FRANKFORT, Ky. (AP) — A Kentucky audit that found two public pension systems falling short of complying with a law requiring more transparency will result in follow-up legislation, a veteran lawmaker said Monday.
Republican state Sen. Jimmy Higdon predicted that the next round of legislation in 2020 will try to bring the pension systems in sync in complying with the 2-year-old state law.
The audit revealed the Kentucky Retirement Systems and Teachers’ Retirement System are interpreting parts of the law differently, he said. The law aims to boost transparency in disclosing information about how the pension systems invest money and pay investment managers.
“We want everybody on the same sheet of music,” Higdon told reporters after a meeting of the Public Pension Oversight Board. “We do not want to come back and have the auditor next year ... say that there are issues with our retirement systems. We don’t want issues. We want transparency, and we want everybody reporting the same way.”
Uniformity among pension systems is needed on such issues as the process of redacting information on pension investment contracts that are posted for public scrutiny, Higdon said.
The recent audit found that KRS allows the money managers to do their own redacting.
TRS has a process to handle redaction requests in writing from money managers, but TRS also redacts other information without requests, the audit said.
Kentucky Auditor Mike Harmon, an oversight board member, reviewed the special examination that found the pension systems have fallen short of meeting the law’s requirements.
“Both KRS and TRS have failed to comply with the basic requirements to post all contracts,” Harmon told the board during a two-hour review of the audit.
Top executives with both pension systems stood their ground, taking issue with recent findings in the audit and insisting that the systems strive for transparency.
“We believe firmly that we are compliant with the intent of this law,” said Beau Barnes, deputy executive secretary and general counsel of TRS.
KRS Executive Director David Eager said he welcomes reviews but added that he had “serious issues” with the audit. Eager acknowledged that he worries about fallout from the findings.
“If we lose the confidence of you all and the legislators and the general public, we’re going to be hard-pressed to get the funding we need,” Eager said.
State lawmakers saw the 2017 law as a needed increase in transparency. In recent years, they have approved Republican Gov. Matt Bevin’s proposed massive increases in state funding to keep the financially troubled pension plans afloat.
Much of the oversight board’s review Monday focused on the process of deciding what information is blacked out, or redacted, from pension investment contracts.
Information deemed confidential or propriety is redacted.
But Harmon said the audit found that some information being redacted shouldn’t be blocked from the public. The auditor also said KRS has “abdicated” its responsibility by allowing money managers to do the redacting.
“This is certainly like a baseball player going up to the plate and being able to call his own balls and his own strikes,” Harmon said.
KRS executives believe they shouldn’t control the redaction process, Eager replied.
He warned that controlling the process could expose the state and pension system to being sued if the release of contractual information resulted in a lawsuit.
Higdon noted that other state officials — including the auditor’s office and the legislature’s Government Contract Review Committee — have access to entire contracts in unredacted form.