New look, same old debt: KY’s state pension rebrands itself, as lawmakers ordered
The state’s long-underfunded pension agency has reorganized and rebranded itself, as ordered by the Kentucky General Assembly last year, replacing its one governing board with three governing boards.
The Kentucky Retirement Systems is now the Kentucky Public Pensions Authority, with roughly $20 billion in assets but also $25 billion in unfunded pension liabilities. As part of the restructuring, city and county governments will get to manage their pension funds under their own governing board, a request they’ve made for years.
At a meeting on Tuesday, the newly created eight-member KPPA Board of Trustees adopted bylaws and chose its leaders, including chairman Keith Peercy, a retired lieutenant colonel from the Kentucky State Police.
Nearly 400,000 state and local government workers or retirees are enrolled in the KPPA, including non-teaching employees at school districts and regional universities.
“From our members’ point of view, this really doesn’t change anything. They’re still going to get their checks, we’re still going to be here processing their benefits,” said David Eager, the KPPA’s executive director.
Previously, the Kentucky Retirement Systems oversaw the pension funds for state and local governments. But city and county leaders lobbied the state legislature for a change over the last several years, protesting that they didn’t have enough clout on the KRS Board of Trustees, which was dominated by gubernatorial appointees.
Those local government leaders were upset when then-Gov. Matt Bevin’s appointees to the KRS board approved more realistic assumptions about public payroll growth and the pension fund’s investment returns, neither of which are as strong as they used to be. An immediate consequence of the change was a rise in the official pension debt and a corresponding jump in the local governments’ required contribution rates.
Also, the local government’s primary pension fund, which was 47 percent funded in Fiscal Year 2020, is ailing but still in far better shape than the state government’s primary pension fund, which is 14 percent funded. There has been a strong desire by some cities and counties to cut ties with the state pension fund.
State lawmakers in 2020 passed House Bill 484, giving cities and counties control of their pension funds under a County Employees Retirement System Board of Trustees. The KRS board now will only administer the pension funds for state workers and state police.
Four members from each of those boards sit on the new KPPA board.
Critics complain that the reorganization is a costly waste that fails to address the state’s huge pension debt.
“More bureaucracy for the same result doesn’t sound like a good deal to me,” said Jim Carroll, spokesman for the Facebook advocacy group Kentucky Government Retirees, speaking Wednesday.
“You’re going to have all this duplication,” Carroll said. “Both boards are going to go out and hire a chief executive officer and a general counsel. Instead of doing 25 meetings a year, we’re going to have 60 meetings a year, with all of the staff demands that requires.”
“And I don’t know what this accomplishes,” he added. “I can’t recall that many KRS meetings where there were split votes or board members who disagreed with each other on a staff recommendation.”
