Fees, Resignations Hold Up Recommendations on KY Pension Shortfall

August 6, 2007 (PLANSPONSOR.com) - Work by a commission to help Kentucky find solutions to its $18 billion pension deficit is being held up by questions about attorney fees and resignations of commission members.

The Louisville Courier-Journal reports that the legislative bipartisan Government Contract Review Committee in July rejected a $250,000 contract with an attorney for legal consulting services, which included pay for travel time between Frankfort, Kentucky, and Pasadena, California, at a rate of $550 an hour. In addition, Chairman John Farris has resigned as finance and administration secretary and commission member Brad Cowgill is leaving his post as state budget director, the newspaper said.

Personnel Cabinet Secretary Brian Crall, who replaced Farris as commission chairman, said the controversy over the attorney fees rather than the departures¬†is the reason for the delay. He also told the Courier-Journal the commission had to ask the attorney to halt work for about 10 days while it decided whether to overrule the Government Contract Review Committee’s decision to reject his contract.

According to Crall, the administration is considering pushing the due date for the recommendations to January 1 from December 1. He said the administration has decided not to fly the attorney back to Frankfort for his final presentation, but would require local lawyers working for the California attorney to come from Lexington, with the attorney available by teleconference if necessary.

The pension crisis has been building for about 20 years, according to the Courier-Journal, starting with a strengthening of retirement benefits during the strong economic times of the 1990s and compounded by not fully funding the system when the economy slowed and state revenue lagged.

The Kentucky legislature ended its spring session with no solution to the pension crisis after the state House rejected a bill calling for a bond sale to infuse about $540 million into the Kentucky Retirement System – which covers state and county public employees, police and firefighters – and $290 million into the Kentucky Teachers Retirement System, covering public school teachers. Governor Ernie Fletcher afterwards said it was likely the pension issue would be left off the agenda for a special legislative session (See KY Pension Bailout May be Left off Special Session Agenda ).