Auditor Adam Edelen: Too late for ‘no’ in funding teacher pensions
01/22/2015 06:30 PM
FRANKFORT — Kentucky Auditor Adam Edelen came away with a firm conclusion after his staff spent about a year poring over financial statements at the Kentucky Teachers’ Retirement System: problems facing the pension system are rooted in money, not mismanagement.
Edelen spoke to about 25 KTRS members and officials at the Thomas D. Clark Center for Kentucky History on Thursday, putting his support behind a plan to pump $3.3 billion into the pension system through bond sales.
House Speaker Greg Stumbo, D-Prestonsburg, drafted the proposed bonding program as House Bill 4, and Edelen said the General Assembly should pass HB 4 or come up with some sort of fix for KTRS’s long-term funding woes.
As new federal accounting standards take effect for public pension programs, KTRS is reporting $21.6 billion in unfunded liabilities and a funded ratio of 45.6 percent in fiscal year 2014, Edelen said. That’s an erosion from the previous fiscal year, when KTRS calculated its unfunded liabilities at $13.9 billion and its funded status at about 52 percent, he said.
That tide would be stemmed, Edelen said, with the bonding proposal that also calls for a long-term funding solution from the state to keep KTRS on solid financial ground. The first-term auditor is aware that HB 4 may not be “palatable” for all lawmakers, but Edelen urged the General Assembly to take swift action on the legislation or, barring that, come up with some kind of fix for teachers’ pensions.
After all, pension issues age more like milk than wine, he said.
“Let me be clear about this: Folks, there are no good, easy options left,” he said. “If we were going to do the easy thing, we would have done it a long time ago.”
Edelen continued: “My challenge to those who don’t like the idea of borrowing money to invest it — I certainly don’t like the idea either — but my point to those folks is that during this session, given the gravity and certainty of this problem that has to be addressed right now, no is not an option.”
As Edelen closes the books at KTRS, the Kentucky Chamber of Commerce has requested the auditor’s office conduct a performance review of the Kentucky Retirement Systems, particularly the beleaguered Kentucky Employees Retirement System that covers most state workers.
The Louisville Courier-Journal first reported that in a letter to Senate President Robert Stivers, R-Manchester, last week, Edelen said such an evaluation would cost at least $150,000.
Edelen said he supports the idea of auditing KRS, but such a review not only needs a six-figure cash infusion, but also bipartisan support.
“My office has conducted financial audits of the retirement systems, there have been several other studies done, there’s been a lot of work done in the space, but what we’re talking about is a performance audit, which would require being able to get information that we haven’t been able to get in the past,” he told Pure Politics in an interview.
“And to take on an issue of this magnitude, we really do need to make sure that we have resources and strong, bipartisan support because reforming that system and making sure that it’s moving in the right direction, in a way that is transparent and accountable is critical to the long-term health not only of that retirement system, but of the entire state of Kentucky.”
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