Auditor-Elect Harmon Prioritizes Retirement System Audit

While the change in party for the Governor’s office was the big news of last week, another state office will have a change that could greatly affect the state’s woefully underfunded pension system.

Current Republican State Representative Mike Harmon, of Danville, unseated current State Auditor Democrat Adam Edelen in Tuesday’s election. In his acceptance speech, Auditor-elect Harmon emphasized the need for a comprehensive performance audit of the Kentucky Retirement System, something the Kentucky Chamber called on earlier this year.

“We were fortunate to have both candidates for State Auditor embrace the Chamber’s call for a performance audit” said Kentucky Chamber President and CEO Dave Adkisson.

In January the Kentucky Chamber called on Auditor Edelen to conduct a comprehensive performance audit which would examine a number of important factors, including:

• How the system’s investment performance compares to other state pension funds and the reasons for any underperformance.

• How the investment fees paid by KRS compare to those in other states and whether those fees are reasonable.

• The accuracy of the assumptions made by the system’s actuary about current liabilities and the amount of the actuarially required contribution compare to actual experience (including the accuracy of assumptions about: the rate of return on investments; salary increases for public employees; the cost of health insurance; the rate at which employees are retiring; and other factors).

Auditor Edelen voiced support of conducting the audit, but said his office needed additional funding from the legislature. The Chamber is advocating that the necessary funds be advanced from existing funds allocated to the Legislative Research Commission (LRC).

In October the KRS Board of Trustees passed a resolution requesting a comprehensive audit and peer benchmarking study of KRS was passed by the retirement group’s board. In their resolution, the KRS board encourages the General Assembly to allocate funds for the audit outside of the money appropriated to pay the full actuarially required contribution. The board encourages the General Assembly to appropriate “up to $1,000,000” to fund such a comprehensive audit and study.

However, the Chamber would like to see the funds advanced from LRC immediately. Adkisson said “There’s no reason to lose a year waiting for the next state budget. We would like to see Auditor Harmon be able to start the audit process in January.”

Keep checking Bottom Line for more updates on the audit request and other pension news.