Wednesday, June 4, 2014

Kentucky's Pension Cesspool Sucks In Another Lawsuit

Anything with the potential to force open that self-dealing pit of vipers is welcome, but the local government angle doesn't touch the state government corruption.

John Cheves at the Herald:

A Northern Kentucky city sued the Kentucky Retirement Systems Monday over what it described as "illegal and imprudent investments" involving hundreds of millions of dollars in public pension money.

In its lawsuit, filed in Kenton Circuit Court, the city of Fort Wright said KRS violates the law with risky investments in hedge funds, venture capital funds, private equity funds, leveraged buyout funds and other "alternative investments" that have produced small returns and excessive management fees, possibly in excess of $50 million over the last five years.  
The pension system for local governments is in better shape than the system for state workers because local governments, unlike the state government, have been making their annually required contributions. The largest pension fund for state workers, which covers more than 90,600 current and former state workers, has $2.6 billion in assets and $11.3 billion in assumed liabilities, making it only 23 percent funded. By contrast, the largest fund for local government workers is 60 percent funded. 
As the condition grows more dire for the plan covering state workers, every KRS participant is being forced to contribute more money and watch their investments go into riskier ventures in the hopes of a bigger payoff, Miller said.

"It's a sinking ship over there," Miller said. "My argument is, let's cut our losses and separate CERS from the rest of the system and let CERS be managed more prudently, using plain-vanilla investment techniques instead of these risky equity funds that have enormous fees."

Fort Wright's suit is only the latest blow to KRS.
 On Friday, a federal bankruptcy judge in Louisville cleared the way for a nonprofit mental-health agency, Seven Counties Services, to leave KRS and escape its soaring pension contribution rates. The decision — likely to be appealed — would mark the first time a KRS participant was allowed to quit, and it could set off a rush for the exits by dozens of quasi-governmental groups, potentially leaving KRS with an even worse unfunded liability.

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