Kentucky Pension Law Struck Down for the Way It Was Passed

by | June 22, 2018

By Jack Brammer Daniel Desrochers

Franklin Circuit Judge Phillip Shepherd struck down Kentucky's controversial new public pension law Wednesday and permanently enjoined Gov. Matt Bevin from enforcing it.

In a 34-page ruling, the judge said the Republican-led General Assembly failed to enact the law in compliance with the requirements of the Kentucky Constitution.

The legislature violated Section 46 of the state constitution in two ways, Shepherd ruled. First, it failed to give the bill three readings on three separate days in each chamber, as the law requires, he ruled.

Second, he said the bill appropriates money, and therefore needed the support of a majority of all members in the House to pass. The bill, though, was approved with only 49 votes, which is two shy of a constitutional majority in the 100-member chamber.

Because the bill was enacted improperly, Shepherd said he did not consider whether the law violates the state's "inviolable contract" with teachers and other public workers.

Attorney General Andy Beshear, who challenged the law with the Kentucky Education Association and the Kentucky State Lodge Fraternal Order of Police, and Gov. Matt Bevin's attorney, Steve Pitt, argued June 7 before Shepherd whether the legislature followed proper procedures in passing the law and whether it runs counter to an inviolable contract -- language that guarantees teachers and state workers get the benefits promised when they are hired.

The law places teachers hired after Jan. 1, 2019, in a hybrid cash-balance plan, which is similar to a 401(k), rather than a traditional pension, and requires those teachers to work longer before becoming eligible for retirement. It also caps the amount of accrued sick leave teachers may convert toward retirement to the amount accrued as of Dec. 31, 2019.

State employees hired between 2003 and 2008 also are required to pay 1 percent more for health care.

"Today's decision is a win for open, honest, government, ruling that the Kentucky General Assembly violated the Constitution when it turned an 11-page sewer bill into a 291-page pension bill," Beshear said.

Bevin did not immediately respond to a request for comment. Bevin has previously described Shepherd as an "incompetent hack" and unsuccessfully asked Kentucky Chief Justice John Minton to remove him from the case.

The case is expected to be appealed to the Kentucky Supreme Court.

Larry P. Totten, president of the Kentucky Public Retirees System, said his group hopes the case goes directly to the Supreme Court and bypasses the Kentucky Court of Appeals "so that current public employees and teachers know the terms and conditions of their retirement benefits."

He added: "We also hope the court addresses the process by which language in bills that are further along in the legislative process is gutted and replaced by that from dissimilar bills."

Kentucky's ailing public pension systems have an unfunded liability of more than $40 billion.

In his ruling, Shepherd noted that the lawsuit raises important questions of legislative practice and procedure under the the state Constitution. The pension law was enacted late in this year's legislative session about six hours after it was first described to the public.

House Minority Leader Rocky Adkins, D-Sandy Hook, said the ruling is "a victory in every sense of the word for the people of Kentucky, especially our teaches, public employees and retirees."

"It confirms the arguments that House Democrats and I made as we soon saw the bill," he said. "I said it was a bad bill then; it's still a bad bill today; and Judge Shephered reaffirmed that with his opinion."

Republican legislative leaders did not immediately comment on the ruling.

One legal argument Beshear lost Wednesday was his claim that the pension law violated the Constitution because it was signed by House Speaker Pro Tempore David Osborne. Beshear argued the bill must be signed by the Speaker of the House, but the House did not have a speaker this year after Jeff Hoover of Jamestown resigned from that position early in the session because of a sexual harassment scandal.

(c)2018 the Lexington Herald-Leader (Lexington, Ky.)