It's Gonna Cost Ya

I need a show of hands on this one. How many of you have ever heard of the Kentucky Asset/Liability Commission (ALCO). I’m not seeing many hands out there.

We need to cover a couple of points before the meat of this post is going to make any sense at all.

First, the purpose of the Kentucky Asset/Liability Commission is to develop policies and strategies to minimize the impact of fluctuating interest rates on the Commonwealth's interest-sensitive assets and interest-sensitive liabilities.

What that means is that they can issue bonds for all of state government. They go to the financial markets and borrow money which your tax dollars pay back.

Second, the members of the Commission are:
Secretary of the Finance and Administration Cabinet Jonathan Miller
Attorney General Jack Conway
State Treasurer Todd Hollenbach
Executive Director of the Office of the Controller Edgar C. Ross
State Budget Director Mary E. Lassiter

Staff is provided by the Office of Financial Management, and the Commission has one employee, F. Thomas Howard, Executive Director.

Here is the thing to understand, Ross, Lassiter and maybe Howard, are running the show with staff support from the Office of Financial Management. Miller, Conway and Hollenbach are politicians with law degrees so they probably wouldn’t have a clue what was going on if they went to a meeting. But the understanding thing is not a problem for the politicians since none of the three have ever gone to a meeting, they do sometimes send a proxy.

Third, Fitch Ratings is one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's and Standard & Poor's.

In other words, these guys decide how much of a risk someone is taking if they buy your bond. Good rating the state pays less interest (your tax dollars) on the bond. Crappy rating the state pays more interest (your tax dollars) on the bond.

So far we have three things:
1. ALCO issues bonds.
2. Politicians don’t do their job.
3. Fitch rates bonds.

Now we get to the good part from Business Wire:

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA-' rating to the following Kentucky Asset/Liability Commission (ALCO) bonds:

--$269.725 million funding notes, 2011 General Fund First Series (Taxable).

The bonds are expected to be offered through negotiation on or about Feb. 23, 2011. Fitch has also affirmed the 'AA-' rating on approximately $7.1 billion of appropriation bonds issued by Kentucky agencies. The Rating Outlook is revised to Negative from Stable.

RATING RATIONALE:

--The Outlook revision to Negative reflects the commonwealth's low and deteriorating pension funding levels, in part due to a failure by the commonwealth to fully address its funding requirements. Pension reform will slow growth in liabilities, but funded levels are likely to decline further during the fifteen years permitted statutorily to reach full funding of the annually required contribution (ARC). The delay in making full ARC payments will increase the impact pension payments will have on future fiscal operations.

What this is basically saying is that because a number of Kentucky Governors and Sessions of the General Assembly have repeatedly not made the contributions to the Kentucky State Retirement System the cost of borrowing money is going up.

The bottom line here is that a monumental number of lazy and gutless politicians in both the Executive and Legislative Branches have so totally underfunded the Kentucky Retirement System that it is now going to start costing the state more tax dollars to borrow money.

This additional cost will be seen by taxpayers in the form of poorer service from government and eventually higher taxes.

In the words of the Mighty Favog, "It's gonna cost ya."

Really Randy -- Go Home

It’s good to see the main stream media following our lead on an important story. Here is Herald Leader reporter John Cheves’ story on house bill to aimed at controlling the petty fiefdom in the Kentucky Retirement Systems.

The guys at KRS are holding on to their little fiefdom tighter than Hosni Mubarak did to the Presidential Palace. From Herald Leader story:

(Representative Mike) Cherry said Kentucky Retirement Systems officials have asked him to delay changes to their governing board until state Auditor Crit Luallen completes a sweeping review that her office has begun, examining all aspects of the agency, including its board, employees, business conduct, purchases, ethics policies and the adequacy of its audits and financial reports.

Go home Randy. Really, just go home.

Do We Really Have To Obey The Law?

The fact that the Kentucky Workers' Compensation Funding Commision can't keep a web site up is the least of their problems.

The Kentucky Workers’ Compensation Funding Commission spent over a half a million dollars in violation of Kentucky law and they sort of promise not to do it again.

In correspondence from Auditor Crit Luallen, dated February 4, 2011, the Auditor of Pubic Accounts found that:

As previously reported to you, our office received concerns related to two matters impacting the Kentucky Workers Compensation Funding Commission (KWCFC). This letter is to summarize the concerns presented to us and to communicate the results of our procedures.

The first concern related to whether the KWCFC was compliant with the requirements of KRS 342.1223(4) regarding the use of the Finance and Administration Cabinet’s Office of Financial Management (OFM) as the Board’s investment counselor. Our procedures confirmed that KWCFC has been utilizing an external investment counselor, and that written documentation in agreements or procurement documents did not appear to have sufficient justification to overcome this requirement. Therefore, we are making recommendations to the WCFC regarding compliance with this statute.

An aside here:

How could you not understand this law?

