Kentucky lawmakers are once again calling for transparency in the state’s pension agencies, which manage the worst-funded public retirement funds in the nation.
Even though legislators on both sides of the aisle agree on some transparency provisions, the issue has taken on a political tone ahead of high-stakes races to determine control of the state House of Representatives this fall.
Last week Rep. James Kay, a Democrat from Versailles, proposed a bill for the upcoming legislative session that would alter how the pension agency for most state workers — Kentucky Retirement Systems — operates. The legislation would make pension contracts and investments public, and require the agency to operate under the same purchasing guidelines as state government.
Kay said the bill would give state employees and the public peace of mind.
“They would better know how their contributions and tax dollars are being invested,” Kay said in a news release. “This system needs less secrecy and more accountability, and my bill provides for both.”
The bill would also ban the use of pension funds to pay placement agents and forbid governors from reorganizing the KRS board, a power recently exercised by Gov. Matt Bevin that is the subject of a lawsuit in Franklin Circuit Court.
Republicans, who rallied around a pension transparency bill with some of the same provisions during this year’s legislative session, are critical of Kay’s bill.
Sen. Joe Bowen, a Republican from Owensboro, said Democrats are late to the table on transparency, accusing them of making it an election-year issue.
“There was no absence of opportunity to address these issues in the 2016 General Assembly session, but I assume these issues were not considered important to them at the time,” Bowen said in a statement. “I am glad they now believe pension transparency and accountability are important issues.”
The Senate bill from this year’s legislative session also would have subjected the pension systems to the state’s procurement code, requiring investment contracts to be competitively bid out. Different from the new bill, it would have required Senate review of appointees to agencies’ governing boards and forced the agency that manages lawmakers’ pensions to post financial information online.
The Senate unanimously approved the bill. Although a House committee passed it as well, the bill was never given a vote on the House floor.
House Republicans have tried to pin Democratic-leadership for not passing the bill ahead of 65 contested races for state House seats this fall. The two parties are fighting for control of the chamber, where Democrats have 53 seats and Republicans have 47. There are 65 contested races for House seats.
House Minority Floor Leader Jeff Hoover, a Republican from Jamestown, said Democrats were only interested in pension transparency because “they see power slipping” from their grasp.
“Aren’t all taxpayers, especially teachers and state employees, owed an explanation over House Democrat leadership’s unwillingness to fix the pension crisis?” Hoover said in a statement.
A recent S&P survey showed that combined, Kentucky’s pension systems only have 37.4 percent of the money they need to make payouts to current and future retirees, the lowest ratio of all states.
The crisis is due in large part to the state not putting enough money into the pension systems for 15 of the last 22 years, compounded by the recession.
Lawmakers have made efforts to fund the pension systems, this year putting more than $1 billion into the ailing funds. But recently, elected officials have also taken interest in how the retirement systems’ funds are managed, with some casting doubt on the agencies’ strategies with risky “alternative investments” and hefty fees paid to investment managers.