Gov. Beshear Calls on Pension Systems to Reform Investment Practices

Press Release

Gov. Beshear Calls on Pension Systems to Reform Investment Practices

Calls for plan to be implemented in concert with key stakeholders; Kentucky Chamber of Commerce

Gov. Steve Beshear today announced a series of recommendations to reform the investment practices of the state's two major public pension systems, the Kentucky Teachers' Retirement System (KTRS) and the Kentucky Retirement Systems (KRS). The recommendations are in response to the report of Gov. Beshear's bi-partisan Public Pension Working Group, which was chaired by Finance and Administration Cabinet Secretary Jonathan Miller. The working group found the systems had significantly trailed the average investment returns of their peers, to the tune of approximately $5 billion over the last decade.

After weeks of intense study and discussion, Gov. Beshear brought together key stakeholders and representatives of the Kentucky Chamber of Commerce late Wednesday to forge a final set of recommendations for the pension systems. The recommendations include:

* Adding four investment experts to the investment committees of each of the two pension boards, enabling them to better formulate allocation policies to net better investment returns;
* Requiring all public pension board members to receive continuing education on current investment practices;
* Conducting an immediate study to determine the proper allocation of the systems' investment portfolios; and
* Reviewing administrative regulations and eliminating those that impair the pension systems' ability to implement efficient investment portfolios.

Gov. Beshear today also announced the appointment of Henry Clay Owen, retired long-time treasurer of the University of Kentucky, to the board of KRS. Owen is the governor's second appointment of an investment expert to the KRS Board. This spring, he appointed Chris Tobe, a Chartered Financial Analyst from Louisville to the board. By statute, the governor does not have the authority to appoint members to the board of KTRS.

"We appreciate and respect the hard work that each of our public pension board members does to ensure a safe and secure retirement for all of our teachers and public employees," stated Gov. Beshear. "But since every dollar of investment earnings translates into one less dollar that taxpayers need to contribute to these funds, it is essential that we have the involvement of investment experts. That is why I have appointed Mr. Owen and Mr. Tobe, and that's what we hope the systems will accomplish through enacting our recommended actions."

"We support the changes embodied in this proposal and applaud the governor's leadership on this issue," stated David Adkisson, president and CEO of the Kentucky Chamber of Commerce. "Adding a majority of members with investment experience to the public employee pension investment committees is a step in the right direction to ensure confidence in the ongoing performance of these plans."

"In a time of economic uncertainty, it is imperative that we as constitutional officers act in the best interest of our fellow Kentuckians," stated State Treasurer Todd Hollenbach, who Gov. Beshear appointed chair of the Investments Subcommittee of the Public Pension Working Group. "To that point I want to thank Gov. Beshear for tackling the issues most important to the people of the commonwealth."

Sharron Oxendine, president of the Kentucky Education Association (KEA), a statewide membership organization made up of more then 40,000 teachers, classified employees, education students and retired school employees, said: "KEA appreciates the work of Gov. Beshear, Finance Secretary Miller and Treasurer Hollenbach to bring together concerned parties to work together to improve the investment returns. The governor's leadership in creating a consensus is exactly what the commonwealth needs in these troubling economic times. While the agreement addresses investment returns, it also protects the independence of the retirement systems, important to protect them from political influence like that seen in the Transportation Cabinet during the previous administration."

With the issue of the pension funds' investments taking pre-eminence in the Governor's Public Pension Working Group discussions, and with the boards of both KTRS and KRS meeting before the end of the year, Gov. Beshear felt it essential and timely to issue his recommendations today, in the hopes that the two boards will immediately enact needed reforms. Absent implementation, the governor said he will work with key members of the General Assembly to pursue legislation in the upcoming session.

Gov. Beshear will release additional recommendations on other issues addressed by his Public Pension Working Group within the next few weeks.

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