FRANKFORT — Gov. Steve Beshear signed an executive order Tuesday creating a 23-member group to address the state's financially strapped Teachers' Retirement System, or KTRS.
Beshear named David Karem, a former Democratic state senator from Louisville and a former chairman of the state Board of Education, to chair the panel and to submit a report to him by Dec. 1.
Beshear leaves office in early December but could turn over any recommendations to the 2016 General Assembly.
The creation of the special panel drew applause from the top two legislative leaders — House Speaker Greg Stumbo, D-Prestonsburg, and Senate President Robert Stivers, R-Manchester — but criticism from House Minority Leader Jeff Hoover, R-Jamestown.
Hoover said he was "extremely disappointed."
"Gov. Beshear had a real opportunity to create an independent, nonpartisan panel to give a thorough review of KTRS in an effort to make substantive recommendations to solidify the system," Hoover said in an email.
"Instead the governor chose to fill this task force with self-serving special-interest groups that have been part of the problem, not part of the solution."
Hoover said House Democrats this year proposed $3.3 billion in bonds, "which would have handed taxpayers the bill and crushed Kentucky's economy for decades to come."
"Meanwhile an outside group recently advised investors to exercise caution in purchasing bonds in Kentucky because of our tremendous pension debt and sluggish economy in the Commonwealth."
Hoover said he was calling for an independent panel with experts in areas such as investments and actuarial audits "so we can deliver on our promise to teachers that they will have a stable retirement system for years to come."
Asked to respond to Hoover, Beshear spokesman Terry Sebastian said the governor's release would speak for itself.
Beshear said he wanted the Kentucky Teachers' Retirement System Funding Work Group to stabilize and secure funding for the system that serves more than 75,000 active and more than 45,000 retired members.
"Our teachers are the foundation of our educational system for the future of our children and grandchildren," Beshear said. "We must assure that the Kentucky Teachers' Retirement System is able to fully honor our commitments to our teachers and those who retired from teaching.
"Today I'm asking a group of experts to find ways to ensure the future of the KTRS."
According to the system's 2014 actuarial valuation, there is a $14 billion unfunded liability and a 53.6 percent funding status. This is compared with the system's $571 million unfunded liability and 95.7 percent funding status in 2000.
Beshear said he recognized that other study groups had examined the system in recent years, but "since the issuance of the reports by these study groups, a number of changes and improvements have been made by the KTRS."
"We can utilize this prior work in this effort. It is critical that we explore the options and develop recommendations to aid the 2016 General Assembly as action needs to be taken next spring to address this crisis."
The work group will review practices in other states regarding pension benefits, conduct a comprehensive review of funding options and make recommendations for improving the fiscal solvency of the system, Beshear said.
It also may contract for consulting services, he added.
Karem said, "I applaud Gov. Beshear for tackling the issues surrounding the solvency of teachers' retirement and for not just kicking the issue down the road for our next governor to handle.
"With teachers unable to receive Social Security, I believe there is a compelling case that their retirement system must be stabilized. I'm honored to head this work group with such a dynamic membership, and look forward to issuing some real ideas to Gov. Beshear that will help all our teachers."
Stivers said he was "pleased with the new working group to address issues with KTRS."
"I appreciate the governor's willingness to take action on a very serious issue that is definitely a priority for all legislators. This will not be a quick fix, but rest assured that the Senate Republicans are committed to finding long-term solutions to make this system viable in perpetuity for teachers and all Kentuckians."
Stumbo thanked Beshear "for taking action and authorizing this diverse and well-qualified work group. There is no doubt that additional and significant money is needed to address the long-term stability of the Kentucky Teachers' Retirement System."
Stumbo noted that during this year's legislative session he sponsored a bill to issue $3.3 billion in bonds to aid the teachers' retirement system, but that the measure died in the Senate.
"My hope is that this work group will inform and help the legislature find the best solution for the needed funding. The General Assembly proved in 2013 that we can take on a project of this size, as we did with state retirees, and I'm confident we can do it again in 2016 for our teachers — they deserve no less."
Beshear said recent bond rating warnings issued by national credit rating agencies regarding the KTRS were "further evidence that this fiscal crisis has financial implications beyond this administration."
"If Kentucky is to compete for 21st-century jobs, we must have a world-class education system for our children," he said. "The success of such a system is dependent upon the recruitment and retention of outstanding educational professionals.
"If we do not have a stable, secure retirement system for our teachers, Kentucky will never be able to compete in education at the highest levels."