Bevin abolishes pension board, creates new one

Tom Loftus, and Morgan Watkins
The Courier-Journal

FRANKFORT, Ky. - Gov. Matt Bevin on Friday abolished the board overseeing the Kentucky Retirement Systems and created a new board to take its place.

A news release from Bevin says his order adds needed financial expertise to the board and establishes new transparency requirements that will be "critical in helping to address the state's pension system," which – with billions of dollars in unfunded liabilities – is one of the most poorly funded public pension systems in the United States.

But an advocate for retirees and a Democratic lawmaker immediately blasted the move as a setback for the pension systems and potentially an illegal exercise of executive power by Bevin.

Attorney General Andy Beshear said he's reviewing both the pension systems reorganization as well as Bevin's Friday order replacing the University of Louisville Board of Trustees. "Lawmakers mandated that these boards be independent," Beshear said.

The Kentucky Retirement Systems, which traces its origin back to 1956, is a group of pension systems for state and local government employees. Its website says it currently administers about $16.2 billion in assets and serves "over 348,000 active, inactive and retired members in the combined systems." Teachers are part of a separate Kentucky Teachers' Retirement System.

Bevin's news release says, "The reorganization will provide a more focused, expert vision and purpose, designed to carry out the objectives honoring the expectations of current retirees and employees. It will also help promote and achieve greater transparency, expertise, efficiency and improved administration."

Under Bevin's order, the 13 members of the current board will be retained, but he appointed four new members to join them.

An advocacy group called Kentucky Government Retirees objected to the move, calling it an "assault on fiduciary independence."

The Kentucky Government Retirees Statement said in part, "The governor has granted himself extraordinary new powers over a board that is supposed to be insulated from political interference." It urged what it called the systems' "legitimate board" to challenge Bevin's action in court.

The group's co-founder Jim Carroll also said in an interview that more governor appointees to the board marginalizes the influence of six members elected to the board by state and local government employees

"We believe that elected trustees are more inclined to listen to the needs of the people for whom the pension system was established," Carroll said.

State Rep. Brent Yonts, a Greenville Democrat who chairs the House State Government committee, said, "This is a total politization of the retirement systems to its detriment and to the retirees' detriment. ... This is unheard of, and I think it's unconstitutional."

But State Sen Joe Bowen, an Owensboro Republican who chairs the Senate State and Local Government committee, said in a statement that the reorganization demonstrates Bevin's commitment to solve Kentucky's pension crisis and public employees should "find comfort" in it.

"I have called for the KRS Board to operate in a more open and transparent manner and I have also pointed out the need for investment professionals on the KRS Board," Bowen said. "After today, both of those goals are accomplished."

The four new appointees to the board are: William S. Cook, of Louisville, retired from KKR Prisma; David L. Harris, of Nicholasville, a senior partner and shareholder of MCF Advisors LLC; Neil P. Ramsey, of Louisville, founder of Ramsey Financial Inc.; and John E. Chilton, a certified public accountant from Louisville who Bevin appointed in December as state budget director.

Gov. Matt Bevin

Governance of the Kentucky Retirement Systems has already been subject to controversial Bevin orders. In April the governor removed Thomas Elliott, of Louisville, as chairman, but Elliott initially stayed in that post because he noted he had three years left on his term. But in May Bevin sent top administration officials to the board meeting – along with three state troopers – who persuaded Elliott to step down.

Bevin's order came just a couple hours after he abolished and re-created the University of Louisville Board of Trustees. And in the past two months Bevin has reorganized many other state boards including the Kentucky Horse Racing Commission, Kentucky Horse Park Commission, and Kentucky Workers' Compensation Nominating Commission.

His reorganization of the workers' comp board has been challenged by a lawsuit pending in  Franklin Circuit Court.