The State and Local Government Committee advanced the bill Tuesday on a party-line vote without making any changes to it, setting up a climactic vote Wednesday in the Senate. If the bill clears the Republican-led chamber unaltered, it goes to the GOP governor for his signature.
Bevin called lawmakers into special session last Friday to take up his plan to deliver relief for regional universities and quasi-governmental entities hit by massive increases in retirement costs. The agencies provide crucial social safety-net services and include public health departments, community mental health centers and domestic violence shelters.
"It is a positive step in the right direction," Senate Majority Floor Leader Damon Thayer said of the bill after the committee vote. "It will be a good step forward for the regional universities, and it will keep a lot of these quasi-governmental agencies ... from closing their doors."
Kentucky's pension woes have overshadowed Bevin's tenure in office, as the governor and lawmakers have struggled to shore up one of the country's worst-funded public pension systems.
Senate Minority Floor Leader Morgan McGarvey said the bill advancing in the legislature doesn't fix the pension system's unfunded liability problems. The Democratic leader the lack of additional revenues means the measure will "continue to kick the can down the road."
The measure, he said, will end up discontinuing the pension benefits counted on by many of the people working for those agencies.
"I just think it's the first step in many of trying to dismantle the entire retirement system," McGarvey said.
Thayer responded that Democrats' arguments against the bill are a "red herring," adding that the legislation reflects "the kind of reforms that need to be made" to protect the pension system.
Bevin's plan would spare the regional universities and quasi-public agencies from the spike in pension costs by freezing rates at the much lower amounts for another year. His proposal would allow 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.
Murray State University President Robert Jackson told the Senate committee that the surging levels of required contributions to the state retirement system are "unsustainable."
Jackson, a former state senator, noted that Murray State's annual pension payments went from $1.66 million a decade ago to $7 million in the last fiscal year. Unless lawmakers deliver relief, the school's payment will rise to $11 million this year, he said. Those rising pension payments came as the school's state funding declined in the past 10 years, he said.
"We cannot continue on this path," Jackson said Tuesday.
The bill's leading supporters acknowledged that some affected agencies, while eager for the freeze locking in lower pension costs for the next year, have expressed misgivings about some other sections. Their concerns include language requiring agencies to pledge real estate and other assets as collateral if they choose to leave the state pension plan and pay off liabilities over time.
Republican Rep. James Tipton, the bill's sponsor, pledged to be part of bipartisan work in 2020 to review the measure to determine if any follow-up changes are needed.
The bill gives groups until next April to decide whether to leave the state plan, after the conclusion of next year's legislative session. That would give lawmakers time to make changes to deal with any issues that might arise.
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The legislation is House Bill 1.
