As Kentucky’s public pension systems continue to falter, elected officials including newly sworn-in Governor Matt Bevin have committed to pursue the Kentucky Chamber of Commerce’s call for a comprehensive performance audit of the Kentucky Retirement System (KRS).
In his inaugural address Tuesday, Bevin began the policy portion of his speech by saying audits of the state’s retirement systems will be a priority of his administration.
“We talked about auditing the pension plans and I will tell you, we are going to audit every single pension plan in the Commonwealth of Kentucky,” Bevin said in his inaugural address.
During the campaign, Bevin agreed with the Chamber’s call for a comprehensive performance audit of the Kentucky Retirement System and said there needs to be a closer look at all the system to “open the books, let people see exactly what is going on and what isn’t going on under the hood.”
Other have also committed to following through with the effort to do a comprehensive performance audit of KRS as Auditor-elect Mike Harmon prioritized the audit request in his acceptance speech on election night.
The Kentucky Retirement System itself has also agreed with the call for an audit as the KRS Board of Trustees passed a resolution suggesting it be done in October.
Kentucky Chamber President and CEO Dave Adkisson has said funding for a comprehensive performance audit should be found before the 2016 session to ensure that the process not be delayed. And the Kentucky Chamber Public Pension Task Force has called for action on the independent audit in recent months.
The Kentucky Chamber’s call for a comprehensive performance audit made in January 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).
Almost all of the previous audits have ended up being whitewashes because they did not know or refused to ask the right questions. KRS is really 11 different legal entities, and by commingling them has been able to avoid any transparency or accountability. CIO admitted to Reuters last week that KERS and SPS will be have to be invested drastically different than CERS, and they are already funded in completely different ways.