" Notwithstanding the provisions of this chapter to the contrary, the Kentucky Workers' Compensation Funding Commission shall utilize the investment expertise and advice of the Office of Financial Management in the Office of the Controller within the Finance and Administration Cabinet rather than entering into a consulting contract for investment counseling. "

The law says you shall do one thing and not do another thing. How do you not understand that?

Ok back to the post.

The Auditor’s office found that:

Utilizing an external investment consultant since 1999 has cost the KWCFC around $510,000. From 1999 until 2007 the outside investment counselor was paid $40,000 per year; this was increased to $50,000 per year beginning in 2008 to present. Also using an external investment counselor in lieu of utilizing OFM does not comply with KRS 342.1223 (4).

The Auditor’s made the following recommendation:

We recommend that the KWCFC utilize the investment expertise and advice of the OFM in accordance with KRS 342.1223(4). If the OFM is unable to fulfill its statutory role, or advises the Board that additional services are needed due to investment matters beyond its level of expertise, we recommend that KWCFC award the personal service contract in accordance with KRS 45A.695.

The Workers Compensation Funding Commission agreed with the Auditor’s findings and recommendations and said that after the current Personal Service Contract with Morgan Stanley Smith Barney expires this summer they will obey the law.

Here is my problem with all of this.

No group or person is being held accountable for over $500,000.00 that was spent in flagrant disregard for Kentucky law. The response seems to be “Oh well, I guess we will play by the rules if you make us.”

WTF

Why isn’t the Governor Beshear chewing someone’s rear end at the KWCFC?

Why isn’t Jonathan Miller, Secretary of Finance, doing his job making sure the Office of Financial Management is doing their job?

Does the Attorney General Jack Conway have his head stuck in the sand? Why isn’t he looking into this?

I know a half a million dollars of public funds is just chump change to these guys, but that is a pretty big number for most Kentuckians.

Crit did her job. When are the boys going to man up and do theirs?

Go Home Randy

KRS Chairman Randy Overstreet

If you look at the past posts on this blog you can see that I am not a fan of the current management of the Kentucky Retirement System.

Representative Mike Cherry has introduced House Bill 480 to address some of these problems.

The new pension transparency bill bans placement agents and enforces the 3 term Trustee limit enacted in 2008 with HB 1, effectively forcing out Randy Overstreet, the guy in the picture, who has been the Chairman of the Board of Trustees for 15 consecutive years at KRS, and Bobby Henson who is in his 4th term.

House Bill 1, “An Act relating to retirement and declaring an emergency,” which became effective on June 27, 2008, amended Kentucky Revised Statues, KRS 61.645(3) to shorten the term limits for elected trustees of the Kentucky Retirement Systems from five to three consecutive terms.

Some lawyers have already challenged the authority of the board with these two members over the 12 year limits. This legislation clarifies the original intent of HB1’s 3 term limit. The two 4 termer’s Overstreet and Henson should resign immediately to prevent any more liability for the board.

Because of the ongoing SEC and State Auditor investigation it will be much more difficult for Overstreet to kill this bill in the Senate than in the past.

Candidates on the Environment and Coal

We all pretty well know that Steve Beshear is owned by King Coal. He is not the only candidate that drank the contaminated water coming out of the mountains.

David Williams is also in the pocket of King Coal.

“David and Richie strongly support the use of Kentucky coal, and strongly oppose the Obama EPA’s War on Coal.”

Phil Moffett is a "me too" suck up to the coal industry.

“Moffett said if elected he plans to challenge federal regulations such as the dissolved solid standards recently handed down by the Environmental Protection Agency which coal industry interests say could cripple coal mining in Appalachia.

“The obvious intent when you look at that regulation is (for the federal government) to shut down Appalachian coal and they’re not allowed to do that,” he said. “We’re free people living in a free country, and the state should stand up and tell the EPA those regulations don’t apply.”

Who knows what Bobbie Holsclaw thinks about the Coal Industry polluting Kentucky.

Again the only candidate that seems to be thinking about what is happening is Gatewood Galbraith.

"ENERGY
Kentucky could become the energy capitol of the United States. Our coal and mineral reserves are well documented as bio-industrial development to be utilized as a fuel crops. Add that to our wind and water power and I believe we are a match for any other state. We would like to proceed as “green” as possible because we need to attract progressive new businesses who will demand same. That is why the next issue is so important.”

ENVIRONMENT
The environment will forever be a top three issue in any intelligent political campaign. Ours is no different. We must be conscious of our impact on the earth. Therefore, whatever our industry or work, we must insist on reclaiming the land for future use and restoring the hills and streams to their natural state. Enforcement of current regulations and tax incentives to foster compliance are critical tools to protect our living space. Utilization of Kentucky's natural resources for the purpose of recreation, tourism, and education are key to fostering economic growth.”

While the Gatewood/Riley ticket is on the right page regarding energy and the environment, they do not seem to have a clue on how to get the message out.

With the citizens in Frankfort standing up to the coal industry the best the Gatewood/Riley campaign can muster is a few Facebook posts and Dea Riley standing around with a bumper sticker.

If that is their best shot then kiss their campaign goodbye.