OP-ED: Sen. Joe Bowen on Pension Transparency

COMMONWEALTH OF KENTUCKY
SENATOR JOE BOWEN

For Immediate Release
May 2, 2016
Contact: John Cox
502-564-3120
JOHN.COX@LRC.KY.GOV

The following is an op-ed submitted by Kentucky State Sen. Joe Bowen of Owensboro:

“Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

– Justice Louis D. Brandeis (1856-1941)

These words were powerful in the early 20th Century when written by the former Justice of the Supreme Court and are arguably even more meaningful today.

As the primary sponsor of Senate Bill 2 (SB 2) during the 2016 Session, I sought to focus needed “sunlight” into the activities of the Commonwealth’s taxpayer funded state employee pension systems. Unfortunately politics got in the way and my efforts were fruitless. Key decision makers in the House of Representatives succumbed to the relentless opposition from the retirement system’s lobbyists and decided that transparency is not important.

The nearly $40 billion in liabilities of the retirement systems are a ticking time bomb threatening our entire state. Our retirement systems are ranked among the worst funded in the nation. Taxpayers deserve to know how the pension systems operate and legislators should to have the ability to set policy, not simply react to crisis after crisis. It is past time for change. SB 2 would have provided an opportunity for everyone interested in finding a solution to have the information they need to find those solutions.

Even my good faith attempts at compromise produced no results. The consequences of this inaction mean that you, the taxpayer, and state retirees (who are dependent on the systems for their checks) continue to be in the dark regarding how the systems make decisions. Decisions that involve investing billions of dollars.

Senate Bill 2’s key provision was requiring adherence to the state’s “Model Procurement Code” by the retirement systems. Meaning for the first time an open and competitive bidding when hiring investment managers. While establishing this process would have been victory enough, the bill also called for the reporting of management fees, transparency in investment performances, and Senate Confirmation of the Kentucky Retirement Systems’ Executive Director. Senate Bill 2 would have required more financial expertise of appointed board members and provided additional oversight from a watchdog group known as the Government Contract Review Committee.

The House’s failure to enact Senate Bill 2 does not mean the General Assembly took no action to solve Kentucky’s public pension crisis.  The Commonwealth will be making an unprecedented contribution of $1.28 billion above the recommended and required contributions to the pension systems.  A move I have been advocating for some time.  But this additional funding does not remove the need for more transparency.

“The most important political office is that of the private citizen.”

– Justice Brandeis

 

All is not lost. I have lived to fight another day and the retirement systems should remember that the 2017 Session of the General Assembly will be here before they know it.

 

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Note:  Senator Joe Bowen (R-Owensboro) represents the 8th District including Daviess, Hancock, and McLean counties.  He is chairman of the State and Local Government Committee and a member of the Transportation Committee, the Licensing and Occupations Committee, and co-chair of the Public Pension Oversight Board.  For a high-resolution .jpeg of Senator Bowen, please visit http://www.lrc.ky.gov/pubinfo/portraits/senate08.jpg.

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SENATORS BOWEN, HIGDON CALL FOR MORE TRANSPARENCY OF KRS AT PUBLIC PENSION OVERSIGHT BOARD MEETING

SEAL

Commonwealth of Kentucky
Senate Majority Office

For Immediate Release
Contact: John Cox
502-564-3120 Ext. 202

SENATORS BOWEN, HIGDON CALL FOR MORE TRANSPARENCY OF KRS AT PUBLIC PENSION OVERSIGHT BOARD MEETING

FRANKFORT, KY. (October 26, 2015) – At Monday’s Public Pension Oversight Board (PPOB) meeting in Frankfort, Chairman-Senator Joe Bowen (R-Owensboro) and Senate Majority Whip Jimmy Higdon (R-Lebanon) reacted to action by the Kentucky Retirement System (KRS) Board of Trustees to increase Executive Director Bill Thielen’s salary by more than 25 percent.

“I am very troubled that the KRS Board of Trustees, in the midst of rising shortfalls and stagnant raises for state employees, chose to raise Mr. Thielen’s salary by 25 percent to $215,000 a year,” Senator Bowen said.  What’s more disturbing is that a member of the KRS Board of Trustees went on to say that he is not concerned about criticism from the legislature because he ‘doesn’t work for the legislature.’”

“This may be true, but all of us do work for the people of the Commonwealth, and I don’t think it sits well with taxpayers when government leaders, who are ostensibly ‘public servants,’ are granted huge raises while the people that pay the large salaries struggle to make ends meet,” Bowen added. “And it goes without saying that large raises will result in larger pensions upon retirement.”

