Get off Steve's Back

It looks like those evil outsiders are at it again.

Prodded by federal regulators, who last month issued a report critical of Kentucky's bonding levels for mining companies, the state Department for Natural Resources is working with the coal industry and environmentalists to update its method for calculating the amount of reclamation bonds. In the future, bonds will cost more, but how much more and under what circumstances remains the subject of negotiations.

State officials have agreed to submit a revised bond calculation method by April 1 to the U.S. Office of Surface Mining. Otherwise, OSM has advised, it will "take actions necessary to remedy the issue."

Will Steve Beshear, the Coal Industry and Brandon Smith defend our right to leave mining land unreclaimed?

Will Steve Beshear and the Coal Industry now sue the Kentucky Department for Natural Resources or the United States Office of Surface Mining or both?

Can they just add this to their suit against the Environmental Protection Agency?

Will Brandon Smith call for a Sanctuary protected from the Kentucky Department of Natural Resources?

Can’t they just get off Steve’s back?

That Cow Dried Up

I’ve never milked a cow, but it would seem to be common sense that you wouldn’t want to upset the cow while you were milking her.

Maybe this is the reason Governor Steve Beshear, Secretary Jonathan Miller and Attorney General Jack Conway and the entire General Assembly aren’t looking real hard at the Kentucky Workers Compensation Funding Commission.

But it looks like Franklin Circuit Judge Thomas Wingate has solved the problem for them.

Franklin Circuit Judge Thomas Win gate has ruled that the state cannot balance its budget by using more than $1.9 million from a fund supported by assessments on employers.

Maybe now that Beshear and General Assembly aren’t milking the cash cow Beshear can actually look at running the agency in the public interest.

Herald Leader Editorial Lacking

I am glad the Herald Leader has finally called for some change at the Kentucky Retirement Systems (KRS) in an editorial. However, they seemed to have missed a couple of major points.

First, the term limit language is in the 2008 bill, the current bill HB 480 only clarified it

The Statute Section 21 of House Bill 1, amended, KRS 61.645(3) clearly says “An elected trustee shall not serve more than three (3) consecutive four (4) year terms.” Bobby Henson is serving his 4th term and Randy Overstreet is serving his 4th term and running for his 5th term. The 4 termers are at the root of the problem at KRS.

I find it disappointing to see the Herald Leader editorial wimping out on term limits. I think this is probably Auditor Crit Luallen’s fault. She sent the message to wait for her audit until mid-summer. I don’t know if this was to give cover to her protégé Jack Conway’s egregious Attorney Generals’ opinion regarding KRS or if there is some other reason.

Regardless of the Auditor’s opinion or the reason for it, the term limits need to be enforced.

Second, KRS has put the spin out that the 5 year audit is unnecessary because the Auditor always has the option to do an audit. This is true.

However, the Auditor of Public Accounts has declined to do an audit of KRS or Kentucky Teachers Retirement System (KTRS) for probably the past 30 years because of the cost of doing the audit.

KRS is an umbrella over 10 separate complex entities, retirement, health plans, hazardous duty, non-hazardous duty etc. that range in size from around $100 million to $4 billion. If you bid these out as 10 separate entities to have a thorough professional job done by a national firm with experience in these type audits it would probably cost between $800,000 and $1 million to do a good job.

KRS however for the past 20 years has had a local Kentucky firm with no experience with other pensions and no experience with complicated investments do a rubber stamp audit. Dean Dorton Ford (DDF) currently does the audit for all 10 parts of KRS for $40,000.

“These financial statements are the responsibility of the Kentucky Retirement Systems’ management. Our responsibility is to express an opinion on these financial statements based on our audits……

As part of obtaining reasonable assurance about whether Kentucky Retirement Systems’ financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion”

DDF, by their own admission, does not understand the complicated investments and have relied on management’s representation of the facts. They do a superficial job (who blames them at $4,000 per plan) that relies almost 100% on KRS management statements.

The APA would only do the job if they could stand by their work and would need to probably charge at least $200,000. KRS comes back saying it is against their fiduciary duty to pay that much when they can get it done for $40,000.

This is why no real audit has been done for 20 or 30 years by the Auditor of Public Accounts and why one needs to be mandated.