LOUISVILLE, Ky. (WDRB) -- Kentucky Gov. Matt Bevin has vetoed a bill that would help prevent communities across the state from busting their budgets next year.

House Bill 362 would help shield communities from the huge increases that are coming to their pension costs. Without it, starting next year, cities and counties would have to immediately contribute millions more toward employee retirement.

“You would have to either pull back services or you wouldn't have the funding to perform in the future,” said Jeffersontown Mayor Bill Dieruf, who is also second vice president of the Kentucky League of Cities.

HB 362 would allow local governments to phase-in those pension contribution increases over a longer period of time. Instead of a 50 percent jump next year, it would be 12 percent.

“We all agree that we need to put in funding," Dieruf said. "This conversation is how fast do you put it in?"

According to his veto statement, the phase-in is not what Bevin objects to. He does not like the second part of the bill that requires the state to help pay the cost for quasi-government agencies, such as colleges and mental health agencies, that want to leave the state pension system.

Bevin called the buyout "problematic" and said it would cost the pension systems $2 billion.

The bill's sponsor said he understands the Bevin's concern. But Sen. Chris McDaniel (R-Taylor Mill) said something must be done to help those agencies who cannot afford to stay in the pension system and want to bail out.

“I'm fearful that, absent this legislation, what we'll see is a lot of those folks just go through either bankruptcy to discharge their pension obligation or simply refuse to pay their bills,” McDaniel said.

Dieruf is confident lawmakers will find a solution in the session's final two days next week. He believes they will either override the veto or break the measure into two separate bills.

“We're setting our budget up this week," he said. "And in our budget, we are budgeting for the 12 percent phase-in as is in the bill."

It could be a potentially expensive game of political chicken, but McDaniel said he believes a solution can be worked out.

“I'm optimistic that my colleagues saw previously, and continue to see, the benefit of taking these steps,” he said.

Louisville Mayor Greg Fischer released the following statement on the veto:

“Without the phase-in legislation, Louisville Metro, like cities, school districts, and other entities across the state are facing a devastating hit. In our city, it means an unprecedented $38 million increase that grows to a budget deficit of at least $50 million when you factor in other likely pension-related state budget cuts. And when you add in other Jefferson County entities, the impact on our community climbs to nearly $80 million. And that will mean potentially crippling cuts to services and programs that residents depend on – including in public safety, job creation efforts, parks, community centers and libraries.

“I encourage the General Assembly to re-enact phase-in language during the final two days of the session.”

Bevin’s full veto statement can be seen here.

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