Pension fund spends big on travel, meals
Arizona’s pension system for firstresponders, judges and lawmakers has mandated state and local governments make larger payments to compensate for the retirement system’s poor-performing investments.
The cost has left some cities unable to hire new police officers and firefighters.
But administrators of the Public Safety Personnel Retirement System haven’t tightened their own belts, critics say.
Former Administrator Jared Smout; Chairman Will Buividas, a Phoenix police officer; and Vice Chairman Mike Scheidt, a Tempe firefighter, have spent at least $58,000 on travel, entertainment and meals during the past two years, records obtained by The Ar
izona Republic show.
The spending includes $555-a-night hotel stays; lunch for two at an upscale Phoenix steak house; $2,249 for staff Christmas gifts; and catered lunches for PSPRS staff and the board nearly every month, with one meal costing $880, the records show.
PSPRS spokesman Christian Palmer defended the spending, saying it represents a tiny fraction of the system’s $15 million annual operating budget.
“These meeting, educational and travel reimbursements have all been budgeted for and are a necessary component of a $10.5 billion investment portfolio doing business as effectively and efficiently as possible.” Palmer said. “If fact ... PSPRS has come in significantly under budget for these expenses in each of the past three years.”
But officials with some of the cities that fund the pension system and have seen their payments rise as PSPRS’s investments have sputtered think it sends the wrong message.
Bisbee Mayor David Smith, whose city has teetered on the brink of bankruptcy and struggled to hire police and firefighters because escalating pension costs, was flabbergasted by the spending.
“It’s obviously abominable they are using our money to entertain themselves,” Smith said. “They have no fiduciary responsibility.”
Phoenix City Councilwoman Thelda Williams, whose city has grappled with rising pension costs cutting into other public services said, “In the big scheme of things it’s not that huge of an amount of money, but it’s the perception.”
PSPRS should be “more prudent” with the public’s money. “It’s a partnership between them and us, and they should tighten their belts,” she said.
Records obtained under the Arizona Public Records Law since Jan. 1, 2018 show:
❚ Smout, the former administrator who was paid $252,200 a year, spent $1,019 on movie tickets and $1,229 on copies of the book “How will You Measure Your Life.” Smout’s attorney said the movie tickets and books were used for staff Christmas gifts.
❚ In March 2018, Smout spent nearly $900 on a catered lunch to celebrate PSPRS’ 50th birthday. Later that month he spent $674 for a catered lunch from Buca di Beppo for a board of trustees meeting.
❚ Smout regularly spent a few hundred dollars to feed the board and staff each month. The Arizona State Retirement System does not buy lunch for its board and staff during trustee meetings.
❚ Smout regularly spent hundreds of dollars taking staff and board members out to eat at restaurants. A favorite spots was the upscale Hillstone steak house, which has a dress code and restrictions on cell phone use. Buividas joined Smout for at least 15 meals. Buividas said agency business was discussed during these meals.
❚ The agency regularly bought cakes and other treats for staff birthday parties.
Palmer said since taking over in April, interim Administrator Bret Parke ended catered staff meals and did not take out board members because he was not comfortable with the practice. Michael Townsend, deputy county manager of Coconino County, will become the permanent administrator in early December. He did not return calls.
PSPRS, funded by public employees and their employers, has less than half the money needed to pay future retiree benefits. The nonpartisan Pew Charitable Trusts found PSPRS was among the worst-run pension systems in the U.S., with sub-par investment returns and high investment-management costs.
Arizona cities like Phoenix and Bisbee have, as a result, been required to significantly increase their payments to PSPRS.
An employer typically pays PSPRS about 55% of its first responders’ annual wages. For some communities, including Bisbee, because a larger number of retirees are receiving maximum benefits, contributions are close to 100% of wages.
By comparison, the $41 billion Arizona State Retirement System for teachers and public employees has money to cover more than 72% of its obligations.
ASRS does not buy meals for staff or its board, and it doesn’t use public funds for staff gifts, according to its spokesman.
ASRS uses employee fundraisers to pay for Christmas celebrations summer barbecues, and other morale building activities.
