The State Capitol dome in Frankfort | Photo via Legislative Research Commission

The Kentucky General Assembly quickly pushed through a controversial bill Thursday evening to alter the state’s public pension system, which led thousands of furious teachers across the state to call in sick as a form of protest, causing at least 28 county districts — including the two largest in Louisville and Lexington — to cancel classes on Friday.

Gov. Matt Bevin appears certain to sign the bill that — while greatly watered down from his original pension proposal released last fall — he lobbied heavily for in the past several weeks, saying that it fulfills his pledge to save the underfunded pension system from imploding.

However, this pension bill — which had much of the language of the Senate Bill 1 on pensions inserted into Senate Bill 151 on sewage at the last minute — will now face a legal challenge by Attorney General Andy Beshear and teachers’ unions, who argue that it is illegal due to being passed without a required actuarial analysis and violating teachers inviolable contract.

While that legal fight could drag on in the courts for months, there is still major legislation that must be resolved dealing with the state’s two-year budget and phasing in pension cost increases for local governments on Monday — the last day of the 2018 session before the governor’s 10-day period to veto bills. Two additional legislative days remain after Bevin’s veto period to override vetoes and pass bills, but any legislation passed in those two days could not be overridden if later vetoed by Bevin.

And despite the fact that the larger pension bill has already been passed, teachers from all over the state are expected to fill the capitol building in Frankfort on Monday to continue their protests.

Pension relief bill for local governments appears more likely to pass

As late as Thursday morning, the prospects of Senate Bill 66 passing — which caps at 12 percent the increase in employer pension costs for local governments and school districts over 10 years — were not good. With many assuming that SB 1 would not pass, Republican Senate leaders and Bevin both said that SB 66 would die along with it, saying the two were inextricably linked. Local government officials across the state warned that this would be a disaster as dramatic increases in pension costs loom in the next fiscal, with Louisville Mayor Greg Fischer saying the city would have to make draconian cuts to vital services in next year’s budget without such relief.

However, with the unexpected and sudden revival of the larger pension bill provisions on Thursday, Republican Senate President Robert Stivers indicated after that evening’s vote that he now expected the provisions of SB 66 to pass, though some of its language would change and it might be inserted into another bill.

While the language of the bill will be similar in that it will allow cities, counties and school boards to phase in employer pension costs, Stivers added Thursday night that “there were a few things in the original bill we found after talking to actuaries that need to be changed to make sure we weren’t hurting ourselves more than helping ourselves.”

Such legislation may save some local agencies from having pension contribution increases of over 50 percent, but the new hybrid cash balance plans for future teacher hires created by SB 151 shifts nearly a third of employer costs to the local school districts, which now must contribute 2 percent of the new teacher’s pay for the benefit — which could prove to be a heavy burden for poorer, rural districts.

State budget bill would have to move quickly to pass Monday

In order for both the House and Senate to pass a two-year state budget on Monday before the gubernatorial veto period begins, the conference committee would have to present a compromise bill that morning that reconciled the differing budgets passed by each chamber, and then have both full chambers pass the bill by that evening. This would be yet another large task for a short amount of time, similar to the pension bill passed on Thursday.

As for the per-pupil SEEK funding for K-12 public education, the House bill was slightly more generous with $4,055 to the Senate bill’s $3,984 — though both would be an increase from the current level. The Senate bill also included larger education cuts to Family Resource and Youth Service Centers and Learning and Results Services, in addition to language requiring local districts to curb administrative costs and install electronic security at the front entrance of all schools, without additional funding for such installations.

Part of the reason the House budget bill was more generous than the Senate bill was because it included a new tax increases on tobacco and prescription opioids, which were stripped out of the Senate bill. Republican legislators have talked about including some kind of tax reform in the compromise budget bill, though no details have been made public. Also at issue is whether the compromise budget and revenue bills will include funding for charter schools, which was present in the Senate version.

The University of Louisville and other public colleges are also watching this budget process closely, as the Senate bill cut higher education appropriations by 6.25 percent — as Bevin first proposed in January — and ending funding for many affiliated programs, while the House bill eliminated such cuts. A 6.25 percent cut would amount to $8.3 million for UofL in the next academic year, as the university’s administrators are hoping to craft a budget that keeps tuition flat for the second straight year.

Additionally, a provision added late to the Senate budget bill would allow university boards to fire tenured professors if those schools make major changes to their programs. The chance that this provision may be included in the compromise budget bill on Monday has led to some university professors considering a strike — which may end up coinciding with the wildcat strikes of public K-12 teachers if their “sickout” protests continue.

If both chambers do not pass a budget bill on Monday, they could still do so in the two days following the governor’s 10-day veto period. However, if legislators waited to pass a budget bill until them, Bevin’s veto — which could include line-item vetoes of specific sections — would not be able to be overturned.