Mark's answer above is correct.
Just to expand on it - the tool converts to WGS84 on your behalf if your data isn't already there. Doing this on your behalf it guesses at the best transformation (if one is needed). I'd use the Project tool to be absolutely certain about which transformation is being used and ensure the accuracy of your data as "WGS84" before converting to KML.
And of course, Mark's point about comparing to other data is very important. I've seen other "complaints" about data not lining up, and in the end its the imagery that isn't right. The data is "where its supposed to be". Unless you have/own the data, be skeptical about how authoritative it is, in this case, the imagery.