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LOUISVILLE, Ky. (WDRB) -- A pension system that had become so financially troubled that it weakened Kentucky's credit rating would be shored up under legislation approved by the Legislature on Tuesday.
The proposal now goes to Gov. Steve Beshear, who played a lead role in crafting it, to be signed into law.
The legislation would provide nearly $100 million a year to make the state's required contribution to the pension plans of state government employees. It also would create a 401(k)-like retirement plan for new employees in an effort to protect the pension plans of current employees and retirees.
The House voted 82-17 for the proposal. The Senate voted 35-3 on Tuesday evening for the funding plan, just hours before the end of this year's legislative session. The proposal to create the alternative retirement plan was approved as a separate measure; it cleared the Senate 32-6 and the House 70-28.
"It is my opinion that this will avert a looming fiscal catastrophe," said Senate Floor Leader Damon Thayer, the Georgetown Republican who has been working on the pension issue for years.
Beshear and legislative leaders had been trying for the past three weeks to develop a revenue bill that rank-and-file lawmakers would support.
What they ended up with was a 228-page bill that tweaked the state's tax code to generate some $63 million while pulling another $33 million from other sources to make the state's annual contributions to the pension plans. The plan specifically requires the Legislature to provide the state's full annual contributions.
Several lawmakers complained that they had scant time to read the bill before voting on it. Others complained that it was developed behind closed doors by the Democratic governor and legislative leaders without adequate input from lawmakers or from employee groups.
Removed from the proposal Tuesday was a 2-cent rollback of the state's gasoline tax, which had been added in an effort to make the proposal revenue neutral. That would have taken more than $60 million out of the Road Fund, which proved particularly unpalatable to rural lawmakers who constantly press for improved roads and bridges.
The legislation would reduce a standard $20 income tax credit available to all Kentuckians to $10, which would provide an additional $33 million for pensions. That's half of what Beshear had originally proposed. The proposal also calls for a trade-in tax credit for people buying new vehicles, a move that would cut Road Fund revenue by some $34 million a year. That arrangement was made to appease lawmakers who insisted that the tweaks to the tax code be revenue neutral.
House Speaker Greg Stumbo had warned Tuesday that failure to get a pension bill passed would set the stage for a possible special legislative session that would cost taxpayers about $60,000 a day.
"Obviously, nobody wants to come back for a special session," Stumbo said.
State Rep. Jim Wayne, D-Louisville, had urged his colleagues to kill the bill because it would be detrimental to future state workers who might have to spend money from the 401(k)-like plans, depleting what would have been their retirement income.
"This is a bad plan," Wayne said. "We need to go back to the drawing board."