State agencies also raise money for employee gatherings.
And employees who travel on state business are required to spend within certain guidelines depending on the location for business. In most cases, they also must provide detailed receipts as well as conference agendas to be reimbursed.
PSPRS board members Buividas and Scheidt are long-serving public safety officers for Phoenix and Tempe, respectively. In total, Buividas incurred at least $25,000 in expenses, while Scheidt incurred $12,848 the past two years.
Buividas replaced Chairman Brian Tobin, a Phoenix Fire Department executive. Tobin incurred no expenses in 2018, records show, including mileage or per diem to attend monthly board meetings. He did not respond for a request for comment.
While doing PSPRS work, records show:
❚ Buividas, in April 2018, spent $382.50 to stay one night at a Four Seasons in Houston, then spent the next night at a DoubleTree at roughly half the cost. The hotels are less than one mile from each other. Buividas said the PSPRS board approved the trip, and he changed hotels because that’s where business meetings occurred.
❚ In May, Buividas traveled to Austin, Texas, for a conference. The event began with a 4 p.m. welcome reception on May 19, but Buividas arrived the day before and charged a $309 hotel night and a full day of meals to PSPRS. Buividas said he went a day early for business reasons, but no records show businessrelated activities.
❚ Buividas routinely rents a car to travel around the state for PSPRS business. He said the rental car cost plus fuel is less than being reimbursed for driving his own vehicle.
❚ Scheidt in May 2018 attended a conference and stayed at the Sheraton New York Times Square Hotel for five nights at a cost of $2,777, or $555 a night, for a king bed and a city-view room. Scheidt did not provide a detailed receipt for his spending.
Buividas attended the same conference and stayed at the same hotel, spending $295 a night, according to a detailed receipt.
Palmer, the PSPRS spokesman, said hotels frequently charge different rates depending on when and how guests book their rooms. He said there were no unauthorized reimbursements.
Eleven other board members have served at various times since January 2018. They incurred a combined $6,175 in expenses.
However, five current and former board members — Jim Ameduri, William Davis, Chris Hemmen, Harry Papp and former Chairman Tobin — incurred no expenses even though all board members are allowed mileage reimbursements and a $50 per diem to attend meetings.
Papp, on his reimbursement form, wrote: “Please do not pay me anything, ever. Thanks.”
PSPRS has four citizens who have financial expertise; four public safety officers, including Buividas and Scheidt; and Queen Creek’s finance director, a certified public accountant.
The board seats are considered volunteer positions, and both Buividas and Scheidt are paid their annual salaries by their cities while working for PSPRS, according to both cities.
A Tempe spokeswoman said Scheidt, as a union officer, is paid his $84,626 salary when he takes time to go to out-of-state conferences and for PSPRS duties. Scheidt declined to be interviewed.
Buividas is paid $72,425 as a Phoenix police officer. He said he spends up to 60% of his week on PSPRS-related business, including agency meetings in various parts of the state.
Buividas said it is a good investment for the city, which pays more than a quarter billion dollars a year to PSPRS for pensions.
“There is value in having someone oversee that,” Buividas said.
Phoenix spokesman Dan Wilson said Buividas’ role is “unconventional for a public safety employee, but we believe it is a critical collaboration with PSPRS due to the financial stress of the state pension system for public safety.”
Phoenix Councilman Sal DiCiccio, a longtime critic of PSPRS, questioned why the PSPRS board has four public safety officers, including the chair and vice chair.
“What do these individuals know about running a financial institution?” DiCiccio asked. “It’s no different than having a member of the public with no experience coming in and running the police or fire departments.”
The pension system has been so mismanaged that the governor and Legislature should place it under the state’s better-performing pension, ASRS, DiCiccio said.
Jon Riches, direction of national litigation for the watchdog Goldwater Institute, said PSPRS staff and some of its board members should be embarrassed by their spending.
“If you are stewards of taxpayers’ dollars, you should be stewards of the dollars. You shouldn’t be living extravagantly and taking in expensive benefits at the expense of taxpayers,” Riches said. “It’s fine to attend a conference. Just don’t waste money.”