Oh, yes, John Cheves did it again:
Kentucky lawmakers are debating whether to borrow nearly $1 billion to plug a hole in the Kentucky Retirement Systems, which provides lifetime pensions to state and local government retirees.
The money would come from “pension obligation bonds” sold to the public, with the proceeds invested financially at KRS. At present, KRS is $12.3 billion short of what it expects to need in coming years to honor its pension obligations, to say nothing of its health insurance commitments. KRS hopes that investing extra money on Wall Street now will help cover the future shortfall.
t’s the principle of taking on debt to pay more debt,” said state Sen. Damon Thayer, R-Georgetown, co-chairman of a legislative task force studying the state pension system. “I’m not enamored of that approach.”
But here’s the kicker: Kentucky already is doing it.
Read more here: http://www.kentucky.com/2012/11/10/2403333/kentuckys-pensions-are-woefully.html#storylink=cpy
Experts say few states do a worse job than Kentucky in managing public pensions.
“The notion that all public plans are in trouble is simply not correct. Before the two financial crises of the past decade, most plans were in reasonably good shape. And in the wake of the crises, plan finances have begun to stabilize,” Alicia Munnell wrote in her new book State and Local Pensions: Now What? Munnell, an economist, is director of the Center for Retirement Research at Boston College.
Click here to read the entire thing.
He’s the only mainstream reporter in the Commonwealth of Kentucky bothering to take the Kentucky Retirement Systems this seriously.
While Cheves described the lack of transparency with the KTRS POB as giving “scant public notice”? A case can definitely be made that it was covered up to mask the magnitude of the pension problem.
The Securities and Exchange Commission doesn’t care about misleading Kentucky taxpayers (no one does, obviously). The SEC does, however, care about misleading investors who bought Kentucky municipal bonds based on public information of the state’s financial soundness. There’s even a case in New Jersey involving lies the state told municipal bond holders, covering up just how bad the pension problem was in their bond offerings. You can read all about it (Warning: External PDF Link) directly from the SEC. You can bet that’s being examined in the current SEC investigation of Kentucky Retirement Systems.
That secret POB was issued by the Kentucky Asset Liability Commission. Besides the state finance officials, the KALC consists of both Todd Hollenbach and Jack Conway – independent constitutional officers there for oversight.
Why is that a big deal? Some external PDF links:
Little Todd and Jack seemingly rubber stamped everything without any mention or public discussion of that $700 million in taxable bonds. The last control for that was former State Auditor Crit Luallen. Luallen, you’ll recall, refused to use the words “Pension Obligation Bonds” in official financial statements with only a teeny, tiny footnote (Warning: External PDF Link) on page 106 of the official state CAFR.
And that new September 2012 report from the Legislative Research Commission about the pension financing? It conveniently fails to mention the teachers issued a POB but did reference a health care issue in teeny, tiny footnotes.
We hear talk that someone is getting ready to file a legal challenge to a POB for KERS because those tax dollars would be going to the credit union, Kentucky Employers’ Mutual Insurance and dozens of other non-government entities.
Now that the secret is out about the issuance of $700 million in POBs for teachers, maybe there will be some serious discussion before throwing more money into the toilet.
Just don’t hold your breath.