FRANKFORT, Ky. (WDRB) -- After narrowly passing the House on Monday, Gov. Matt Bevin's pension bill has taken another big step toward becoming law.
The Kentucky Senate State and Local Government Committee easily approved the bill Tuesday on a straight party line vote.
Testifying before the committee, the sponsor of House Bill 1, Rep. James Tipton, bluntly assessed the problem.
“Frankly, ladies and gentlemen, we're in a mess,” Tipton said. “There are no good answers. There are no perfect solutions to this.”
HB 1 is designed to help the state's regional universities and quasi-government agencies, such as health departments, deal with ballooning pension costs.
As of July 1, the contribution rate increased from around 49% of payroll to more than 80%.
The bill freezes the rate at last year’s level and gives the agencies a one-time window to make a decision whether to stay in the state retirement system. If the agencies decide to leave, they'll have the option of paying their outstanding obligation in a lump sum or in installments. Each agency will also have to decide whether or not to keep their eligible employees in the system or place them in a 401(k)-style plan.
“These agencies provide vital services to the citizens of the commonwealth," Tipton said. "So, it's in our inherent interest to try and help them."
Robert Jackson, the president of Murray State University, told lawmakers that, without the bill, his school's pension obligation will jump by $4 million, even as state funding is being cut.
“Pensions are going in the wrong direction, state appropriations are going in the wrong direction, and the gap in-between puts great pressure on our students and families,” Johnson said.
But Senate Democratic Leader Morgan McGarvey said the bill gives the agencies incentives to leave the pension system, costing employees their future benefits.
“We are incentivizing them, with money, to cut benefits that employees believe they are going to be getting, believe they are entitled to,” McGarvey said.
Sen. Ralph Alvarado, Bevin's 2019 running mate, fired back.
“What would really stink would be to have several of our health departments, our rape crisis centers, many mental health centers and universities lay people off or fire them entirely,” Alvarado said.
The bill passed the committee 8-3 with all Democrats voting "no."
“I just think it's a first step in dismantling the entire Kentucky Retirement System, and I don’t think we should allow it to happen,” McGarvey told reporters following the vote.
Senate Republican Floor Leader Damon Thayer said Republicans are trying to save the system, and he disputed McGarvey’s accusation.
“That's a red herring that the Democrats are throwing out here at the last minute to try to derail the bill,” Thayer said.
The bill is expected to pass the Republican Senate Wednesday morning and then land on Bevin's desk.
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