What goes on in a $27 billion pension? It’s a question state Treasurer Curtis Loftis posed at a January 16 hearing before a Senate Finance subcommittee. And it’s a mystery the members have been working to solve because of an ongoing conflict between Loftis and the Retirement System Investment Commission.
The commission’s Chief Operating Officer, former Sen. Greg Ryberg worries that the retirement system won’t hold up under constant pressure by the Treasurer. “I’m here to tell you that the system we put into place is on the verge of destruction because of personal politics,” Ryberg told the subcommittee Tuesday. A spokesman from the Treasurer’s office was not immediately available for comment at the time this report was filed.
Ryberg spent much of his time in the Senate trying to straighten out the retirement system’s unfunded liability, which jumped from $300 million to $17 billion in the past 14 years. It’s an increase Loftis harps on frequently. But it’s one Ryberg attributes to better accounting for liability.
Take the state’s Teacher and Employee Retention Incentive program, for instance. TERI, which was born in the earlier part of the last decade and impacts the unfunded liability, lets state employees who are eligible for retirement collect retirement while working. These employees pay into the system without earning future credit and must quit working at the end of the TERI period.
But the conflict revolves mostly around a disagreement over the fund’s returns—in the bottom 20 percent in the nation, according to Loftis—in lieu of the $427 million the commission shells out to money managers. The national average is $154 million. Commission staffers say they are unaware of any side-by-side comparison when it comes to pension plan fee reporting by other states.
The commission staffers say the commission thoroughly reports all three of its fees, including $200 million in management fees—a measure Loftis has pushed for. Also included in the plan’s fees are pass through expenses—like legal costs and audit fees—and performance fees. These last two are fees most other plans don’t report, according to the commission’s Director of Operations, Sarah Corbett, though she notes there are varying degrees of reporting nationwide. Corbett also testified before the subcommittee.
The subcommittee’s co-chairman, Sen. Joel Lourie said lawmakers will present a plan to the full committee in the coming weeks and asked what Ryberg suggested to help prevent future disagreements. Ryberg said he couldn’t think of anything that would help get past what he called a personal issue. Loftis—who is running for reelection—walked out of a meeting in October after he wasn’t allowed to speak during a special RSIC meeting. He also raised his voice before the subcommittee at a January 30 hearing after Corbett said the commission reconciles its fees. Loftis said he didn’t consider waiting to reconcile until the end of the year reconciling fees.
Commission staffers anticipate a study by Funston Advisory Services—a consulting firm—that will compare the state’s retirement system with similar systems. But the study won’t be a true apples-to-apples comparison. It will focus on management fees paid by state pensions. Completion of the study is expected some time in April.