What are state’s two largest pension funds hiding?
Anyone who teaches in a public school or works for the state ought to be asking the question: Why won’t the boards that oversee their pension funds cooperate with auditors? Pennsylvania Auditor General Bob Casey Jr. has been attempting since last August to perform audits on the state’s two largest pension funds – the State Employees’ Retirement System (SERS) and the Public Employees’ Retirement System (PSERS). The balking by the funds’ leaders led Casey to issue subpoenas last week to the funds’ leaders. If they fail by today to provide the financial documentation, Casey is prepared to wage a court battle.
During the past year or so the terms “audit” and “dwindling pension funds” have grown legs. With the market downturn, money has been lost. According to published reports PSERS market value plunged from a high of $53 billion in June 2000 to $43 billion in June 2002. SERS’ market value of $28 billion dropped to $21.5 billion.
Readers might recall that last summer when local school boards were pulling budgets together they wrestled with increased pension costs that they were forced to pay. Some of the additional money was because lawmakers tinkered with payouts to future retirees but the bulk was to offset the steep decline in the fund’s value so that it would remain solvent.
But as many people who labored for companies that cooked the books have discovered, figures can be manipulated and not provide a true picture of worth. And unscrupulous auditors, depending on who is paying the fee, can make the picture as rosy or as grim as the person cutting the check prefers.
Casey wants to audit the accounts with an eye toward scrutinizing about $300 million paid each year for external investment advisors and consultants. The funds have refused.
They claim first that the auditor general’s office doesn’t have the authority to perform such an audit. If the auditor general can’t, then who can? This is nonsense. Casey cites statutes that give him such authorization. Surely, the state’s top fiscal watchdog should have the power to make sure the public’s money and the retirement future of public employees is safeguarded.
The funds also claim that Casey lacks the expertise. He’s willing to concede that if his staff is not able to handle the task outsiders will be hired.
According to Casey the funds at first balked, then agreed to collaborate with his office to retain a consultant to perform a joint independent audit. This seemed a logical compromise that would keep the process fair and lose the taint of politics.
Yet when it came time for the particulars, the funds refused to let Casey in the door stating they were hiring their own consultant.
Any such audit, conducted without the input of the auditor general’s office, will and should remain suspect.
Casey has not accused the funds of wrongdoing but said his suspicions are mounting. What do these two pension funds have to hide, he asks.
Those who are banking their retirement on these funds should ask the same question.
Luanne Traud is the Herald-Standard’s editorial page editor. E-mail: ltraud@heraldstandard.com.