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| Local agencies react over pension bill |
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4/19/2019
By Tom Marshall
Senior Advocate writer
Two local agencies are speaking out following Gov. Matt Bevin’s veto last week of a pension relief bill known as House Bill 358.
Even with the expectation of rising pension costs, Morehead State University President Jay Morgan told the Advocate that the university is committed to Mt. Sterling.
“Morehead State University’s long-term plans are to keep our extended campus open in Mt. Sterling, despite the potential for rising pension costs,” Morgan said in a statement. “We are committed to Mt. Sterling and our good partnership with all the area partners.”
The statement was issued to dispel rumors of MSU leaving Mt. Sterling.
Matters are a little more uncertain at the Montgomery County Health Dept., which stood to get a one-year reprieve from the pension increase under HB 358.
Without relief, the dept. would see an increase in its retirement contribution rate from 49.47 percent to 83.43 percent.
Public Health Director Allison Napier told the Advocate the impact could mean closure of the health dept. within two years.
“It would result in bankrupting many other local health dept.’s,” Napier said. “We certainly hope that the governor and legislators will act quickly to pass updated legislation to address the pension situation for the agencies affected by HB 385.”
Many state lawmakers were stunned by Bevin’s veto announcement, which came on the last day of the most recent legislative session when the General Assembly would have no time to override the veto.
State Rep. David Hale, R-Wellington, said he was surprised because he thought the Legislature and the governor were in lockstep on the bill.
“I don’t think any of the legislators, especially in the House, saw that coming,” Hale said.
Bevin said he will hold a special session by July 1 to address the ailing pension system.
State Sen. Ralph Alvarado, who is Bevin’s running mate for lieutenant governor in the next gubernatorial race, said the governor was relying on legal advice in vetoing the bill.
Advisers reportedly told him the state would be sued and could very well lose if the bill was passed, the Winchester Republican said.
Alvarado said the plan now is for legislators to work out a plan they can present before going into a brief upcoming session.
The governor would also like to have a public committee hearing prior to passage of any new pension legislation, he said.
Hale said reaching a compromise won’t be easy.
“We have our work cut out for us,” he said.
Under the vetoed bill, universities and “quasi-government” state agencies like the MCHD could have remained in the Kentucky Retirement Systems and begun paying nearly 84 percent of their payroll as their share of pension contributions after the one-year reprieve, the same as the rest of state government.
The other option would be to leave KRS and pay off their pension liabilities, either through a lump sum payment or start at their current rate of 49 percent and gradually increase it by 1.5 percent a year until it is paid off.
Bevin said in a veto message that any entity that opts out of the Kentucky Employee Retirement System should be able to pay off its unfunded liability within 30 years.
An analysis by a KERS advisor, however, shows that 74 quasi-government employers out of 118 would not be able to pay the full installments in that time, the governor wrote.
Bevin also objected to the possibility of allowing the Kentucky Finance Administration Cabinet to take over management of universities or other agencies that default.
Bevin wrote that he vetoed the legislation out of a “moral and legal obligation” to protect the benefits of retirees.
“I believe strongly that we must protect our important quasi-government entities, such as our regional universities, rape crisis centers, domestic violence shelters and local health services agencies, from potential insolvency due to the onset of significantly higher employer pension contributions,” he added. “These entities provide critical services throughout the commonwealth. It is paramount that their services remain uninterrupted. By having ignored the true costs of pension obligations for so many years, the risk to service interruptions is now very real.”
Napier said she preferred to keep the MCHD in the current system.
“Any agency leaving KERS would still be responsible to make payments for benefits accrued by its current and former employees, including retirees,” Napier explained. “If the agency is unable to make those required payments, benefit payments and health care benefits to retirees would stop. We believe the state has an inviolable contract with these individuals for their retirement benefits.”
Napier said she agrees with other members of the Health Dept. Association that the one-year reprieve would have provided time to implement key elements of the state’s public health transformation.
“These elements include addressing the fiscal instability of the current system; introducing a simplified public health model with clearly defined priorities focused on core public health services; and preventing duplication of efforts both internally and externally,” she said.
Napier said the dept. is already preparing for an expected rise in contribution rate.
“We have already taken steps to streamline our workforce,” Napier explained. “As employees have resigned, they have not been replaced but instead their duties have been reallocated or reviewed to determine alignment with public health transformation priorities.”
Napier added that the dept. is also looking at reducing its space at the civic center to reduce lease costs.
“Our hope is the Fiscal Court can lease out that space and avoid a significant impact to the county’s budget,” she said.
Napier said employees are fully aware of the situation.
“We have been open and honest with MCHD employees that layoffs could be required if the pension rate increase occurs on Jul
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