Pennsylvania’s two embattled pensions, the Pennsylvania Public School Employees’ Retirement System (PSERS) and State Employees’ Retirement System (SERS), stated their case in court against a lawsuit this month.
Attorneys representing the state’s auditor general, Robert Casey Jr., squared off in court Sept. 10 against counsel for the two pension funds. The hearings before Pennsylvania’s Commonwealth Court concerned preliminary objections that the pension funds brought to the auditor general’s lawsuit. The hearing lasted half an hour.
Casey is suing the pension funds over the question of his office’s authority to conduct a performance audit of the two retirement systems. Should the court rule in favor of the auditor general, his lawsuit would proceed in Commonwealth Court. A ruling in favor of the pension funds would end the suit unless Casey appealed to a higher court.
“What we’ve put on the line here is more than the ability to audit the two pension funds,” says Karen Walsh, a spokeswoman for the auditor general. “We want the court to rule on performance audits in general.”
Walsh says that the auditor general is confident about winning the ruling and proceeding with the suit, but is ready to appeal to State Supreme Court should the Commonwealth Court rule against him. The court is expected to rule between 60 and 90 days.
A spokesman for PSERS declined to comment and the pension funds’ attorney Edward Mannino did not return calls.
Casey initially sought to conduct an audit last August over the retirement systems’ use of 150 outside consultants and investment advisors. The tally for those services adds up to more than $250 million. Meanwhile, the two pension funds have had to scramble for cash infusions totaling $200 million this year to pay pensioners. The funds, which manage more than $60 billion combined in assets, have lost about $20 billion over the last two years.
The overseers of the funds, State Treasurer Barbara Hafer, who is chair of PSERS and sits on the SERS board, and SERS chairman Nick Maiale, maintain that the auditor general lacks the authority to conduct such an audit and is using the audit request to pursue political objectives.
While the case has yet to be worked through the courts, Casey has been winning the battle of public opinion. On Sept. 9, the Pennsylvania Association of School Retirees (PASR) announced its support of the special performance audit. On July 18 the Pennsylvania State legislature overwhelmingly passed a resolution by a vote of 187-12 calling on the two pension funds to cooperate with a special performance audit by Casey. The resolution also calls on the two sides to reach an agreement on the costs of the performance audits that would provide for the auditor general’s office to be reimbursed up to the amount that the pensions had initially planned to spend on their own audit.