Hot Law: Kentucky Supreme Court Invalidates Bill that Would Affect Education Pensions

Yesterday, the Kentucky Supreme Court issued its much awaited decision relating to the fate of SB 151 which was passed to reform public pensions in Kentucky, including those for public educators. By way of history, SB 151 was passed on the 57th day of the 60-day 2018 legislative session and was intended to modify pensions for future public employees. Critically, however, SB 151 started out as a bill relating to wastewater. At the time of its passage, the body of the bill was substituted with another bill, SB 1, which included the pension reforms with the least opposition amongst legislators, though the title still related to wastewater.

Why did this situation occur? After SB 1 was introduced and discussed, staunch opposition from education groups and teachers caused the bill to stall in the legislature. In order to get the bill through before the session closed and to attempt to meet constitutional reading requirements, legislators modified SB 1 and substituted the body of the wastewater provisions in SB 151 with the pension reform content.

After passage, the matter was challenged by Kentucky Attorney General, Andy Beshear and advocacy groups for teachers and police officers in the Franklin Circuit Court on the grounds that SB 151 violated the 3-readings requirement of Kentucky Constitution Section 46. The challengers also alleged that SB 151 failed on substantive grounds because it violated the “inviolable contract” doctrine governing public pensions. The Franklin Circuit Court agreed with the procedural challenge, but did not address the substantive argument.

On appeal, the Kentucky Supreme Court essentially did the same thing. The Court found that SB 151 violated the 3-readings requirement of Section 46 of the Kentucky Constitution. To make this determination, the Court first had to wade through a challenge by the Kentucky Governor, Matt Bevin, to the reviewability of the issue. Bevin argued that the Court should not consider the legislature’s compliance with Section 46 because it was an issue of legislative discretion with which the Court, a separate branch of government, should not interfere. The Court easily rejected this argument, however, noting that Section 46 as a constitutional provision is clearly within its authority to interpret.

As for Section 46, the Court gave little guidance as to exactly how a legislature could comply with the 3-readings requirement. Yet, it was clear that a bill, such as SB 151, with a title that had nothing to do with the content in its body, could not satisfy its requirement. In other words, the Court was concerned that the wastewater title of SB 151 got its readings, but no title relating to public pensions had. Based on this, the Court held that SB 151 failed because the procedural requirements of Section 46 had not been fulfilled.

Like the Franklin Circuit Court before it, the Supreme Court also refused to consider whether SB 151 also failed on substantive grounds. This is common practice for courts for a number of reasons, including judicial economy and the reluctance to provide advisory opinions on issues that need not necessarily be decided. As a practical matter, however, the Court’s reluctance to provide concrete guidance to the legislature on both its procedural obligations under Section 46 and the substantive constraints imposed by the inviolable contract doctrine means that the controversy over pension reform in Kentucky is far from resolved.

The Kentucky General Assembly is about to begin a brief legislative session. Because SB 151 was invalidated only on procedural grounds, the legislature could in theory pass the same substantive bill and avoid the procedural errors committed last term. Yet, since the Court was mum on substantive issues, such a bill would likely face another court challenge on substantive grounds. While educators and education advocacy groups hailed the Supreme Court’s rejection of SB 151 as a victory, the Governor, several legislators, and business groups decried it as a failure to address Kentucky’s pension crisis. Thus, though the Supreme Court in Kentucky is the final word on the fate of SB 151, the legal issues relating to pension reform are far from settled. For pension reform in Kentucky, divisions remain and the path to a resolution is unclear and, most likely, long.

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