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At Least Some People Realize KRS Is A Nightmare

February 11th, 2013 · 2 Comments

The Lane Report tried really hard to get the pension disaster story right. It half-succeeded:

Kentucky Retirement Systems (KRS) is underfunded by more than $30 billion and falling further behind. Investment yields that are supposed to produce two-thirds of system funds were stunted by the 2008 economic crisis. That serious situation is worsened significantly, though, because successive administrations and legislatures have been shorting appropriations to the pension systems for more than a decade, cutting the financial feedstock that was to compound for investment.

For many state employees who put their money into pension programs, those golden years appear less secure than they once did.

To be fair, KRS is in bad shape for a wide variety of reasons beyond underfunding. The reasons include: diversion of funds due KRS by elected officials; questionable investments; investment underperformance and losses from a stuttering economy; reduced tax revenues; and unfunded mandates (e.g., cost of living raises). It all adds up to chaos in the KRS.

-SNIP-

Organizations such as Bluegrass Mental Health and Commonwealth Credit Union are part of KERS. Many more like them have been added over the years by legislators and governors, often as political favors.

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Some blame the media, too, for not sounding the alarm sooner. Until mid-2012, despite being heralded for years by a variety of voices – including an April 2007 Lane Report cover story – the issue received little attention. And KRS critics note the state auditor’s office has passed over retirement system activities to investigate much smaller but politically juicier targets.

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“The governor and our legislature are doing their best to kick this can down the road,” said Chris Tobe, former member of the KRS Board of Directors. “It’s ugly, messy and none of them want their name or party associated with it. You will most likely see a Tea Party candidate in the next election running for governor on an anti-bankruptcy ticket.”

Tobe is a chartered financial analyst (CFA) who served as a pension investment expert for the state auditor from 1997 to 1999 and was on the KRS board in 2008-09. In August 2010, Tobe filed a whistleblower complaint and agreed to provide information to the Securities and Exchange Commission regarding certain KRS board-authorized investments made by outside investment firms.

“The legislature is underfunding the pension by as much as $800 million a year,” according to Tobe, “and has done so for 10 straight years. That is the main reason we are in such a deep hole.”

The anti-bankruptcy ticket sounds like it could happen. Especially when you consider the folks who will be running on the Democratic and Republican tickets. Democrats are afraid to investigate and go after their own – the people responsible for what’s happened at KRS. Republicans are afraid to go after Democrats.

Kentucky loses no matter what.

Tags: Corruption · Wasted Money

2 responses so far ↓

  • 1 John Cheves // Feb 11, 2013 at 2:10 pm

    The Lane Report wrote:

    “It’s important to understand that KRS is not one system but six:

    • Kentucky Employees Retirement System (KERS), which functions as the umbrella organization.

    • Kentucky Teachers’ Retirement System (KTRS).

    • County Employee Retirement System (CERS).

    • State Police Retirement System (SPRS).

    • Kentucky Judicial Retirement System for judges (KJRS).

    • Kentucky Legislators Retirement System (KLRS).”

    No, that’s not correct.

    The Kentucky Retirement Systems (KRS) is a wholly separate organization from the Kentucky Teachers Retirement System (KTRS) and the Judicial Form Retirement System (which includes judges and state legislators in separate funds).

    They’re all based in Frankfort and they all are responsible for providing pensions for our public employees. But they’re not the same entity. They are run by different people under different rules and they’re in different financial conditions.

    It is, admittedly, hard to follow.

  • 2 Chris Tobe // Feb 11, 2013 at 5:27 pm

    My quotes were a little off. My prediction was for the next Republican governors primary to have a pro-bankruptcy tea party backed candidate vs. a anti-bankruptcy Republican establishment candidate.