Frustrated by the lack of legislative oversight in the state’s struggling pension systems, two Republican lawmakers say they are introducing a bill to make the agencies more transparent.
State Rep. Mike Harmon of Danville and Sen. Joe Bowen of Owensboro want to give four non-voting seats on the KRS board of trustees to members of the General Assembly and to require KRS contracts to undergo legislative review.
They announced their intentions five days after the KRS board gave its executive director, Bill Thielen, a contract calling for a 25 percent raise — to $215,000 a year — over nearly three years. Harmon also took offense at a published remark by KRS Chairman Tommy Elliott — a Louisville banker appointed by Gov. Steve Beshear — that he doesn’t “work for the legislature.”
“The actions by the KRS board last week fly in the face of the thousands of current and retired state employees, many of whom are gravely concerned about the financial stability of their retirement system,” Bowen said in a statement.
“Couple that with continuing concerns among retired and current teachers about KTRS, and the need to make necessary changes as well as addressing the financial challenges within that system, I believe it’s time we in the General Assembly take the bull by the horns and bring these retirement systems in line.”
Kentucky’s public pension funds are among the worst-funded in the nation. Harmon, who is currently running for state auditor, wants taxpayer-elected lawmakers to play a greater role in their oversight.
“It will be the first step in transparency, to diagnose so that we can eventually fix, and then once we do the fixes we can, we’ve got to fully fund it,” he said. “If we diagnose it and we fix what we can but don’t fund it, then we’ll be right back where we’re at.”
Harmon said the bill proposals were to have been filed Wednesday. One would make two state representatives and two state senators ex-officio members of the 13-member KRS board and the nine-member KTRS board. Another proposal would make all appointments to the KRS board subject to Senate confirmation.
“We’re being asked and the taxpayers are being asked to participate more in this particular process,” Harmon said in an interview with the Kentucky Center for Investigative Reporting, “and we think it’s important both for the taxpayers, but definitely for the employees.”
The other main proposal in the bill would remove the existing exemption of KRS and KTRS contracts from review by the legislature’s Government Contract Review Committee. Such contracts include those with hedge funds and private equity funds that insist on the confidentiality of investment contract terms. As a result of that non-disclosure, state retirees can’t learn the precise holdings of those funds — or what those funds charge in fees. About 20 percent of KRS assets are in hedge funds and private equity funds. (Read KyCIR’s 2014 report: “When it Comes to Investments, Kentucky Keeps Pension Holders in the Dark”)
Thielen had no immediate comment. “I’m sure we will provide information on the impact, etc. after reviewing the legislation and during the legislative process,” he said.
Reporter James McNair can be reached at firstname.lastname@example.org or (502) 814.6543.
This story has been updated.
This story was reported by WFPL’s Kentucky Center for Investigative Reporting.