Opinion: Pension Funding Means More Accountability

Nontransparent state budget conference committees aren't the only place that armed state troopers apparently can be found in the capitol these days.

They also showed up at the monthly Kentucky Retirement Systems (KRS) board of trustees meeting to help enforce Gov. Matt Bevin's decision apparently to prevent, by arrest if necessary, its now former chairman Tommy Elliott – who was in attendance – from participating in the meeting.

Elliott had refused to leave and the board defiantly snubbed Bevin's appointment of Madisonville dermatologist Dr. Bill Smith, who understands as well as any Kentuckian how the systems work.

While no one was arrested and Smith withdrew, my bet is there hasn't been the potential of as much excitement at a meeting of the state retirement system's board meeting since the Kentucky Employees Retirement System was created in 1956 during Gov. A.B. "Happy" Chandler's second stint as the commonwealth's chief executive.

Much has changed since the state's first known actuarial evaluation in 1957 revealed 16,000 participating employees in a Kentucky Employees Retirement System (KERS) with assets of $2.8 million.

Today, the entire KRS includes nearly 350,000 employees and retirees and nearly $20 billion in unfunded pension and insurance liabilities.

Add in the financial woes of the Kentucky Teachers' Retirement System and the commonwealth faces a massive $37 billion in unfunded liabilities – the cost of benefits already earned by state workers that aren't covered by the systems' assets.

All of which makes me curious about why Jim Carroll of the Kentucky Government Retirees, a group advocating for pension reform, opposed replacing Elliott as KRS chairman because the board needs "stability."

Actually, it's past time to shake the board up with qualified trustees who have the right kind of experience, will hold the system accountable for how it handles taxpayer dollars and won't use their seat to raise funds for favored political causes or simply to protect the status quo.

Why would Carroll or anyone concerned about the survivability of these ailing pension funds favor protecting a status quo that has resulted in digging the pension hole much deeper than it was even when Elliott first took his seat on the board in 2011?

As the hole gets deeper, the news gets worse for taxpayers.

A new Pew Charitable Trusts report reveals that Kentuckians experienced the nation's largest growth of unfunded pension liabilities to personal income between 2003 and 2013. The amount of pension debt as part of our personal incomes rose from less than 3 percent in 2003 to nearly 15 percent in 2013.

Carroll, his group and retirees receiving benefits and those who soon will be retired give Bevin enthusiastic high fives for increasing pension funding by more than $1 billion in the new state budget.

Achieving such funding without a huge tax increase means that other areas of the state budget, including colleges and universities, will be forced to endure significant cuts.

However, by defending Elliott's presence on the board and calling for Bevin to back down from removing him, Carroll sends mixed signals.

To believe such massive increases in retirement systems' funding forcing serious belt-tightening in Frankfort must not also be accompanied by attempts to bring more accountability to a board that's been largely ineffective in addressing the nation's ugliest pension crisis is unrealistic.

Bevin's doing his part by seating highly qualified board members like David Eager, a Louisville investment consultant, and John Farris, vice president for investments and chief financial officer at Centre College.

It's past time for those pleased with more funding to show the same kind of interest in more accountability from an ailing and chaotic public retirement system.

Jim Waters is president of the Bluegrass Institute, Kentucky's free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.