FRANKFORT, Ky. (AP) — Kentucky's massive public pension problem moved from the fiscal to the political limelight Thursday when the chairman of the state pension board refused the governor's order to step down — presiding over a board meeting instead.
Thomas K. Elliott took his seat at the head of the board table at the meeting, a day after Republican Gov. Matt Bevin ordered his ouster from the Kentucky Retirement System's board of trustees. Bevin's choice to fill Elliott's term — Madisonville dermatologist Bill Smith — observed from the audience.
Elliott listened quietly, his hands folded, as his colleagues discussed how to respond to the governor's removal order. The system's executive director, William Thielen, recommended the board continue with "business as usual" at the regularly scheduled meeting.
"It is our position that the governor has no authority to do that," Thielen said.
At issue is how to deal with one of the country's worst-funded public pension systems. The Kentucky Retirement System has an unfunded liability of more than $19 billion.
Bevin campaigned last year on fixing the problem. His spokeswoman, Jessica Ditto, said Wednesday that Elliott's removal was intended to give a "fresh start" to fixing the problem.
No board member tried to force Elliott's removal or to have Smith take his place.
The board was scheduled to elect its leaders for the next year but delayed that vote until the next meeting. Board members also decided to seek an attorney general's opinion on whether Bevin exceeded his authority by ordering Elliott's removal.
That request is likely to add fuel to a feud between Bevin and Democratic Attorney General Andy Beshear, who are sparring over how Bevin has wielded his executive powers.
Bevin and Beshear are embroiled in a fight over whether the governor had the authority when he ordered budget cuts for state colleges and universities without approval of the state Legislature. Both sides argued their case before a judge on Thursday.
Beshear said his office would provide an opinion if requested by the KRS board.
Bevin's office cites a Kentucky law that says the governor can remove any officers appointed by him "for any cause the governor deems sufficient." The exceptions are the board of trustees for public colleges and universities, the Council on Postsecondary Education and the state Board of Education. The office also cites a 1934 state appellate court decision upholding the right of then-Gov. Ruby Laffoon to remove a member of the state highway commission without giving a reason.
Meanwhile, some members of the KRS board predicted that any standoff between Bevin and the board over Elliott's tenure would end up in court.
Elliott was reappointed last year to the board by Beshear's father, former Democratic Gov. Steve Beshear. Elliott's term does not expire until 2019.
The governor's office sounded determined Thursday to follow through on Elliott's removal.
"He was removed lawfully and has no right to serve," Ditto said.
Elliott said in an interview Thursday that Bevin's removal order caught him by surprise. He said he had been reaching out to his colleagues in hopes of continuing as board chairman.
Asked if he was uncomfortable about defying the governor's order, Elliott said, "If I had a board that was not supportive, maybe it would be looked at differently."
A final budget deal passed by state lawmakers last week put more than $1 billion toward the state's public pension debt over the next two years. It also includes a separate "permanent fund" of money that can only be spent on the pension system upon completion of a state audit.
Smith, who said his college undergraduate emphasis was in mathematics, said he has spent considerable time studying pension systems. He said he wants to help "save the pension system," making it financially viable for beneficiaries and the state.
"Big changes need to happen," he said.
Jim Carroll, co-founder of an advocacy group called Kentucky Government Retirees, said he was "appalled" by Bevin's selection of Smith, calling him an apparent "pension funding hobbyist."
"It is impossible to imagine an appointee less qualified by background or philosophy to contribute meaningfully to the KRS board of directors," Carroll said in a statement.
Associated Press writer Adam Beam contributed to this report.