State lawmakers met with officials of Pennsylvania's public pension funds Thursday to vet reform measures that have been introduced to increase transparency and oversight of the pension system.
The measures are working their way through the legislative process and could be considered for passage this year. Thursday's hearing offered participants a chance to voice concerns or probe for costs and conflicts that could derail the measures.
Calls for reform have a renewed urgency with the larger of two funds, the Public School Employees' Retirement System, known as PSERS, facing a pair of federal investigations, turnover among top staff, and calls by lawmakers of both parties to make public its own delayed internal investigation of exaggerated profits and Harrisburg land deals. The $73 billion fund is the largest in the state.
"PSERS has been though a rough year," the fund's board chairman, Chris Santa Maria, told members of a House subcommittee reviewing the pension proposals. He was joined by acting executive director Terrill S. Sanchez and other top staff.
The measures under review would also impact PSERS' sister fund, the $38 billion State Employees' Retirement System, or SERS, whose executive director, Joseph Torta, fielded questions with his senior staff. The pension leaders appeared before the subcommittee on public pensions, benefits, and risk management.
Among the proposals reviewed by pension officials and legislators was a bill that would force the funds to more closely track more than $1 billion of annual investment manager fees, and profit-sharing and other money-management costs. The measure would also require video copies of hours-long board meetings to be made publicly available — online for three years, and then by request.
SERS "will be able to work within the guidelines of the legislation" and has already implemented or begun to implement what the bill calls for, at an expected annual cost of $500,000 a year for additional software, according to a statement that agency gave the committee.
Other proposals include two authored by State Rep. Frank Ryan, R-Lebanon, who represents Republicans on the PSERS board and heads the audit committee overseeing the internal investigation. His proposals would oblige PSERS and SERS to observe Global Investment Performance Standards, or GIPS, designed to ensure that money managers accurately report all their costs and investments. The second proposal would require pension trustees to get formal training in their fiduciary responsibilities to plan members.
Pension leaders did not voice objections to terms of those measures, though PSERS' acting chief investment officer, Bob Devine, said staff is concerned that the agency's investment consultant, Conshohocken-based Hamilton Lane, was not yet prepared to collect some of the data required under the bills.
Rep. Seth Grove, R-York, urged SERS and PSERS to cut costs by working together on improved investment data systems. Legislators have not yet acted on a recommendation by a 2018 state pension reform commission that they merge the SERS and PSERS investment offices under guidance of a board of paid finance professionals.
Asked by Rep. Brett Miller, R-Lancaster, why these reforms, which had been under discussion for the last few years, are finally winning support, PSERS chairman Santa Maria credited unidentified "new board members" who had pushed for "greater transparency."
Despite record "employer contributions" to the funds by taxpayers and public workers and last year's surging investment values, the PSERS (public-school) and SERS (state worker) pensions still face a combined long-term deficit of more than $50 billion, and the system expects higher yearly costs for years to come.
State treasurer Stacy Garrity, a Republican and a PSERS trustee, and Gov. Tom Wolf, a Democrat who appoints three members of the PSERS 15-member board, have called for prompt, full public disclosure of the investigation prepared for PSERS last year by the law firm Womble Bond Dickinson.
Also calling for the Womble report's release are candidates from both parties running to succeed Wolf in this fall's election, including Pennsylvania Attorney General Josh Shapiro, a Democrat, and three Republican state senators: Senate President Pro Tempore Jake Corman, R-Centre; Doug Mastriano, R-Franklin; and Scott Martin, R-Lancaster); along with fellow GOP candidates Guy Ciarrochi, Scott Gerow and John Ventre.
Ryan, 71, who just last week agreed to serve another year as PSERS vice chair and audit committee head, told friends Tuesday that he plans to end his legislative career after three terms and won't run for re-election this fall.
In his note to friends, obtained by The Inquirer, Ryan cited frustration with the slow pace of fiscal reforms. He has warned that the pension deficit and other long-term spending imbalances threaten to drive the state bankrupt. Ryan confirmed highlights of the note for The Inquirer.
"While I have been successful in introducing and passing bills that have resulted in incremental change," Ryan wrote in Tuesday's note, "there are simply too many financial matters that still need to be fixed," which he said he's leaving to be fixed by successors "with the youth, intelligence and energy necessary."
Ryan's decision to step down at the end of the year was unrelated to the pension investigations, and he "absolutely would not" seek the open job of PSERS executive director, temporarily filled by former SERS chief Terrill S. Sanchez, Ryan told The Inquirer.
