Kentucky’s Chamber of Commerce last month called for an audit into the Kentucky Retirement Systems.
This week, Kentucky’s top auditor revealed that such an endeavor would cost at least $150,000 and require the expertise of outside investment experts, which could raise the cost further.
The audit would focus on the investment polices at KRS and its reliance on outside money managers.
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State Auditor Adam Edelen says an effective review of Kentucky’s crippled pension system would cost at least $150,000 and require help from outside investment experts.
“My office, which has struggled with deep budget cuts similar to those imposed on other state agencies, would need upfront financial resources to launch this work,” Edelen wrote. “It is difficult to put a price tag on such an investigation due to the legal uncertainties we’d face.”
The Kentucky Chamber of Commerce called on Edelen last month to launch an investigation into investment policies at Kentucky Retirement Systems, and Edelen has cautioned from the beginning that such an audit would require additional resources and bipartisan support.
Meanwhile, KRS has faced growing scrutiny for allocating large portions of its investment portfolio toward private equity and hedge funds.
Critics also question its reliance on external investment managers, who handle around 80 percent of the system’s market assets and can charge millions in fees.
Edelen wrote in his letter Thursday that both issues are a concern. Still, he cautioned that pension officials might use contract confidentiality clauses to withhold key documents and that thorough analysis of investment strategies will require outside consultants.
“An investigation of this scope would not cost less than $150,000, barring significant legal and consulting expenses that we might also incur,” he said.
The largest plan for the state’s public workers, KERS non-hazardous, is only 21 percent funded.