Retiree fund trustees worry mergers afoot
Gov. Asa Hutchinson’s aim to reduce the number of state agencies has at least a few trustees of the largest retirement system wondering if this latest overhaul effort portends another attempt to merge different retirement systems.
Almost two decades ago, legislation to merge state government’s retirement systems fizzled in the Legislature.
On March 15, the Republican governor announced his intention to propose in the 2019 regular legislative session cutting the number of state agencies that report to him from 42 to fewer than 20. He declined to rule out options such as merging state retirement systems.
While the directors of the retirement systems are part of state government, they don’t report directly to the governor; they report to boards of trustees. However, the governor appoints some of the trustees on most of the retirement boards.
On the same day as Hutchinson’s announcement, Arkansas Teacher Retirement System Trustee Danny Knight asked system Executive Director George Hopkins in an email whether “this is a move to combine the retirements?”
In response, Hopkins wrote in an email, “I don’t think so.”
Their emails were obtained this week by the Arkansas Democrat-Gazette
through a public-records request.
During the board’s meeting this week, Trustee Richard Abernathy posed a similar question to Hopkins.
“I have not been contacted by the governor’s office whether there might be any potential for ATRS to consolidate with any other agency,” Hopkins told the board. Arkansas Public Employees Retirement System Trustees Steve Faris and Larry Walther were in the audience.
“I would say that the chances of that, once they looked at what we really do and how specialized it is, that it would be unlikely that there would be any cost savings by … creating what I’ll call a retirement head that would be supervising all the retirement [system] executive directors in the state, because each of the systems are so unique in terms of their benefits and how they operate,” Hopkins said.
The Arkansas Teacher Retirement System — state government’s largest — has more than $17 billion in assets and more than 100,000 working and retired members.
The second-largest system is the Arkansas Public Employees Retirement System, which has nearly $9 billion in assets and more than 75,000 working and retired members. The system manages the investments for the Arkansas State Police Retirement System.
Completing the list are the Arkansas State Highway Employees Retirement System, Arkansas State Judicial Retirement System and Arkansas Local Police and Fire Retirement System. These systems collectively have more than $3 billion in assets.
Hopkins told the teacher retirement system’s trustees that the system operates with about 75 employees and that’s about 25 percent fewer than it had when he started as executive director in December 2008. The system has become more efficient with the help of technology, he said.
“As we get into some of the esoteric things on our later part of this agenda … you will see that having somebody trying to oversee like five retirement systems, if they had hair when they started, they’re not going to have hair long, male or female. It just runs you ragged with all the different issues that pop up,” he said.
Hopkins said system officials will work cooperatively with the governor’s office and “anyone else to see if there is some kind of thing we can do differently to save money.
“Our members demand and the board has demanded that the staff here do all they can to save money. Every day we try to do it. We may have a failure here and there, but not many,” said Hopkins.
“I don’t think I want to take on the challenge of managing some other people … and I don’t think anybody wants to manage me,” he told the trustees.
“We welcome the opportunity to work with state government. From a person that has been here and seen all sides of state government, I think they’re going to figure out that we are sort of like a dog that sees a skunk out in the yard; they think it might be something they want to chase for a while, but they quickly change their mind when they get too close,” said Hopkins, who is a former Democratic state senator from Malvern.
In response, Abernathy said he hoped to get that response from Hopkins.
“But I also know there have been a lot of different groups out there that would like to change the pension system. We have seen it in Kentucky just a couple of days ago,” he said.
“I think under your leadership and this board we have made some very tough decisions that politically have been hard to make, but to ensure the soundness of this system, and I hope it is recognized at the state level and we continue to march down the road we’ve been on,” said Abernathy.
Walther said in a brief interview that he attended the teacher retirement system’s trustees meeting this week because “I just wanted to come over and see how they operate. I never have been to a teacher retirement system meeting. George is an old friend of mine.”
Faris, a former Democratic state senator whom Hutchinson appointed to the Arkansas Public Employees Retirement System board a year ago, said he has been attending the teacher retirement system’s trustee meetings to learn about potential improvements that the public employees system could make.
As far as options for state government reorganization, Hutchinson spokesman J.R. Davis said Friday that “everything is still on the table,” though the teacher retirement system “is not currently a focal point” for the governor.
In 1999, legislation to consolidate state retirement systems died in the Legislature without even getting a public hearing. But the proposal’s sponsors got a message from critics, according to Democrat-Gazette archives.
“I knew it might generate a lot of heat,” then-state Rep. Courtney Sheppard, D-El Dorado, said in March 1999. “Boy, did it ever.” Thenstate Rep. Shawn Womack, R-Mountain Home, who now serves on the state Supreme Court, and Sheppard said their bill was part of a larger effort to trim the number of state boards and commissions that totaled about 400.
The ill-fated bill in 1999 would have abolished the teacher, highway employees, local police and fire, state police, judicial and public employees systems. The legislation also was an initiative of the Murphy Commission, a group of business executives that reviewed state government operations and finances in depth.
In 2009, the Legislature enacted a bill, sponsored by then-Sen. Faris, for the public employees system to manage the police system’s investments.
Madison Murphy, who served as chairman of the Murphy Commission, said Friday in a telephone interview that merging the retirement systems is probably deserving of another rigorous review by state officials. The political environment was less receptive to change than it is today, he said.