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Bevin vetoes HB 358, health dept in limbo

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FRANKFORT – While Governor Matt Bevin had previously assured lawmakers he would not veto the pension reform bill, on Tuesday he did just that, leaving offices like the local health department in limbo and requiring the General Assembly to reconvene for a special session.

On Tuesday, April 9, Governor Bevin announced he was vetoing House Bill 358, which raised quasi-governmental entities’ pension costs, but gave them one-year reprieve before their payroll pension contribution rates increased from 49.47 percent to 84 percent. 

Without any other changes, their rates will jump on July 1, 2019, which Salyersville Mayor and Magoffin County Health Department Public Health Director James “Pete” Shepherd had previously told the Independent that would cost the health department $120,000 next fiscal year, which they don’t have and he anticipated they would bankrupt within a year to 14 months.

Bevin did say he would call an extraordinary session before July 1 “to provide the relief necessary to protect the solvency of these entities and their ability to provide services, while at the same time maximizing funding to KERS and protecting the inviolable contract rights of retirees.”

The governor said in the press release that parts of HB 358 violated the moral and legal obligations they have to public sector retirees. 

Bevin noted that if a quasi-government agency decided to opt out of the Kentucky Employers Retirement System and eventually defaulted on paying back the full actuarial cost of the benefits accrued by its current and former employees, those individuals could lose benefit payments, including health care, which he said was unacceptable.

He said the discount rate to pay back the unfunded liabilities could potentially cost the KERS hundreds of millions of dollars, further threatening the solvency of the system.

He noted that allowing Tier 1 and Tier 2 employees to elect to continue participating in KERS even if the agency as a whole opts out is legally questionable, with no precedent for if that’s in compliance with the law.

“I believe strongly that we must protect our important quasi-government entities, such as our regional universities, rape crisis centers, domestic violence shelters, and local health services agencies, from potential insolvency due to the onset of significantly higher employer pension contributions,” Bevin stated in the release. “These entities provide critical services throughout the Commonwealth. It is paramount that their services remain uninterrupted. By having ignored the true costs of pension obligations for so many years, the risk to service interruptions is now very real.”

Bevin did note that he appreciated the good intentions of the General Assembly in passing HB 358, but said they could do much better. 

As for the Magoffin County Health Department, Shepherd said, “We’re hoping for the best, but preparing for the worst.”

He said they have to have their budget approved before the General Assembly will meet, again, so they will cut costs and programs on the presumption that their payroll pension contribution rates are going to be doubled come July.

“If this comes back, we may be able to add stuff back into our budget through amendments, but we have to plan like this increase is happening and try to find a way to make ends meet with that,” Shepherd said. “That’s all we can do.”
 

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Heather Oney

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