Bowen went on to cite concerns expressed earlier this year that KRS and the Kentucky Teachers’ Retirement System (KTRS) were paying hefty hourly rates to law firms, far in excess of the normal $125 per hour maximum, without any responsibility to have these contracts reviewed by the Government Contract Review Committee.

Senator Higdon said at the hearing that the large pay raise for Mr. Thielen was a “line in the sand” event for him, and announced his intention to introduce legislation to make non-elected members of the KRS Board of Trustees subject to Senate confirmation, and to investigate the possibility of legislation making KRS executive director raises above the annual CPI subject to Senate approval, as well.

“Now we have another instance in which KRS is awarding a large salary increase to an employee, and the contract itself is not subject to review by the General Assembly, unlike almost every other state government agency personal services contract,” Senator Bowen said. “Both KRS and KTRS are currently exempt from the Model Procurement Code, which establishes conflict of interest and anti-kickback rules, grants vendors the right to file protest with the Finance Cabinet over the awarding of a contract, and makes personal service contracts subject to Government Contract Review Committee.”

The Public Pension Oversight Board was created by the General Assembly in 2013 to bring more transparency to the operation of KRS.  In 2015, the PPOB’s authority was extended to include oversight of the Legislators’ Retirement Plan, the Judicial Retirement Plan, and KTRS.

“This trend toward greater transparency should continue,” Bowen said. “KRS and KTRS should not operate as islands to themselves, and I urge fellow PPOB members to adopt consensus legislation to remove these agencies’ exemption from the model procurement code so that their personal services contracts, such as this one with the executive director will be subject to further review by the General Assembly.”

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SENATE LEADERSHIP ANNOUNCES THREE APPOINTEES TO TEACHERS’ RETIREMENT WORK GROUP

SEAL
COMMONWEALTH OF KENTUCKY
SENATE MAJORITY LEADERSHIP OFFICE


For Immediate Release
Contact: John Cox
502-564-3120 Ext. 202

SENATE LEADERSHIP ANNOUNCES THREE APPOINTEES TO TEACHERS’ RETIREMENT WORK GROUP

FRANKFORT, Ky. (July 13, 2015) – Senate President Robert Stivers (R-Manchester) announced Monday the three Senate representatives who will be participating in Governor Beshear’s “Teachers’ Retirement Work Group” to address funding issues: Senate Majority Leader Damon Thayer (R-Georgetown), Senator Joe Bowen (R-Owensboro) and Senator Morgan McGarvey (D-Louisville).

“It has been the position of the Senate Majority to seek a complete solution which combines structural reform with any additional funding,” Senator Thayer said. “We look forward to learning the structural solutions offered by this working group. We recognize that lasting structural changes will make any additional taxpayer funding of public pensions have a long-term impact that will benefit all Kentuckians.”

According to Governor Beshear’s office, “The work group will review best practices in other states regarding pension benefits, conduct a comprehensive review of funding options and make recommendations for improving the fiscal solvency of the KTRS. The work group may also contract for consulting services.”

Gov. Beshear also asked the work group to complete its work and submit its report to him on or before December 1, 2015.

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SENATE PRESIDENT STIVERS ON NEW STUDY FROM ASSET PRESERVATION ADVISORS:

SEAL
Commonwealth of Kentucky
Office of Senate President Robert Stivers

For Immediate Release
June 17, 2015
Contact: John Cox
502-564-3120 ext. 202

SENATE PRESIDENT STIVERS ON ASSET PRESERVATION ADVISORS’ RECENT STUDY:

It has always been the Senate’s position that we will fix the Kentucky Teachers’ Retirement System’s (KTRS) pension problem.  The House Democrats’ solution of pension bonds is not the answer to the problem. A recent study released from Asset Preservation Advisors recommended investors to remain “highly selective” when purchasing bonds issued in our state.

This message comes as no surprise to the Senate Majority Caucus, as we were not willing to accept the $3.3 billion bond proposal from House Democrats proposed in House Bill 4 earlier this year. While we fully acknowledge the Commonwealth’s unfunded liability to KTRS, we were not about to risk further lowering our state’s credit rating by issuing the single greatest debt in the history of the Kentucky General Assembly.

When neither chamber could reach an agreement on House Bill 4, a conference committee was formed. We brought in a representative from the Governor’s Budget Office who said that would be impossible for our state to sell $3.3 billion in bonds in the proposed time of one year and that it would be extremely difficult and risky to sell even $1 billion in bonds. At that moment we knew the original language of HB 4 was no more than a political move by House Democrats, yet we kept working for a compromise.

