Gov. Matt Bevin on Tuesday vetoed a bill passed by the Kentucky General Assembly in the final hours of the 2019 legislative session two weeks ago, which froze the rapidly increasing pension payments of several state universities and quasi-government agencies such as health departments and nonprofits that seek to buy out of the state pension system.
The governor vetoed House Bill 358 over concerns that it would further harm the already underfunded pension plans within the Kentucky Retirement System but also said that he will call for a special session before July 1 so that legislators can try again at passing legislation to provide relief to those universities and agencies.
The veto appeared to catch Republican leaders in both chambers off guard, with House Speaker David Osborne issuing a statement referring to their “exhaustive amounts of time meeting with the stakeholders, the universities and the quasis, as well as the representative employees of both.”
“We sent the Governor a bill that we believed provided stability for the employers while keeping the state’s commitment to the retirement futures of our employees,” stated Osborne. “I am hopeful that the Governor will begin meeting with us immediately to find a solution that ensures this balance.”
Bevin also called a special session late last year in which he tasked legislators with passing a pension bill — in response to a contentious bill altering pension benefits for state workers being struck down by the Kentucky Supreme Court — but the General Assembly quickly gaveled out without passing any legislation.
Alluding to that failed special session, Osborne’s statement added that it is “critical” that the governor begin meeting with legislators “before calling another special session without a solution in hand.”
Sen. Chris McDaniel, R-Taylor Mill, the chair of the Senate Appropriations & Revenue Committee that worked on the compromise version of HB 358 that passed, told Insider Louisville that he was under the impression that Bevin would sign the bill.
Under House Bill 358, regional universities and agencies would have had the choice of remaining within KRS and making pension contributions that equaled 84% of their total payroll, or leaving KRS by next summer and buying their way out. Such a buyout could have been accomplished in either a lump sum or by paying their current amount next year — nearly half of their total payroll — with 1.5% increases until it was paid off.
Bevin’s veto message said exiting universities and agencies would be allowed to pay their way out over the course of 30 years, which would undermine the funding of the retirement system, increasing the pension payments for the state to cover workers, in addition to the possibility of retirees having their benefits frozen if their old employer defaulted on their payments to KRS.
In the meantime, dozens of local health departments throughout the state are now at risk of closing down if their pension contribution rates are no longer frozen for next year.
Bevin’s veto message said that the state must protect those quasi-governmental entities “from potential insolvency” due to rapidly increasing payments, adding that “it is paramount that their services remain uninterrupted.”
This story has been updated.