EDITORIAL: Pensions don't favor taxpayers
Apr. 9—When school districts send tax bills, they should include a notice of how much they pay to the scandal-plagued Public School Employees Retirement System.
Due to PSERS' history of limited transparency and mismanagement, legislative malpractice, and financial practices for the benefit the finance industry, each of 500 Pennsylvania school districts must pay a massive pension contribution equivalent to 35.26% of its payroll.
This year, taxpayers will pump $5.2 billion into the $70 billion system. More than 100,000 active employees will contribute an average of 7.26% of their salaries.
PSERS' investment record is spotty. Former state Treasurer Joe Torsella — a PSERS board member as treasurer, and later as Gov. Tom Wolf's appointee until he recently resigned — calculated that the plan made more from low-cost index funds than from riskier, higher-cost investments. The plan paid multi-million-dollar fees to investment managers for mediocre results.
Investment returns can determine whether contribution increases are required of employees or taxpayers. Three years ago, the plan reported earnings just high enough to trigger a contribution increase by taxpayers rather than employees. The calculation was wrong, however, and the increase was passed to employees.
That miscalculation prompted a 17-month criminal investigation by federal authorities, who decided not to prosecute, and a civil investigation by the Securities and Exchange Commission.
It also prompted a change in administration, which has discovered that it is expensive to unravel the mess. PSERS recently reported to the SEC that it has spent more than $6 million on lawyers and consultants regarding federal and internal investigations. That meter will run, since testimony in an ongoing civil lawsuit against PSERS has contradicted some of an internal investigation's findings.
And, as reported by The Philadelphia Inquirer, PSERS has begun to sell off real estate at potential losses. For example, several Harrisburg properties that it acquired for more than $13 million to construct a new headquarters now have an estimated value of $1.3 million.
Lawmakers, meanwhile, rather than reforming the system, have begun to debate whether to further stress it through pension increases for some retirees, even though the school plan provides benefits fixed at retirement.
It's time for PSERS and lawmakers to consider the pension system with taxpayers in mind.
