Political problems continue to plague Pennsylvania’s pension funds.
The latest point of contention between the auditor general and the directors of the Pennsylvania Public School Employees’ Retirement System (PSERS) and State Employees’ Retirement System (SERS) comes over potential disclosure issues. The squabble involves the proposition and subsequent withdrawal of a provision that would exempt investment information controlled by the pension funds from being covered under the state’s right-to-know law.
It began when state Rep. Steven Nickol proposed legislation in October that would have allowed the state’s pension funds to be exempt from the state’s right-to-know law if such a disclosure would: (1) adversely affect or impact the value of the system’s investments; (2) release proprietary information in violation of a contractual confidentiality agreement; (3) impair the board’s ability to maximize the return on any investment in the fund; (4) potentially expose an investment of the fund to significant competitive harm or place it at a competitive disadvantage; or (5) otherwise compromise the board’s fiduciary obligations or duty of care to the members of the system under this part.”
The provision was introduced as part of HR 2109, a larger bill that addressed the administration of the state’s pension funds.
The proposal prompted Pennsylvania Auditor General Bob Casey Jr. to write the committee chair overseeing the bill and to issue a press release denouncing such changes. Casey says the proposal is an attempt by the PSERS and SERS boards to maintain operational secrecy at the expense of legally mandated public accessibility. Nickol is a member of the PSERS board of directors.
“They chose to select language that would have a blanket effect on information that would be available to taxpayers,” says Casey. “They could interpret it very broadly, and that gives them carte blanche to prevent information from being made public.”
In response to Casey’s complaints, Nickol asked the state government committee that oversees the legislation to withdraw the controversial provision. Nickol also dismisses Casey’s salvos as political posturing.
“These are issues that need to be addressed, but not in the context that Casey put them,” says Nickol. “He’s pulled them into his political playpen in regards to the audit issue.”
Separately, Casey is suing PSERS and SERS over the question of his office’s authority to conduct a performance audit of the two retirement systems. Casey, a Democrat, is expected to run for the office of State Treasurer next year. Current State Treasurer Barbara Hafer, a Republican, oversees the state’s pension funds.
Nickol says that his intention was not to sneak anti-disclosure legislation into law, but to begin debate and address disclosure issues before lawsuits may potentially send them to the courts.
“It’s more to deal with the issues before they become a problem and discuss them openly,” he says.
Several state pension funds and university endowments have been forced to disclose private equity investment information by the courts in their respective states. Limited partners that have released private equity data over the past year include the California Public Employees’ Retirement System, California State Teachers Retirement System, University of California, University of Michigan, and the University of Texas Investment Management Co.
Casey denies that his motives are political. He says that he’s willing to help craft disclosure policy in the future, though his office doesn’t oversee or enforce the state’s right-to-know laws.
“If they wanted to draft something that keeps the interest of taxpayers in mind we’d be willing to help,” says Casey. “I don’t think they’re going to ask us for help though. I think they just want us to go away.”
Nickol adds that the issue isn’t going to go away, and that he fully intends to bring it up later, perhaps when the political climate is more welcoming and the political fighting over the pension audit ends.
“Once that blows over I’ll probably introduce it again and seek a discussion of it,” Nickol says. “That may take a while.”
Email Matthew Sheahan