The Kentucky Senate has passed a proposal that would provide relief from surging pension costs for regional universities and 118 “quasi” state agencies like local health departments, rape crisis centers and domestic violence shelters.
The measure allows the agencies to buy out of Kentucky’s ailing pension system and incentivizes them to move their employees into 401k-type retirement plans, preventing them from earning future pension benefits.
The bill could affect up to 7,000 employees and is also expected to add $827 million in state pension costs.
Gov. Matt Bevin crafted the proposal with Republican leaders of the legislature and is expected to sign the measure into law Wednesday afternoon.
Senate Minority Leader Morgan McGarvey, a Democrat from Louisville, said the bill represents the “beginning of the end for state pensions in this state.”
“These are people who worked at rape crisis centers making $35,000 a year. The only hope of a life when they’re old enough is a pension. We’re going to cut that off today,” McGarvey said.
The measure won’t eliminate pension benefits for workers, but will encourage agencies that exit the system to cap employees’ benefits and move them into 401k-type plans on a going forward basis. It does not require employers to make contributions to 401ks.
Bevin called a special legislative session last week for lawmakers to address the issue after spending months hammering out the pension bill with Republican leaders of the legislature.
The bill narrowly passed out of the state House of Representatives on Saturday, but easily passed the Senate on Wednesday with a vote of 27-11.
Senate Majority Leader Damon Thayer, a Republican from Georgetown, accused Democrats of spreading rumors about destroying the pension system in order to rally up opponents.
“It’s a red herring, a ruse. Something to get the attention of groups not even affected by this bill and to attempt to fire them up here in the middle of the summer against this bill,” Thayer said.
Democrats criticize the proposal, saying that it violates contract rights for state workers by moving them out of the pension system without their permission.
Republicans say that the state is allowed to alter pension benefits for workers on a going-forward basis.
Jim Carroll, president of the Kentucky Government Employees advocacy group, said the bill “assaults the contract rights of dedicated public employees.”
“We will stand in solidarity with affected employees when guaranteed benefits are terminated next year and this matter is litigated. We will expect the Kentucky Retirement Systems board of trustees to fulfill its fiduciary duty to its members by joining in any such litigation,” Carroll said.
Democratic Attorney General Andy Beshear has also threatened to sue over the legislation, saying that Bevin’s proclamation that called the special session prevented lawmakers from considering other proposals.
This story has been updated.