Senate and House Republicans proposed the formation of a task force to analyze KTRS in order to identify systematic changes to make KTRS viable in perpetuity. We also proposed a good faith contribution to KTRS in the form of $50 million identified in the Budget Reserve Trust Fund. This was real money offered to a seriously underfunded system, but unfortunately, House Democrats walked away from our proposal leaving the $50 million on the table.

As recently as the last Legislative Research Committee meeting on June 3, Senate and House Republicans have asked for Gov. Beshear to follow through with our idea of a KTRS Task Force. We desperately need to take action to address our unfunded liability to KTRS, but we also must be responsible to taxpayers across the Commonwealth, which is why a comprehensive analysis is a vital first step to addressing teacher pension concerns.

The Governor has answered our call as he has assembled a “Work Group” for this very issue. We are appreciative to the Governor for realizing the severity of the KTRS problems and for taking some type of action in order to put Kentucky teacher pensions back on the right track.

I will be appointing two Senate members to this work group, whom I will announce in the near future.

This will not be an easy process but rest assured we are committed to our teachers and all Kentuckians and will continue to do what is right for the Commonwealth.

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Note:  Senate President Robert Stivers represents the 25th District, which encompasses Clay, Knox, Lee, Owsley, Whitley, Wolfe counties.  He serves as chairman of the Senate Committee on Committees and Rules Committee and the co-chair of the Legislative Research Commission.  Additionally, President Stivers is a member of the Senate Judiciary Committee.  For a high-resolution .jpeg of President Stivers, please visit http://www.lrc.ky.gov/pubinfo/Senate25.htm

SENATE REPUBLICANS SUPPORT FIXING TEACHER RETIRMENT

SEALCommonwealth of Kentucky
Senate Majority Office

For Immediate Release
April 10, 2015
Contact: John Cox
502-564-3120
 ext. 202

SENATE REPUBLICANS SUPPORT FIXING TEACHER RETIRMENT

Earlier this month, House Republican Leader Jeff Hoover (R- Jamestown) sent Governor Beshear a letter urging the appointment of bipartisan task force to develop a fiscally sound plan to fix the Kentucky Teachers’ Retirement System (KTRS). The Republican members of the State Senate are pleased Representative Hoover has joined with us and the growing number of voices calling for a transparent process to the save the KTRS.  We encourage Governor Beshear to use the bully pulpit of his office in his remaining months as Governor and become a driving force for reform by establishing a task force much like the bipartisan group which developed the plan to reform the Kentucky Employees Retirement System.

It is important to remember that the Senate Republican caucus was the first to issue a clarion call for pension reform, so, we recognize the danger the unfunded liability that the KTRS poses both to individual teachers and to the fiscal health of the Commonwealth.  That is why the Senate did not agree to issue $3.3 billion in bonds during the last legislative session.  As you will see, that plan was unworkable and was interpreted by many as nothing more than a cynical move by Democrats in the House of Representatives to gain a political advantage by harming Republicans.

But first let us be perfectly clear on several key points:

  1. No retired teacher is in danger of failing to receiving their monthly check.  The KTRS can continue to meet their obligations for the next 20 years,
  2. We know teachers do not receive Social Security,
  3. We understand the KTRS has an unfunded liability and has been selling assets,
  4. We understand the KTRS needs an influx of money to help close the unfunded liability,
  5. We understand structural changes need to be made to the KTRS to ensure a stable retirement for active teachers and future teachers;
  6. We are prepared to do the work and make the hard decisions to make sure retired teachers continue to receive their checks on time.

During joint discussions between the House and Senate on House Bill 4, we all agreed to seek guidance from a bonding expert in Governor Beshear’s office. He explained to us that it would be impossible for the state to sell $3.3 billion in bonds in the one year called for by House Bill 4.  In fact it would be very difficult to sell even $1 billion of bonds in one year.  He went on to outline how selling even $1 billion of bonds would lower the Commonwealth’s credit rating and increase the cost of operating state government.  At that moment it became perfectly clear the plan in HB 4 simply could not work. So, the Senate decided to develop a new proposal to move the process forward.

Just before the House Democrats walked away from the House Bill 4 negotiating table, the Senate team was prepared to offer a plan which would have immediately infused $50 million into the KTRS and create a task force of legislators to develop a fiscally sound plan to fix the KTRS.  This $50 million would have been a responsible, good-faith proposal to demonstrate the General Assembly’s commitment to enacting a workable solution.  Unfortunately, this proposal was never given a public hearing or a vote because the House Democrats chose to shut down the discussions on House Bill 4.

Despite attempts to turn teachers’ retirements into a political issue, we remain focused on doing the right thing.  While we are hopeful Governor Beshear does appoint a task force, Senate Republicans will continue to work toward indentifying a fiscally sound plan to save the teacher retirement system.

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