Kentucky Retirement Systems, Frankfort, conducted business as usual Thursday, with Chairman Thomas K. Elliott presiding over the regularly scheduled board meeting, despite earlier orders from Kentucky Gov. Matt Bevin that he be removed.
On Wednesday, Mr. Bevin issued an executive order to remove Mr. Elliott, a senior vice president at Old National Bank, Louisville, from the board.
On Thursday morning, prior to the board meeting, Mr. Bevin issued another order, appointing William F. Smith, a dermatologist in Madisonville, Ky., to the board, replacing Mr. Elliott.
“KRS needs a fresh start and more transparency,” a spokeswoman for Mr. Bevin said regarding the reason for Mr. Elliott’s removal. “Our (state) pension system has over $35 billion in unfunded liabilities. Change in leadership is needed in order to fix one of the nation’s most underfunded and poorest performing pension plans. The governor is bringing perspectives from all sides to the table to effectively address this crisis.”
Wednesday’s order pointed to a state law that the governor can remove certain gubernatorial appointees for “any cause the governor deems sufficient.”
Mr. Elliott was first appointed to the board in 2011 and reappointed last year by then-Gov. Steve Beshear for a term that expired March 31, 2019. Mr. Bevin has yet to name successors for two KRS trustees whose terms expired March 31.
Disagreeing with governor’s authority to remove Mr. Elliott, the KRS board decided to “move forward with business as usual,” on Thursday, with Mr. Elliott continuing as chairman, and to seek Kentucky Attorney General Andy Beshear’s opinion on the situation, said William A. Thielen, executive director of the $15 billion retirement system. Steve Beshear is Andy Beshear’s father.
In March, the attorney general issued an opinion that the governor cannot “remove a duly appointed member of the Kentucky Horse Park Commission or other boards and authorities with set or defined terms” before the member’s term has ended.
The KRS board’s decision to retain Mr. Elliott as chairman on Thursday was based on that opinion, Mr. Thielen said.
Mr. Smith attended the board meeting but was not sworn in.
A spokesman for the attorney general could not be reached for comment by press time.
The Kentucky Legislature failed to pass a pension transparency bill in the 2016 session that, among other things, would have required state retirement systems to publish investment fees and contracts and make executive directors and trustees appointed by the governor subject to state Senate confirmation. Senate Bill 2 passed the Senate in February but died in the House.