The Kentucky Teachers’ Retirement System (KTRS) and the Kentucky Employees Retirement System Non-Hazardous Plan (KERS Non-Haz) could both be in line for state money sooner than later.
But there might be some strings to that state funding, as lawmakers push for more transparency around investments and placement agents associated with the pension systems.
One lawmaker wants the pension systems to make the search for investment firms more competitive – and more public. From the Lexington Herald-Leader:
Rep. Jim Wayne, D-Louisville, wants the pension systems to use the state’s competitive bidding process to solicit investment proposals, rather than award the lucrative deals privately. Terms of each deal, including the management fees, would be made public. Wayne also would ban payments to third-party “placement agents,” middlemen who help private investment firms sell their products to pension funds.
“The status quo works for the special interests on Wall Street because it hides what they’re making off our pension system,” Wayne said.
Another lawmaker wants to know the fees paid to placement agents, as well as the pension benefits received by state lawmakers:
Sen. Chris McDaniel, R-Taylor Mill, wants full disclosure of placement agent fees. He also wants the public to see how much money individual members of the General Assembly expect to collect through pensions or how much they do collect if they are retired. Kentucky’s part-time lawmakers not only have awarded themselves state pensions, but they also carefully keep them in a separate system, apart from KRS, that is 62 percent funded.
Last winter, several bills along these lines were ignored by House and Senate leaders, including one that would have required public disclosure of all state retirees’ pensions. This time, McDaniel said, he has narrowed the focus to his fellow lawmakers.
“I’ve told people, 95 percent of state workers don’t receive a very big pension when they retire. But there are a handful of pension abuses, and it would be useful for us to understand how it works. So at the very least, the legislature can lead from the front and require transparency for its own pensions,” McDaniel said.
Not everyone in Kentucky politics agrees with the transparency initiatives. In fact, one powerful lawmaker says he won’t consider either of the aforementioned ideas:
House State Government Committee Chairman Brent Yonts, D-Greenville, said he’s not inclined to consider Wayne’s or McDaniel’s bills this winter.
“I’m reluctant to support a can-opener approach to the pension system without knowing the consequences of that and without knowing why it’s currently done this way,” Yonts said.
Outside investment managers might not want to accept KRS’ and KTRS’ money if they know their fees will be publicly disclosed, Yonts said. And nobody who gets a state pension should have to share that information with the public, he said.
“Frankly, I don’t think that’s the public’s business,” Yonts said. “They have access to the public payroll and salary information. They can theorize about what we’re going to collect in pensions. But the public is not entitled to know every last little thing about us.”
Both of the state’s major pension plans are dangerously underfunded, but the KERS Non-Haz plan is among the unhealthiest in the country, with a funding ratio of 21 percent. KTRS is 52 percent funded.