Kentucky Supreme Court strikes down pension reform law

FRANKFORT – In a 7-0 decision, the Kentucky Supreme Court on Thursday struck down the pension reform law passed by the 2018 General Assembly.

The high court ruled that the speedy process used by Republican majorities to zip a bill known as Senate Bill 151 into law violated a provision within the Kentucky Constitution intended to assure that lawmakers have the “fair opportunity” to consider a bill before voting on it.

Tim Abrams, executive director of the Kentucky Retired Teachers Association, released the following statement on the court’s pension ruling:

“The Kentucky Supreme Court’s decision today to overturn Senate Bill 151 provides the citizens of our state with a unique opportunity to put aside partisan rhetoric and come together to craft a legislative solution to our current pension crisis, one that insures dignified retirement for the thousands of our retired school teachers and those who will retire in the future.

“Many states have been able to enact meaningful pension reform that strikes a balance between maintaining the solvency of retirement funds while not breaking state government’s promise to provide teachers with a fair pension upon their retirement. We look forward to and remain committed to collaborating with Gov. Bevin and our legislators to find a reasonable solution to this situation that works for all stakeholders.”

Greater Louisville Inc. released the following statement on the court’s decision:

“Although today’s Kentucky Supreme Court decision was based on procedural grounds, GLI views this ruling as a major step in the wrong direction. Now, Kentucky must act in 2019 to address the unsustainable costs of Kentucky’s public pension systems. Long-standing priorities of GLI, like level-dollar amortization for paying off unfunded liabilities, cap on factoring sick days into benefits, and introducing hybrid cash-balance plans into the teachers’ retirement system, are vital financial reforms. Kentucky can no longer afford credit downgrades and crowding out essential budget priorities, like public education and infrastructure investments. GLI will work with the General Assembly to save our public pension systems and put our state on a more secure financial footing.” – Sarah Davasher-Wisdom, chief operating officer, Greater Louisville Inc.

In response to the ruling, the Kentucky Chamber released a statement expressing disappointment in the decision as the business community has been a vocal advocate of reforms to the state’s woefully underfunded pension systems.

“Today’s decision by the Kentucky Supreme Court is very unsettling for the business community. After several years of advocating for pension reform and a very difficult session that yielded actual progress, the Kentucky Chamber is very discouraged that we are back to square one. The billions of dollars in unfunded liability continues to weaken Kentucky’s bond rating and threatens investment in everything from infrastructure to education.  We urge the General Assembly to not be dissuaded from reforming the pension systems and to again pass meaningful reforms that will put our pension systems on a sustainable track through the process deemed constitutional by the Supreme Court,” Kentucky Chamber President and CEO Dave Adkisson said.

What Comes Next

In the weeks leading up to a decision by the court, the governor and legislative leaders have discussed what would happen if the bill was overturned and if the General Assembly should pass another bill to deal with reforms to the retirement system.

In an interview with The Bottom Line, Gov. Matt Bevin said the practice seen in recent months of the Kentucky Supreme Court making laws from the bench is extremely dangerous and while the three branches of government- executive, judicial, and legislative, are coequal, the legislature holds the most power, as it is the closest to the people.

“If the Supreme Court chooses to overstep their authority, as they have in other instances….if the same thing happens on this pension bill, this state is in big trouble. Because then the failure of the pension system will be on the backs of those seven jurists. I don’t think they would want that responsibility, they shouldn’t. It’s not their authority and they shouldn’t be dictating to the legislature how the legislature passes bills or what they do when passing bills,” Bevin said.

When asked what the legislature should do if the pension reform bill is overturned by the court, Bevin said while he cannot craft legislation and wouldn’t suggest what changes the legislature should make to a new bill, he said something must be done as Kentucky has the worst funded pension systems in the country.

“Our systems are destined for failure on the track they are on. They will not survive. The money will run out. This is a hard thing for people to believe, they say ‘well just get it from somewhere else.’ Raise taxes, people leave. It’s not just as simple as that. So, we have got to fix this,” Bevin said.

At the Kentucky Chamber 2019 Legislative Preview Conference, House Speaker David Osborne said they haven’t had the conversation on what will be done if the pension bill is overturned by the court but said he does believe they would tackle it again, even if the legislation doesn’t look identical to the bill passed in the 2018 session.

Kentucky Senate President Robert Stivers also said if the bill was overturned the legislature must revisit the issue of pension reforms. “I think we can do that and I think we should because it is a problem that has not gone away,” Stivers said.

Following the ruling Thursday, the Kentucky House Majority Leadership released a statement: “Because of this disappointing ruling, state employee retirement will continue to be the most insolvent pension system in America, and will serve as a drag on Kentucky’s entire economy. Senate Bill 151 was the first step in moving our pension systems toward a new day of solvency and health. Today’s decision puts retirement checks for hardworking public employees at risk, and is a major setback to the difficult work undertaken to reverse the indecision and inaction of the past two decades. Despite this, I am committed to leading in the effort to enact a solution for the critical situation that once again faces our commonwealth.”