Fire fighters in Kentucky have won the latest round in a legal battle over pensions for public employees, but the political conflict is likely to continue.
Earlier this year, state legislators passed a measure that would have severely curtailed retirement benefits for fire fighters and public employees until a state judge invalidated the law. Passed during the legislature’s final days, the bill was approved with limited review and did not pass with a majority as required by the state constitution.
Kentucky officials sought to make substantial cuts to public employee pension funds. Sick leave and a deduction for equipment and uniforms were eliminated in retirement benefit calculations.
Most of the state’s fire fighters are enrolled in the CERS pension plan covering public safety employees, while another 100 individuals are participating in a non-hazardous duty pension fund. Each group would have lost financial security in their retirement if the legislation was implemented.
“We’re grateful the judge made his ruling because they didn’t follow the political process,” says President of the Kentucky Professional Fire Fighters Association Joe Baer. “Our main argument is that the reductions in benefits change the contract language so this allows the state to go back and change a contract after someone is hired.”
Fire fighters and other public employees are being expected to shoulder more of their retirement costs. In 2008, Kentucky officials required fire fighters hired between 2003 and 2008 to pay an additional 1 percent of their salary toward health care retirement costs. Then in 2013, lawmakers decided to move all future fire fighters into a cash balance plan with a 4 percent guaranteed rate of return, but the 2018 legislation eliminated the guaranteed rate.
Changes made in 2013 reduced retirement benefits by 30 percent, according to Baer.
“Every five years, we go through pension reform in the state, and nothing good comes out of it,” Baer says. “The changes in 2013 put a real burden on public safety in Kentucky, and communities are having a difficult time retaining and recruiting because of the reductions in benefits.”
Tim Hill, a pension advisor for the IAFF, says the ruling represents an initial victory. Changes to public employee pensions were substituted into a bill addressing sewers, and the measure was passed with limited public input or debate among legislators.
“Our Kentucky affiliates should be congratulated,” Hill says. “This clearly shows the legislature and the governor’s machinations to hurt public employees, but the battle is not over.”
Hill says claims by state officials in Kentucky and other states that they do not have sufficient funding for pensions is untrue. The pension balances are “made to look more broke than they are” with accounting adjustments that alter their true financial status.
IAFF locals in Kentucky, the teacher’s union and the National Public Pension Coalition (the IAFF is a member) pressured state legislators not to move forward with the measure. The original intent was to move all public employees into a defined contribution plan, but that provision did not make it into the final version.
“Advocacy played a role in removing negative items from the bill, and it helped to string the battle over time, so the legislature and the governor needed to find a last-second way to pass the bill,” Hill says.
Andy Beshear, the state attorney general, filed a lawsuit against the measure, claiming the process to pass the bill did not follow the state constitution. Governor Matt Bevin, a strong supporter of the bill, is expected to file an appeal.
States such as Kentucky are facing pension shortfalls because of recessions in 2001 and 2008, but legislators in the state and elsewhere chose not to make minimum payments into the pension funds for several years.
Another reason for the conflict is that a wave of recently elected, conservative governors – such as Bevin – are seeking to slash public employee benefits, according to Hill.
“The purpose of this bill is to destroy public employee unions and push money from defined benefit plans into defined contribution plans so bankers and investors like Bevin can make more money,” Hill says.
