Politics

Incoming state Auditor Mike Harmon is calling for the resignation of the executive director of the state’s most under-performing pension system.

The Kentucky Retirement Systems Board of Trustees recently extended the contract of Executive Director Bill Thielen and gave him a 25 percent raise.

The pension fund covers 120,000 state employees and retirees in non-hazardous positions. It has only 19 percent of the money it needs to make future payouts.

Harmon said Thielen shouldn’t have taken the raise while the system is so underfunded.

“It’s just a bad example,” Harmon said, adding that the system needs a new leader to rebuild that “positive, ‘we can win’ type attitude.”

“It’s kind of like changing out a coach — sometimes it’s just a new direction. A lot of times it works. Sometimes it doesn’t,” said Harmon.

Harmon is currently a Republican state representative from Danville. Earlier this month, Harmon upset Democrat Adam Edelen’s re-election bid and will become state auditor on Jan. 4.

The KRS did not immediately return calls for comment on Wednesday.

Thielen became executive director of Kentucky Retirement Systems in August 2012 after serving as interim director. He had planned on retiring soon, but the KRS board extended his contract through June 2018 after trustees said they had trouble finding a replacement.

On Tuesday, Thielen’s salary will increase from $171,200 to $215,000.

The pay raise drew the ire of some legislators.

During a legislative hearing on Monday, Senate Majority Whip Jimmy Higdon, a Republican from Lebanon, publicly called for Thielen to step down.

“Because your hiring and accompanying large salary increase followed an executive search that was truncated at best, I’m requesting that you retire at the completion of the 2016 General Assembly session as you originally planned,” Higdon said, reading from a letter he sent to Thielen.

The 2016 legislative session ends in April.

KRS has been criticized for its secrecy in investments and costly fees awarded to fund managers. The system invests in so-called “alternative investments” at one of the highest rates among public pension systems. Those investments tend to be riskier and provide lower returns.

State Sen. Joe Bowen, a Republican from Owensboro, said he’ll file a bill in the upcoming legislative session that would require the legislature oversight of KRS’ contracts, including the agreement for Thielen’s raise and extended term.

During the meeting on Monday, Thielen predicted that next year the state’s annual contribution to the non-hazardous pension fund will need to be about $157.8 million more than it was this year.

Ryland Barton is the Capitol bureau chief for Kentucky Public Radio.