Governor vetoes critical pension agreement for regional universities, health departments and other ‘quasi’ agencies
In the final hours of the last day to veto legislation, the Governor rejected an agreement that provided financial relief for quasigovernmental agencies – including local health departments, mental health agencies, and rape crisis centers – and our regional universities participating in the Kentucky Retirement Systems.
The bill, HB 358, was the product of weeks of work and discussions with the stakeholders and employee representatives in an effort to strike a balance between providing relief to the employers and keeping the state’s commitment to employees. I joined my colleagues in the House and Senate in supporting it because I felt it best represented the best interest of everyone involved. While the first step in what will be a very difficult path, the bill provided a solution to one significant part of our state’s overall pension crisis.
In his veto message, the Governor shared that he intends to call us back into session before July 1, and he is the only one who can call us into special session. I do not like the idea of a special session, but I think it is critical that he sit down with us prior to calling one so that we can once again reach an agreement that he will not veto. We absolutely should not incur the costs associated with a special session without a bill that can become law.
Why is this issue so critical? As a result of the Governor’s veto, these agencies and organizations will see the contribution they make towards their employee retirement plans escalate from 49 percent to 83 percent on July 1. That translates into 83 cents for every dollar in wages, almost doubling the cost of each employee.
There are 118 agencies directly impacted by this, employing 9,000 people and providing services to hundreds of thousands of Kentuckians. Regional universities have told us that the increased cost would lead to tuition increases and staff cuts. According to the Cabinet for Health and Family services, health departments that serve 64 counties – more than half the state – would close in two years or less.
The final version of the legislation allowed employers to choose to remain in the current plan. But if they left the plan, Tier 1 and Tier 2 employees could make their own choice to remain in the current plan or move into a new, defined-contribution plan.
Meanwhile, Tier 3 employees – those who have been hired since 2014 – would be moved to a new plan. In the House, we felt that it was very important for employees who have put many years into the retirement system to have their contract honored, and be allowed to remain in the same plan.
While not perfect, this issue came with no perfect solution that kept our commitment to employees and relieved employers. This is a complicated issue with a lot of moving parts, but I would like to keep you as updated as possible as we work to solve it.
Please reach out to me with any questions you may have about HB 358, or any other issue on your mind. I can be reached by email at firstname.lastname@example.org, or through the toll-free message line in Frankfort at 800-372-7181. I appreciate any and all feedback from constituents. If you would like more information, please visit the legislature’s website at www.legislature.ky.gov.