each chamber of the legislature and what specific type of legislation the governor will recommend.
While the consultant’s report, the governor’s state budget director John Chilton and Bevin himself have criticized the proposed strategy of divorcing the County Employees Retirement System (CERS) from KRS, a coalition of 23 government agencies led by the Kentucky League of Cities is spearheading a “Free CERS” movement that has found a receptive ear in local governments that want autonomy over how the pensions of its own workers are managed.
The bipartisan resolution passed by Metro Council calls for CERS to be separated from KRS — where CERS has the large majority of assets but a minority of boards seats — and to have its own nine-member board that manages its benefits, investments and assets, which are in much better shape than other plans within KRS. It also states that this separation “would mean local control of local pensions and would ensure the needs of (CERS) are met so it can continue its current path of growth for years to come.”
At a committee hearing last week, Councilman Robin Engel, R-22 — one of the resolution’s lead sponsors — had suggested slowing the process down so that the council could hear more input from those who opposed the legislation. However, the committee unanimously passed the resolution, with the other lead sponsor — Councilman Bill Hollander, D-9 — stating because Gov. Bevin could call a special session at any moment, it is important from Louisville’s intention to be heard clearly before the legislature meets.
Despite the preference of some Republican members to slow the resolution down, it was ultimately placed on the consent calendar of Metro Council Thursday night, passing by a 24-0 vote along with other legislation and no further debate.
In the Democratic Caucus meeting before the meeting of the full council, Hollander said, “I think it’s fair to say that the Free CERS movement has attracted one opponent, and that’s Gov. Bevin.” Hollander added that the bill would go to the consent calendar because they couldn’t find anyone willing to argue against it, saying “it doesn’t seem to be a priority for the governor.”
Councilman Rick Blackwell, D-12, replied by saying that Bevin “can always let us know with his Twitter feed what his position is.”
Bevin and Chilton have argued that CERS will still be in dire financial shape if it separates from KRS, even if its funding ratio is relatively much higher than that of the Kentucky Employees Retirement System for nonhazardous state workers, which is only 16 percent funded. The consultant hired to study the pension system recommended that CERS not separate from KRS, arguing that this would create additional administrative costs with no apparent benefits.
Before Thursday’s meeting, Councilman Kevin Kramer, R-11, told IL that while some members of his caucus would have just assumed delay a vote, they agreed to place the CERS resolution on the consent calendar because “there’s really no point in having a big floor fight about putting something off that is not likely going to get put off, anyway,” as the resolution’s passage was certain.
Kramer said that some Republicans in Frankfort probably wouldn’t welcome this resolution from Metro Council, though he expressed doubt that any legislation separating CERS would actually come up in the special session.
“I’m getting feedback from Frankfort that it might not be a bad idea to separate them anyway, that it’s a conversation that we should have and there’s no reason for us to feel like people there will get angry,” said Kramer. “By the same token, I’m hearing from folks that there’s no reason to be overly ambitious and think it’s actually going to be done in this session.”
Conceding that the legislature could not only decline to separate CERS, but dramatically alter the benefit structure of those local workers, Kramer noted that the council’s resolution was non-binding, as “we don’t have the authority to pass state law, so they’re going to do what they’re going to do.”
Following the unanimous passage of the Free CERS resolution, the bipartisan lead sponsors issued statements urging the state legislature and governor to hear their call.
“Cities and counties have always paid what was asked of them,” Hollander said. “CERS is much better funded than other systems and it’s on an upward trajectory. The fund should be governed by a board which reflects the employers and employees it covers, meaning local control for local pensions. I am pleased that the Council is unanimous in supporting the Free CERS movement and I hope the proposal will be taken up in any special session dealing with pensions.”
Councilman Engel stated that Frankfort had failed for decades to fully fund and support the plans within KRS, adding, “I commend Governor Bevin for his willingness to take on this issue and I am hopeful that he will listen and incorporate our thoughts into his call for a special session.”