News

The 2018 Kentucky General Assembly came to a close Saturday evening, and among the final actions of the legislature were votes to override Governor Bevin’s vetoes of the budget and revenue bills.  Below is a summary of how WKU will be affected by legislation that passed during the session.

Budget:

With the legislature’s decision to override Governor Bevin’s veto of HB200, the Free Conference Committee Report will become the enacted biennial budget as of July 1, 2018.    The budget includes a 6.25% reduction to higher education’s state appropriation. A portion of that reduction was transferred back to higher education to be distributed through the Performance Funding Pool, with $31 million to be divided among the public universities and KCTCS in the first year and $38,665,800 in the second year.  Equity funding for WKU and NKU, which had been included in the Senate’s version of the budget bill, was instead allocated for distribution through the performance funding model. The funding directed to the Gatton Academy was decreased by 2% ($75,000), and full funding was provided for the Kentucky Mesonet at $750,000 in each year.  The approved budget does not include funding for university capital projects and does not fund the asset preservation matching pool proposed by the Governor.

The final bill also contains language related to the dismissal of tenured faculty in cases where academic programs are eliminated due to financial reasons or low performance.  We view the language as permissive, and the University has been clear in statements on this measure that administrators will follow AAUP guidelines related to tenured faculty in the event that academic programs are closed.  

You can view HB200 here.

In its final two days, the legislature made a series of technical amendments to the budget by making changes to another bill, HB265.  One provision added would freeze the KERS employer contribution rates for university employees at the current level of 49.47% for one year.

You can view HB265 here.

The Governor has ten days to sign, veto or allow HB265 to become law without his signature.  Because HB265 is a budget bill, he will have line item veto authority as well. The legislature will not have an opportunity to override any vetoes of HB265.

Revenue:

In each biennium as a budget bill is adopted, so too is a corresponding revenue bill.  The legislature voted to override the Governor’s veto of the revenue bill, HB366, and thus the Free Conference Committee Report for HB366 will become law.  HB366 Free Conference Committee Report includes sweeping tax reform measures, including dropping the state income tax to a flat 5%, and it imposes new sales taxes on certain services not previously taxed.  The bill also raises the tobacco tax from $0.60 to $1.10 per pack of cigarettes and lowers the threshold of taxable pension income from $41,000 to $31,000.

HB366 includes a provision that will eliminate the 5.1% penalty payment to KTRS that participating universities are required to pay for those employees who elect to participate in a private, optional retirement program.  Eliminating this penalty was a high priority for WKU and will result in significant savings.

You can view HB 366 here.

Pension:

SB151 was amended late in the legislative session to include many of the provisions from SB1, the original Pension Reform Bill, and was signed into law by the Governor.   Among the provisions of interest to WKU employees is the elimination of the defined benefit plan for all employees hired on or after July 1, 2019. Those employees who are required to be part of the KERS system will be placed into a hybrid cash balance plan or may elect to participate in a 401(a) money purchase plan through the Kentucky Employees Retirement System.

Employees that began service prior to September 1, 2008, and who retire on or after July 1, 2023, will not be able to use sick time to determine retirement benefits.  Newly hired employees and those hired after 2008 already cannot use sick time as part of their benefit calculation.

SB151 makes similar changes to KTRS as well.  All newly-hired WKU employees beginning July 1, 2019, who opt to participate in KTRS will be placed in a hybrid cash balance plan.  Current employees with five years or less of service are provided an opportunity to opt into the hybrid cash balance plan.

A particularly troublesome provision in this bill will eliminate the general fund subsidy that covers a portion of the university employer contributions to KTRS beginning in 2020.  Although we have not yet determined the total cost to WKU, we anticipate a near doubling of the total current employer contributions paid by the University to KTRS. This is likely to have a substantial affect on the University budget in the next biennium.

WKU’s human resource professionals are carefully reviewing all of the provisions in the pension legislation and will provide a more detailed update in the coming weeks.    

You can view SB151 here.

HB362 is another bill that addressed pension issues relating primarily to city and county governments and was intended to provide relief for those entities facing crippling employer contribution rate increases to the Kentucky Retirement System.  For universities that participate in KERS, HB362 included an opt-out provision, which would allow universities to leave the public retirement system and pay back the estimated unfunded liability over a 30 year period. The Governor vetoed HB362, citing those specific provisions as the reason.   The veto was overriden. However, the provisions included in HB362 pertaining to universities were subsequently removed in an amended version of HB487 passed on the final day of the session. The amended language effectively reverts back to the original statute stating that any employer participating in KERS may cease participation and leave the system but must pay a lump sum amount of the full actuarial cost of benefits accrued by its current and former employees.  HB487 was sent to the Governor for his signature.

You can view HB487 here.

Statutory Relief:

HB592 is an omnibus statutory relief bill for public universities.  This bill addresses various existing statutes, including those related to mandated tuition benefits for postsecondary employees.  These changes are projected to provide significant financial and administrative relief to the universities. The bill has now been sent to the Governor for his signature. You can view HB592 here.

SB130 aligns the campus crime reporting requirements in the Minger and Clery Acts. The bill has been signed by the Governor.  You can view SB130 here.

Governor Bevin has until April 26 to sign or veto any legislation passed on the final two days of the legislative session. Any bills not signed or vetoed will become law without the Governor’s signature.

The legislature adjourned Sine Die on Saturday, April 14, until January 2019.  Over the course of the legislative session, WKU staff worked closely with legislators and staff as well as members of the executive branch and our colleagues from the other state universities and KCTCS.  In total, WKU staff reviewed 140 different pieces of legislation. If you have any questions about specific bills, please contact either Robbin Taylor (robbin.taylor@wku.edu) or Jennifer Smith (Jennifer.breiwa.smith@wku.edu).  

The complete bill tracking report is available here.