Louisville and other local and county government entities across Kentucky will not be able to phase in pension costs following a veto by Gov. Matt Bevin Thursday of a bill that would have allowed that approach.
Bevin cited “fiscal responsibility” in striking down House Bill 362, saying buy-out provisions in the bill that would allow employers to exit retirement plans are “problematic.” The bill calls for allowing employers to cease participation by paying actuarial costs over 30 years without interest.
That structure would be a “significant benefit to those withdrawing employers and could potentially be a $2.0 billion subsidy that must be financed by the remaining participating employers in the systems,” Bevin wrote in his veto.
Read Bevin’s veto message below:
[scribd id=375644546 key=key-MawweHeu1KvcIWwH9mPH mode=scroll]
He expressed support for the bill’s phase-in provision in his veto and urged the Kentucky General Assembly to restore it in a subsequent version of the bill. The phase-in would allow municipalities to spread the hikes over 10 years, and limit the increases to 12 percent a year.
Louisville Mayor Greg Fischer, in a statement, echoed Bevin’s call for reinstating the phase-in provision in the remaining two days of the 2018 session.
Without a chance to phase-in costs, Louisville Metro will face a “devastating hit,” Fischer said. He described an increased pension obligation of $38 million in the upcoming fiscal year, which begins July 1. That could lead to a budget deficit of $50 million when factoring in other pension-related state cuts, he said.
“When you add in other Jefferson County entities, the impact on our community climbs to nearly $80 million,” Fischer said in the statement. “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.”
State lawmakers still have the option of overriding Bevin’s veto.
Kentucky’s underfunded pension system for state workers has a liability of $30 to $70 billion. Last week, state lawmakers passed a last-minute pension overhaul, which led thousands of teachers to march on Frankfort in protest.