October 2017 – In the weeks after a plan for pension reform was revealed in an October 2017 press conference, Gov. Matt Bevin and Frankfort legislators withdrew the pension reform bill. The governor and other leaders have been meeting behind closed doors to continue to make changes to the bill, and as of this date of the publishing of this article no new version has been released to the public.
November 2017 – An independent analysis of the proposed bill for TRS found that it would cost Kentucky taxpayers $4.4 billion compared to if legislators were enact no pension reform whatsoever but continue to fully fund the system as they did in 2016. After moving to continue making changes to the pension reform bill behind closed doors, Gov. Bevin’s administration asked for a re-do of the analysis that showed this $4.4 billion price difference. Following that, a new independent analysis of the reform bill’s impact on KRS which was set to be released was instead withheld from the public by lawmakers. Meanwhile, experts who have had a chance to evaluate the TRS analysis of the proposed switch from pensions to 401(k)-style plans said the $4.4 billion number shouldn’t “be surprising to anybody that understands how these proposals work.”
Neither that KRS analysis, nor any new pension reform bill are currently available to the public. Recent evaluations indicate that the governor may call a special session to pass this pension reform as soon as December 18.
The reform bill that was available for a short time, before being withdrawn, talked about options such as COLA suspensions and switching teachers to a 401(K)-style retirement plan as a way to solve the unfunded liability with the state retirement system. However, states which have made those types of changes have found their problem only got worse, and a plethora of evidence indicates that pension plans are both less costly to taxpayers and provide more benefits to retirees than traditional pension plans.
Part of the proposed reform includes COLA suspensions, but this would cost retired teachers tens of thousands of dollars over their lifetimes. Teachers are encouraged to use the COLA calculator found here to calculate the actual impact that COLA freezes would have on their lives individually.
The KRTA recently released a set of talking points to better assist teachers and supporters around the state in having better conversations to stress the importance of a pension-style system, instead of a 401(K) style system. The talking points are meant to help provide background and facts when engaging with both legislators and members of your community in meaningful discussions to understand this complicated issue.
December 2017 – Gov. Bevin vowed to call a special session to tackle pension reform before the end of the year, but since a newly revised version of the pension reform bill had not yet been released as of Dec. 6 and since normal session looms in January, House Republicans signed a letter urging the Governor to not call a special session.
Pension reform is expected to be handled in regular session in January 2018. Sen. Joe Bowen says the Ky Senate’s version of the bill is drafted (though still not filed and available to the public), and he finds it critical that the legislature pass the bill within the first two weeks of regular session.
January 2018 – When the 2018 regular session began, many lawmakers such as Damon Thayer were adamant that retired teachers would be switched to a 401(k) system. Thayer said on Jan 2 that a new bill had been written, but was being scored for its actuarial impact before being released to the public and also noted that he and other lawmakers “need to look at making changes outside the inviolable contract…” Neither the bill, nor the actuarial impact were released.
On Jan 22 Gov. Bevin released a pension proposal which provided the requested funding for the pension system, but made cuts to healthcare benefits. These cuts would have affected teachers who retired on or after July 1, 2010 and who are currently under the age of 65, and thus ineligible for medicare. These retirees would see their health insurance spike as much as $500-800 per month. Read the statement from the KRTA here.
Also on Jan. 22, Rep. Shell was interviewed saying that several pension bills had been drafted, and several have been scored by actuaries where “we saw some positive things, we saw some negative things,” Shell said. But nothing was yet available to the public.
February 2018 – 30 days into the 2018 General Assembly session and no pension bill had been filed. Senate president Sen. Stivers insisted on Feb. 8 that a bill was close, and that the assembly was waiting on more information concerning the effects of certain items before constructing the final bill.
As lawmakers had begun making indications that they might consider allowing retirees to remain in the current pension system, the pension debate in Kentucky became subject to a national campaign by conservative activists to reform public employee retirement – campaign which is more about ideology than finance. A conservative think tank in Louisville issued an open letter on Feb. 14 demanding a shift from traditional pensions to 401(k)-type plans. The letter angered many legislators, who have spent many weeks carefully reviewing the effects of such a switch. Read more here.
Finally on Feb. 21, the senate filed Senate Bill 1 to address the pensions. The bill does not require teachers to switch to a 401(k)-style plan, but the KRTA was most concerned that the bill retained COLA reductions for retired teachers from 1.5% to 0.75% per year which is illegal under the inviolable contract. The senate bill was alleged to be able to save the state $4.8 billion, but almost all of those savings come about by reducing benefits for retired teachers or shifting responsibility to local school districts – many of whom are already financially strapped.
The new pension bill was moved to the State and Local Government Committee and on Feb. 28 it was scheduled for a hearing. Supporters and retirees were asked to attend the hearing and turned out in force, cramming into the halls and spillover rooms in the capitol.
March 2018 – On March 2 a new analysis of SB1 was released that found in many cases SB1 would result in benefit levels lower than currently provided and lower than propoed in the Aug. 28 PFM report. View the full report here.
Reports started coming in that a Washington, D.C. group who backs Gov. Bevin was making automated phone calls around the state saying, “without this important pension reform, Kentucky’s workers, teachers, retirees and taxpayers are all in danger,” the voice said.
On March 7 the revised Senate Bill 1 passed the Senate and Local Government Committee and went back to the Senate. Once there, however, the bill was sent back to committee without a vote.
In a March 21 radio interview on Talk 104 FM, Gov. Bevin had many choiced things to say about teachers and opponents of SB1. He seemed to echo comments he made previously about opponents not being “sophisticated” enough to understand the implications which would come about from not passing pension reform, stating, “how do you possibly make progress with people who either clearly don’t understand wha’t being said to them or they don’t care?”
On March 29 the dead pension bill was resurrected suddenly, as a 291-page proposal was attached to a wastewater bill and approved in committee moments after it was released publicly. The bill was stripped down of many of the most controversial parts, COLA reductions were removed and health insurance benefits will be left alone for the next two years. Current retirees are able to remain in their defined benefit pension plan, but under this bill new hires are forced to enroll in a cash-balance hybrid plan. The bill then moved to the House where it was debated for 3+ hours before it was passed. SB151 moved quickly to the Senate where it was pushed through. It should be noted that the bill was passed without a dedicated actuarial analysis, as required by law, and many lawmakers argued during debate that nobody could have possibly had enough time to actually read through the entire bill in such a short timespan.
Following the surprise passing of Senate Bill 151, many teachers took sick time or arranged substitutes, or were lucky enough to be on spring break, and descended on Frankfort to protest. Several schools were forced to close either on Friday or Monday due to the lack of teachers.
A update written by KRTA Executive Director, Tim Abrams concerning the passage of SB151 can be viewed here.
On June 20, SB151 was deemed unconstitutional by Franklin Circuit Court Judge Phillip Shepherd. In his 34-page ruling, Judge Shepherd deemed that the Kentucky General Assembly violated the Kentucky Constitution when it passed a surprise pension bill only six hours after introducing the legislation. The Kentucky Constitution requires that bills be given three readings on three separate days in each chamber before being passed into law.
On December 13, 2018 the Kentucky Supreme Court unanimously struck down Senate Bill 151 on the grounds that it did not provide the constitutionally required three public readings in both the Kentucky Senate and House before being passed in March 2018.
A few days later on December 17, Governor Matt Bevin called a special session to address Kentucky’s pension systems. But the very next day on the 18th, Kentucky House and Senate members voted to adjourn the special session a little over 24 hours after it began – and without passing any pension reform.
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