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April 6, 2018

Gov. Matt Bevin shocked public officials statewide Thursday when he vetoed a measure allowing cities, counties, school boards and other government bodies to phase in soaring pension costs, saying that a provision that allows some smaller entities to "buy out" of the public pension system is fiscally irresponsible.

Bevin's vetoes: Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.Bevin's vetoes: Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.House Bill 362, passed Monday, is meant to provide relief from huge increases in pension payments that take effect in the fiscal year that begins July 1. That includes Louisville, which is facing an increase of $38 million next year, an amount that could wipe out any revenue growth in Mayor Greg Fischer's next budget.

Bevin's veto of HB 362 drew immediate expressions of alarm from officials and calls for legislators to either override the veto or fix the buyout provision that concerns the governor.

{Lawrence County judge/Executive John Osborne, Louisa Mayor Harold Slone and BOE Supt. Dr. Rob Fletcher have been asked for comment on this issue and how they plan to pay for it but have not had time to respond. However, the phase-in has another chance because Bevin has said he does not oppose it and the GOP controlled government is reportedly set to compromise.}

Fischer said that without the phase-in legislation, Louisville — along with cities, school districts and other entities across Kentucky — "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," he said. "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."

HB 362 was passed in a flurry of last-minute action Monday that also included a budget bill and tax plan by lawmakers seeking to allow enough time to return next week and override any Bevin vetoes, if necessary.

Bevin, in his veto message, said he supports the bill's provision that allows groups to phase in rising pension costs but does not support a provision that allows some smaller public entities to buy out of the state retirement system, saying it could prove too costly.

"For the sake of fiscal responsibility, I must veto House Bill 362, while reiterating that the General Assembly should work quickly to re-enact the phase-in portion of the bill," Bevin's letter said.

Republican leaders who control the House and Senate said Thursday they would consider the governor's comments but made no commitments.

Acting House Speaker David Osborne, a Prospect Republican, said House leaders would "strongly consider" Bevin's suggestion to revise the bill before the session ends April 14 but members believe all provisions of the bill are important.

“It’s obvious that the phase-in language in House Bill 362 is crucial to the financial stability of local governments, but members of our caucus also believe that the buyout element is equally important," Osborne said.

Senate President Robert Stivers, a Manchester Republican, issued only this brief statement: "We will continue to work to effectuate an appropriate phase-in."

The Kentucky Bankers' Association released a statement in support of Bevin's concerns about the buyout provision, calling the veto "the right and responsible" action.

The buyout option affects only a small group of agencies within the state public pension system such as community mental health centers, public libraries, local health departments, rape crisis centers and domestic violence shelters, all members of the Kentucky Employees Retirement System.

These groups face an increase in their pension costs of 69 percent starting July 1 — an increase they say is certain to cause some layoffs and cuts in services.

Under HB 362, they could exit the state system, pay off their liability interest-free over 30 years and start their own retirement systems.

An earlier version of the bill offered such agencies terms for exiting the state system and a deadline of July 1. The final bill extends that deadline to Dec. 31.

The change to Dec. 31 gives such agencies more time to "understand the costs of the choices we would have to make," said Steve Shannon, executive director of the association that represents most of the state's mental health agencies.

"If this veto stands, it will not allow us the opportunity to determine what is best for our organizations in addressing our public pension concerns," Shannon said.

Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.

The bill to phase in pension costs was urgently sought by those affected.

Rally in support of teachers gather in Frankfort to protest the recent pension bill. Astrid Hacker/Louisville Courier Journal

"We're strongly encouraging the legislature to either override or pass a separate piece of legislation to restore that phase-in," said J.D. Chaney, deputy executive director of the Kentucky League of Cities. "... It is absolutely the most critical thing the General Assembly can do this session with regard to the operation of city governments."

Cities are among employers facing public pension contribution increases of 50 percent or higher. The bill would provide relief by limiting initial increases to 12 percent per year.

"Without a phase-in, cities will cut personnel, cut services and look at local revenue options, which are limited," Chaney said.

Eric Kennedy, director of governmental relations for the Kentucky School Boards Association said the phase-in is important to every school district in the state. While teachers are insured through a separate retirement system, school boards cover cooks, custodians, bus drivers and others employees through the County Employees Retirement System or CERS, which is subject to the phase-in provisions.

"We hope the legislature will act to either override the veto, or as the governor suggested, put only the phase-in provision into a piece of legislation that can move forward," Kennedy said.

The veto was Bevin's third in the current legislative session.

Bevin vetoed two other bills Monday.

