I recently stood in Philadelphia’s Independence Hall, where 55 delegates gathered in May 1787 to create the U.S. Constitution and form a new government.
While that hallowed room is filled with desks and other period fixtures, the only original piece of furniture is the chair occupied by future President George Washington while presiding over the convention.
Businessmen, merchants, shippers, farmers, scientists and physicians were framers of the document that would set their new nation on a path toward unprecedented freedom and prosperity.
If doctors were included in framing the foundation of this nation’s success, you will have a hard time convincing me that Madisonville dermatologist Bill Smith, M.D., is somehow unfit to serve on the board overseeing the troubled Kentucky Retirement Systems.
Smith, who served his country for nine years, rising to the rank of lieutenant commander in the U.S. Navy, full commander in the Navy Reserve and served a tour as a flight surgeon with the Marine Corps, founded his practice in 2000, which has grown into a multimillion-dollar operation.
Smith while building his practice has studied state and local retirement systems, including helping Madisonville successfully address challenges that threatened that city’s firefighter pension plan a few years ago.
For Smith, the solutions to saving and fixing arguably the nation’s worst government-run pension fund are not political. Rather, they involve doing the math and abiding by Kentucky’s Constitution and its statutes.
He strongly believes that decades spent ignoring Kentucky law requiring actuarial analyses of proposed benefits and benefit enhancements before they’re granted has been a primary contributor to the decline of the state workers’ retirement fund—from being 74 percent funded a decade ago to currently containing only about 17 percent of the funding needed to cover future retirement benefits.
KRS bureaucrats want you to believe that the major contributor to Kentucky’s pension crisis is underfunding by the legislature and—as they occasionally admit—unproductive investments.
They vehemently oppose Smith’s appointment by Gov. Bevin to their board because the doctor’s made it known that the malady is the result of enhancing benefits beyond available funding or a strategy to develop one beyond the biennial budgetary shakedowns of the General Assembly.
When it comes to enhancing benefits, for instance, the potential purchaser of a house or car must demonstrate he’s got funding—either in terms of up-front cash or the ability to make payments—before he’s allowed to move in or drive off the lot.
Smith posits the system is unsound because its leadership has performed like a buyer who purchases a house he can’t afford then goes to his employer and demands a raise because he’s “underfunded.”
This seems the model of choice for too many Frankfort politicians, who’ve offered new and increased benefits without the required actuarial analysis or the funding. Instead, they just add that amount to the funding to the state’s annual Actuarially Required Contribution (ARC). Then, when Frankfort doesn’t meet that obligation, detractors claim the system is underfunded.
It’s appalling that William Thielen, the retirement system’s overpaid and ineffective executive director, dismisses the statutorial requirement for solid analysis of what benefits cost before they’re granted as no longer acceptable.
I sat on the second row at the most recent meeting of the state’s Public Pension Oversight Board during which Sen. Jimmy Higdon, R-Lebanon, tried to make the case to Thielen that the legislature can no longer vote for benefit enhancements without at least an estimate regarding their future costs.
Thielen claimed such costs are “indeterminable.”
He knows that Smith, once he’s seated, will ask the questions, do the math and figure out what’s really going on in that huge retirement system.
No wonder Thielen obsessively opposes Smith’s appointment to the board to whom he answers.
Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at email@example.com. Read previously published columns at www.bipps.org.