For more than a dozen years now, the General Assembly has approved several far-reaching reforms of the state’s public retirement systems. The most successful of those followed a simple formula: They were bipartisan, and they reflected the input and support of those directly affected.
In recent years, however, that approach has been abandoned, and the result has led to numerous protest rallies and adverse court rulings.
Unfortunately, we saw that same negative trend continue during the special session that ended last week.
The issue this time is the very high retirement costs facing our regional public colleges and universities like Eastern Kentucky and KCTCS and what are called quasigovernmental agencies, which include public health departments, domestic violence shelters and rape crisis centers.
Many of these agencies – more than 100 altogether – have been shielded from steep increases in what they have to pay Kentucky Retirement Systems, but that temporary freeze in payments ended June 30.
The legislature passed a misguided bill a few months ago that would have at least provided short-term relief for another year, but Gov. Bevin vetoed it, guaranteeing the need for the special session. Without that freeze, the agencies’ payments to the state retirement system would have gone up almost 70 percent during the current fiscal year.
Most agencies would have had to cut services to the bone, and many would probably have had to shut their doors, forcing the state to take over in many areas. That would have been catastrophic and extremely expensive.
How we got to this point is complicated, but the main reason is that the state retirement system’s board of trustees, which had been restructured by Gov. Bevin, lowered assumptions in 2017 to the most conservative in the nation. This decision took effect immediately, rather than being phased in over years, and that’s why retirement payments have gone up so quickly for state and local government agencies alike.
What ultimately became law last week has the 12-month freeze everyone agrees is needed for the quasi-governmental agencies, but the rest of the law forces them to make impossibly tough decisions next spring that will take effect next July. If nothing else is done by the General Assembly, I am afraid we will see a situation even worse next summer than the one we just avoided.
That’s because last week’s law calls for the affected agencies and regional universities to decide whether to pay the full rate to the state retirement system going forward or to exit the system in one of several ways. None of these choices is remotely affordable, and they set the stage to hurt thousands of people and undermine the nation’s lowest-funded public retirement system.
The law does give the agencies the right to protect many of their employees’ retirements, but at an even higher cost. Many agencies may have no choice but to leave the state retirement system entirely, meaning their employees’ current benefits will be capped while these employees will have to start a new retirement plan well into their careers.
These workers have served our communities admirably, but this this move will cost them a tremendous amount of money or force them to work long after they otherwise would be eligible to retire.
For now, this law only applies to those employed at the quasigovernmental agencies. It does not directly impact those working at our local schools, and it does not affect state and local workers or first responders.
Still, I worry this law could be used to take benefits away from these very groups in the future, if a court rules this is legal. I also have doubts about the way the special session was called by the governor, because it undermined the legislature’s role in deciding what should be law; and there is a question whether the House had enough votes to meet a constitutional mandate on budget matters in a non-budget year.
Many of my House colleagues and I supported an alternative that would have been fairer and more legally sound. It would not have forced thousands of employees out of the state retirement system, and it would have enabled the agencies to continue their missions for years to come in a way that was affordable.
I also proudly sponsored legislation that would have ensured the needed freeze in retirement payments for the quasi-governmental agencies remained if the governor’s bill is rejected by the courts.
I regret these plans were turned down, but I hope at least some aspects serve as a guide for the General Assembly when it returns to the Capitol in January. Otherwise, we will see a repeat of this process a year from now.