One was Senate Bill 7, which would establish a volunteer group to advise lawmakers and state agencies on a host of rare diseases. Bevin said in his veto message that the bill was "laudable" but would mean "an unnecessary expansion of bureaucracy" and additional work for state employees.

Supporters of the measure, including Hallie Pollard, 17, who suffers from a rare, painful joint disorder known as Ehrlers-Danlos Syndrome, told lawmakers at a March committee meeting such an advisory council would aid in educating people about little-known diseases and how to get help.

"I would really, really love to see this bill passed because it would potentially help people who have rare diseases and are fighting them daily," Hallie told the House Health and Family Services Committee. "It could offer a lot of hope to us."

About one in 10 people, many of them children, suffer from one of some 7,000 diseases classified as rare, according to testimony.

Supporters said the advisory council of doctors, nurses, patients and others would be financed through a trust fund created to accept grants or donations and wouldn't cost the state anything.

But Bevin, in his veto message, said it could end up causing more work and expense for the state Department of Public Health.

Sen. Julie Raque Adams said she hopes lawmakers will consider an override.

"It's an important bill," she said.

Bevin also vetoed House Bill 148, a bill that would allow hospice organizations to take and dispose of terminally ill patients' unused drugs.

In his veto message, Bevin called the bill "well-meaning" but said it conflicts with federal law, which does not allow hospice organizations to accept controlled substances from patients.

Meanwhile, Bevin has yet to announce his intentions on other bills awaiting his signature or possible veto, including the pension bill, the state's two-year budget and a tax reform plan — the most significant and controversial pieces of legislation to emerge in the final days of the session.

An override requires a Constitutional majority of 51 of 100 votes in the House and 20 of 38 votes in the Senate. Lawmakers could override vetoes when they meet for the last two days of the session on April 13 and 14.

 

By Deborah Yetter and Tom Loftus
Louisville Courier Journal

 

Previous story from yesterday...

 

Date: 04-05-2018

Bill allows municipalities to phase in massive pension hikes

By Wes Swietek
Bowling Green Daily News

Kentucky municipalities have gotten a last-minute reprieve from massive hikes in pension costs for next year that would have likely meant widespread staffing and other cuts.

As part of efforts to shore up the state’s troubled pension system, municipalities and school districts were informed last year they would have to pay dramatically more – as much as almost 70 percent – in mandated employer funding for the Kentucky Retirement System.

For the city of Bowling Green, that would mean a $3.2 million hike, or almost 5 percent of the city’s general fund budget. For Warren County government, the projected hike was approximately $1.27 million.

But state legislators Monday night pushed through House Bill 362 that allows those increases for the KRS to be phased in over 10 years and caps the hikes at 12 percent per year.

The bill was passed Monday night – meaning it was approved in time to allow legislators to potentially override a veto by Gov. Matt Bevin.

“That was part of the rush to get it through,” said Bryanna Carroll, director of governmental affairs for the Kentucky League of Cities.

When a similar bill was first proposed earlier in the legislative session, Bevin told a Cadiz radio station that he “would never sign that bill.”

Bevin has not commented publicly about HB 362, but the Senate approved it by a 35-3 margin and the House approved it 90-2, meaning the votes are likely there to override a potential Bevin veto.

The legislation “eases what cities and schools were facing,” such as layoffs and other cuts, Carroll said.

Under the new legislation, the city of Bowling Green’s required increase drops from the $3.2 million to $770,458.

Greg Burrell, Warren County treasurer, said the county was bracing for the roughly $1.27 million hike, but with the phase-in, the increase will be about $323,000.

“We appreciate legislators undoing the process ... which would be a significant hit to our budget,” Bowling Green Mayor Bruce Wilkerson said.

Wilkerson said the city would have had to likely slow spending on things like capital improvement projects if it faced the $3.2 million hike next year.

But, he notes that the increase “doesn’t go away – we still have to pay the entire amount.”

The city had already planned for the larger hike by budgeting planned spending accordingly. The city has a general fund budget of about $70 million.

“We prepare for all kinds of contingencies,” Wilkerson said. “We budget from a standpoint of only spending what we have.”

“We’re very thankful legislators took the phased-in approach,” Warren County Judge-Executive Mike Buchanon said. “It certainly will make it easier to budget.”

With a $1.27 million hike, “we would have had to make some staffing cuts,” Buchanon said. “We’re very hopeful” that the lower hike will allow the county to avoid cutting employees, he said. The entire county budget last year was $49.2 million.

Buchanon said it was no secret the proposed hikes would have been devastating to many poorer counties across the state.

“I’m not sure some counties can afford the 12 percent,” he said, adding the phase-in approach is needed “just for the survival of some counties.”

 

 

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