FRANKFORT, Ky. – Kentucky House lawmakers unanimously approved a measure they hope will provide some relief to state agencies that will see a massive spike in their required pension contributions this year.

The state’s pension funds have a shortfall of $25.8 billion dollars, meaning they need that much money to cover what they’re expected to pay out to retirees.

State agencies contribute money to the state’s pension funds based on a percentage of their overall payroll.

That rate was capped at 49% until last summer when lawmakers passed House Bill 1 in the special session.

This year, it’s expected to be around 93% this year, although Gov. Andy Beshear’s proposed budget would lower it to 67%.

House Bill 171 changes how pensions are funded, going from a percentage of payroll to a fixed number, based on what’s needed to cover unfunded liabilities by 2043.

State Rep. Jim Duplessis, R-Elizabethtown, said it will keep agencies from cutting employees to save money on their pension contributions.

“Because we required everybody to pay based on a percentage of payroll, it incentivized folks to get out of the system, and to hire contract labor,” Duplessis said. “And by doing that, it shifted more and more and more to the rest of us that stayed in.”

Duplessis said it also helps agencies like rape crisis centers and domestic violence shelters who don’t owe nearly as much to their pension funds as other agencies.

State Rep. Joe Graviss, D-Versailles, said they brought in several groups to get their thoughts on the bill, and this bill represents the best they could do to address everyone’s concerns.

“It’s not the perfect bill, but one of the things we said in our meetings is we can’t let the perfect be the enemy of the good, and that this solved a whole lot more problems that we were facing,” Graviss said.

The bill also tweaks the unfunded liability calculation, basing the amount owed over 27 years instead of 24 years, saving money in the short term but not changing how much is owed overall.

Lawmakers said House Bill 171 is just phase two of three with pension reform, so another bill will likely be introduced in the future to deal with the unfunded liabilities.