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Judge dismisses lawsuit questioning Kentucky governor’s ability to restructure pension fund board

Kentucky Gov. Matt Bevin

A 2016 lawsuit against Gov. Matt Bevin's reorganization of the Kentucky Retirement Systems' board was dismissed by a Franklin Circuit Court judge Monday.

Judge Phillip J. Shepherd wrote Monday that while the lawsuit "raised valid legal questions," legislation passed in 2017 ratified most of the governor's reorganization, making the lawsuit moot.

Through an executive order in June 2016, Mr. Bevin disbanded the Frankfort-based Kentucky Retirement Systems board of trustees, replacing it with the Kentucky Retirement Systems board of directors. The new board had 17 directors— the 13 who were on the previous board of trustees and four new appointments by Mr. Bevin, which included the state budget director. On the previous board of 13, six were appointed by the governor. Along with restructuring, Mr. Bevin ordered that any executive director appointed by the board must also be approved by governor and mandated that all investment holdings, fees and commissions, contracts or offering documents be available online.

Shortly after the reorganization, two board members and state Attorney General Andy Beshear filed a lawsuit challenging the governor's power to restructure the board. In early 2017, while a ruling on that lawsuit was pending, the Kentucky Legislature ratified most of Mr. Bevin's order.

One lawsuit plaintiff was ousted board Chairman Thomas K. Elliott. Through a separate executive order in April 2016, Mr. Bevin removed Mr. Elliott as chairman, citing a need for a "fresh start and more transparency." At a board meeting shortly after Mr. Elliott's removal, members of the governor's office and state troopers threatened Mr. Elliott with arrest if he participated in the meeting, according to William A. Thielen, executive director of the $12.1 pension fund at the time. Mr. Shepherd wrote that the use of state troopers to enforce the governor's orders was "ill-advised. ... The commonwealth of Kentucky is not a police state," he wrote.

In a statement Monday, the attorney general remained hopeful that a lawsuit about Mr. Bevin's reorganization of state education boards would succeed in the Kentucky Supreme Court. "Today, the court ruled that our lawsuit raised 'profound and legitimate questions concerning the scope of the governor's reorganization power,' and that Gov. Bevin engaged in outrageous and unlawful conduct in sending 'armed officers of the Kentucky State Police' to threaten a board member," Mr. Beshear said. "But, the court ruled that the General Assembly had once again bailed out the governor through new legislation. However, as the court noted, our education board lawsuit is headed to the Kentucky Supreme Court, where we will seek a final ruling that the governor cannot ignore and rewrite Kentucky law. I will continue to defend our constitution and the liberties it provides for our Kentucky families."

Unlike the reorganization of KRS, there has not been legislative action on the reorganization of the education boards.

In a separate statement, Amanda Stamper, a spokeswoman for Mr. Bevin, said: "We are glad another one of the attorney general's many politically motivated lawsuits has been dismissed. It is sad Attorney General Beshear continues to play politics with Kentucky's pension system, which became the worst funded system in the country under his father's administration. After the circuit court denied the attorney general's motion to temporarily enjoin the governor's reorganization of the Kentucky Retirement Systems board, the Legislature confirmed the reorganization into statute, rendering the AG's suit moot."