According to Seven Counties President & CEO Anthony Zipple? Absolutely:
Beginning in 2006, the wheels began to fall off KERS and, with them, the ability of many organizations, including community mental health centers, to afford the generous retirement benefits.
Three primary reasons led to a deficit of at least $23.6 billion in the state employee retirement system: 1) Inadequate appropriations of public funds for the public entities involved; 2) mismanagement and poor investment strategies by KERS; and 3) poor stock performance.
It takes guts to step up and speak out about the mismanagement and poor investments at Kentucky Retirement Systems but there’s much more to this story.
His anger is palpable. But the wheels have been falling off KERS since 2002. Greedy directors have merely hoped those wheels would be reattached so their six-figure pensions could be preserved.
As you already know (because we know you read everything about the KRS because it doesn’t melt your brain or bore you), there are two main pension systems at KRS. CERS, which, by law, counties, cities and other entities contribute 100% of the ARC. KERS exempts itself from that portion of the law – and the standard for pensions around the country – and drops in whatever it feels like. That’s averaged about 50% of the ARC a year for the past decade. CERS is 60% funded and KERS is 30% funded – the worst state plan in the entire country. It’s why most people with sense believe Louisville Metro Government should be hightailing it away from KRS– Louisville is the key player at CERS with 70% and only 1 of 8 board seats. (Not going to happen, though, as Tommy Elliott is chair of KRS, delaying the implosion by bleeding CERS until Beshear and Fischer are out of office.)
All this fear from Seven Counties comes from the fact that new accounting rules will force the agency to list the unfunded pension liability on its balance sheets. In a Credit Union Journal article, KRS executive director Bill Thielen said:
The new GASB standards require us to determine each participating employer’s share of the unfunded liability and they will have to report that on their financial statement. … that despite Commonwealth falling under FASB guidelines, not GASB accounting standards, it still has to comply with the new accounting rule since it is a pension program participant.
Most of the funding at Seven Counties comes from the federal government. The feds? They’re not a fan of liabilities like that. All the sudden, there’s $100 million in liabilities? Hello, federal investigation. If Seven Counties had been a part of CERS, for instance, it would have contributed in $10 million per year. Since it’s a part of KERS, it only contributed $5 million. Feds could look at that extra $5 million per year as fraud – especially if it’s suspected to have been used to pad high executive salaries and six-figure pensions.
These myriad non-profit entities in the pension system and all of the ghost taxing districts would have been public knowledge years ago. That is, well, if KRS pension benefit data were public like in many other states– or like state government salaries here in the Commonwealth.
Great times in Kentucky.