After much debate, a House panel on Thursday approved a bill to require greater transparency from the state’s pension systems — including the one for legislators, which would have to begin posting information online.
Senate Bill 2 would require the pension systems to use open, competitive bidding procedures when hiring investment managers and to accurately disclose the millions of dollars in fees they pay those managers. Unlike most state agencies, the pension systems are presently free to hire investment managers based on their own discretion, withholding those contracts from outside review.
The bill also sets new standards for the boards overseeing the Kentucky Retirement Systems and the Kentucky Teachers’ Retirement System. For example, the Senate would have to confirm the governor’s six appointees to the KRS board, as well as the KRS executive director. Several lawmakers were upset last year when the KRS board awarded a 25 percent pay raise to its executive director, Bill Thielen, taking him to $215,000 a year.
Finally, the bill would force the Kentucky Judicial Form Retirement System — which provides pensions to legislators and judges — to create a website that provides the same financial and management information about itself that KRS and KTRS long have offered online, such as audits, investment returns and board meeting reports. In November, some lawmakers said they did not realize their own pension system publicly offered no information about itself until they were asked by the Herald-Leader.
Sen. Joe Bowen, R-Owensboro, said the legislature and the public need more information to make educated decisions about the ailing pension systems, which face a cumulative $36 billion shortfall in coming decades. (Some are in worse shape than others; legislative pensions are 85 percent funded, while state worker pensions are 17 percent funded.)
“Senate Bill 2 is about what so many of our constituents are demanding of us, and that is transparency in our government, transparency in our subdivisions of government and transparency especially in those things government funds,” said Bowen, who is co-chairman of the Public Pension Oversight Board. “Senate Bill 2 is about the ability of this body to be proactive rather than reactive when it comes to the challenges of our pensions.”
Thielen, the KRS executive director, spoke against what he called “drastic changes to the oversight of our system.” He said the KRS board currently approves the hiring of all investment managers following vetting by KRS staff. Forcing KRS to accept competitive bids for investment management would yield a large number of unqualified applications, making the process more cumbersome, he said.
The House State Government Committee voted overwhelmingly to approve SB 2 and send it to the House for final passage. But that vote only came after a lengthy argument caused by the committee chairman, Brent Yonts, D-Greenville, trying to replace the bill with a substitute that omitted several key points, such as the mandatory website for legislative pensions and the open, competitive bidding. Yonts’ substitute would limit disclosure of some pension information to state officials who signed a confidentiality agreement.
Committee members finally blocked Yonts’ proposed substitute, then rejected an attempt by Rep. Leslie Combs, D-Pikeville, to delay a vote on the bill until an unspecified future date.
Also Thursday, the committee voted 14 to 11 to approve House Bill 430, which would require candidates for governor, lieutenant governor and other statewide constitutional offices to publicly disclose their income tax returns.
Releasing tax returns has been the informal practice of gubernatorial candidates in Kentucky. Republican Gov. Matt Bevin broke from tradition last year by agreeing to release his tax returns after the election, then refusing to do so once he won, “which I don’t think was in the spirit of transparency,” said Rep. Johnny Bell, D-Glasgow, the bill’s sponsor.
Republican members of the committee criticized the bill as a pointless attack on Bevin. Rep. Phil Moffett, R-Louisville, said there is no information in a candidate’s tax return that is relevant for voters, noting that President Abraham Lincoln sought bankruptcy protection early in life. Good people will refuse to run for office if they believe their privacy will be violated, Moffett said.
“If you start asking for tax returns, you’re gonna drive qualified people away like crazy,” Moffett said.