12/5/2012 11:30:57 PM

Kentucky = Worst Funded Public Pension in US

Move over Illinois: The Kentucky Retirement System reported a funding ratio of 24.5% today, according to a former trustee. 

(December 5, 2012) – America’s public pensions have hit a new low. 

At a board meeting today, the Kentucky Retirement Systems (KRS) announced that its funded ratio is now 24.5%, according to former KRS trustee Christopher Tobe, beating out Illinois’ as the lowest in nation. 

From 2007 to the fiscal year-end of 2011 (the latest date for which data is available), KRS’ total assets dropped by more than a third, from $6.44 billion to $3.97 billion. In KRS’ 2011 annual report, Chief Operations Officer William Thielen acknowledged the dwindling funding ratio, and attributed it to a variety of causes. 

“Funding ratios have fallen both steadily and significantly over the last decade as a result of unfavorable market conditions, higher than anticipated retirement rates, employer underfunding…and increased expenses or annual cost of living adjustments that are not pre-funded by the employers,” Thielen wrote. 

It gets worse: “While improved market conditions and the increased funding in…FY 2011 have slowed the growth of the unfunded liabilities of the various systems, KRS uses a five-year smoothing method and the full effects of the market losses in 2008 and 2009 will not be realized for another three years.” 

Tobe attributes KRS’ sorry state to other factors. 

“This 24% is unique,” he wrote in an email. “Unlike Illinois, most Kentucky officials were not aware of the extent of this underfunding. This is primarily due to complete lack of transparency. KRS held back disclosing this level for nearly a month from their normal November meeting.” 

KRS officials were subpoenaed by the US Securities Exchange Commission in 2011 as part of an investigation into the role of middlemen in public pensions.

Contact the writer of this story:Leanna OrrLeanna OrrManaging Editor646-308-2763lorr@assetinternational.comFollow on Twitter at @ai_CIO