Gov. Bevin shuffles KRS board and requires disclosure of investment fees via executive order
06/18/2016 11:23 AM
Gov. Matt Bevin has reorganized the Kentucky Retirement Systems’ governing board and required the agency to disclose fees paid to individual investment managers, circumventing a legislative battle that has stalled in the General Assembly in recent years.
Bevin issued an executive order on Friday, abolishing the KRS Board of Trustees and creating in its place the KRS Board of Directors, which will oversee pension systems with nearly $20 billion in combined unfunded liabilities. The move expands membership of the panel from 13 members to 17 and allows the governor to name chairs and vice chairs.
Bevin named John Farris, a Lexington economist, the new KRS board chairman and David Eager, a Louisville investment consultant, as vice chairman. Others newly appointed to the board include State Budget Director John Chilton, Louisville investor William Cook, Nicholasville investment advisor David Harris and Louisville financial consultant Neil Ramsey.
The governor also named Louisville certified public accountant Mark Lattis, whom Bevin previously appointed to replace ousted KRS board chairman Thomas Elliott, to the newly created body.
Others who currently serve on the board will continue their terms, according to the executive order.
“The reorganization will provide a more focused, expert vision and purpose, designed to carry out the objectives honoring the expectations of current retirees and employees,” Bevin’s office wrote in a news release. “It will also help promote and achieve greater transparency, expertise, efficiency and improved administration of the Kentucky Retirement Systems.”
Bevin’s executive order also gives the governor authority to approve the appointment of KRS executive directors and mandates that the board direct retiring KRS Executive Director Bill Thielen to post investment fees and commissions collected by individual managers and any contracts to the agency’s website by July 1.
The order also requires KRS employees, excluding the executive director, be subject to the state’s personnel system, with salaries determined by the Personnel Cabinet secretary.
The executive order’s language mirrors parts of Senate Bill 2, a bill that KRS lobbied against in this year’s session. The legislation passed the GOP-held Senate on a 38-0 vote but was never called for a floor vote in the Democrat-led House.
Thielen did not return a message seeking comment Friday afternoon.
Joe Bowen, sponsor of SB 2, praised Bevin’s changes at the pension agency.
“I have called for the KRS Board to operate in a more open and transparent manner and I have also pointed out the need for investment professionals on the KRS Board,” Bowen, R-Owensboro, said in a statement. “After today, both of those goals are accomplished. I hope that public employees participating in the pension system and the taxpayers funding those pensions will find comfort in Governor Bevin’s executive order.”
Attorney General Andy Beshear, in a statement addressing Bevin’s decision to reorganize the University of Louisville and KRS boards, said his office is evaluating their legality.
“Today Gov. Bevin took unprecedented actions directed at two important governing boards,” Beshear said. “Lawmakers mandated that these boards be independent. My office is therefore closely reviewing today’s actions.”
Kentucky Public Retirees President Paul Guffey and President-elect Larry Totten expressed surprise at Bevin’s move since a performance audit of the state’s pension systems hasn’t been completed.
“We had assumed any action that would be taken regarding KRS would have been as a result of recommendations from that study, released this coming December, and would have been done in the 2017 General Assembly,” the pair said in a joint statement. “It is especially troubling that the Governor has unilaterally decided to act, paralleling most of the provisions of Senate Bill 2, even before the consultant was chosen to perform this audit.”
Jim Carroll, co-founder of Kentucky Government Retirees, also criticized Bevin’s decision to revamp the KRS board, calling it the “latest assault on fiduciary independence.”
“The governor has granted himself extraordinary new powers over a board that is supposed to be insulated from political interference,” Carroll said in a statement.
“Moreover, his actions further marginalize the elected representation of Kentucky Retirement Systems members by stacking the KRS board of trustees with more appointees. We urge the legitimate KRS board to litigate this matter. We as stakeholders deserve nothing less.”
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