It’s time to rein in PSERS

Adding transparency to Pennsylvania’s two pension systems — one for public school employees and one for other state employees — has been something of a crusade for state Rep. Brett R. Miller, a former public school guidance counselor.

After all, the four-term Lancaster County Republican is trying for a third consecutive session to pass a bill that’d give the general public a more detailed picture of fees, costs and expenses associated with investments and allow citizens to more easily follow what the systems’ boards are doing.

The third time ought to be the charm, particularly as PSERS — the Pennsylvania Public School Employees’ Retirement System — provides ample justification for Miller’s bill at every turn.

PSERS has spent 2021 lurching clumsily from one public relations debacle to the next. This year, PSERS:

- Learned that a consultant’s error overstated the performance of the system’s investments.

- Unceremoniously raised pension contributions from all school employees hired in the last decade.

- Got itself investigated by the FBI and the U.S. Attorney for the Eastern District of Pennsylvania purportedly over both the consultant’s error and some curious real estate investments PSERS has made since 2017 in the City of Harrisburg.

- Got sued by one of its own board members, who claimed she couldn’t get substantive answers to legitimate questions she posed about investment procedures and controls.

- Turned away an effort by several trustees to have its executive director Glen Grell and investment chief James Grossman fired.

PSERS is a system that’s practically begging for enhanced scrutiny. After all, it manages $64 billion in net assets — and those are taxpayer dollars — on behalf of nearly 500,000 active and retired public school teachers and staff.

Miller’s bill calls for livestreaming of all PSERS and SERS board meetings and the archiving of unedited copies of those streams on their websites for at least three years. It’d also require PSERS and SERS to publish nonconfidential documents reviewed by the board there as well.

The websites would also need to annually publish detailed and itemized data concerning fees and expenses paid to all investment managers and broken down into categories such as base management fee, profit share, performance fee, incentive fee and carried interest. “Carried interest” is a substantial yet often underreported amount fund managers siphon off from what’s generated by alternative investment vehicles like private equity, real estate and hedge funds.

The bill would also require PSERS and SERS to break down the performance of all investments by asset class and manager and provide an accounting of all travel or other expenses incurred by the systems’ staff and show what’s been paid for by the investment managers, funds or consultants.

All of this sounds great to us. In fact many of the requirements of Miller’s House Bill 1671 come straight from the unimplemented recommendations contained in a nearly 400-page report drafted in 2018 by Pennsylvania’s Public Pension Management and Asset Investment Review Commission.

Commissioned by Gov. Tom Wolf, the PPMAIRC was led by state Rep. Mike Tobash, a Republican representing portions of Schuylkill and Dauphin counties, and PA Treasurer Joe Torsella, a Democrat.

We’d humbly suggest that had their recommendations been implemented through the previous iteration of Miller’s legislation, PSERS might not be suffering through a year that has shaken public confidence in the system’s stewardship of billions of taxpayer dollars.

That Miller’s legislation failed to get passed in two previous sessions seems to have nothing to do with partisan politics. The House passed it unanimously in the 20172018 session before it lost momentum in the state Senate and the current version is co-sponsored by three Democrats.

The loudest voice in opposition to the increased regulation and oversight has been PSERS’ own executive director. In 2018 testimony in front of the PPMAIRC, Glen Grell strenuously pushed back on suggestions that PSERS was hiding fees or wasting assets and called PSERS “a leader in fee transparency.”

He also bristled at the prospect of legislative interference and called for the PSERS board “to exercise greater autonomy and agility in its operations.”

“(W)e urge caution in any legislation to restrict the management of either fund by its respective board,” Grell testified. “Frankly, when the General Assembly has acted on pension matters in the past, the results have ranged from modestly helpful to disastrous.”

As much as Grell seems to want to avoid legislative meddling in his business, we believe this year proves that the time has come to rein in PSERS through more robust oversight and transparency measures.

So we strongly urge the legislature to finally pass Miller’s bill before the end of the 2021-22 session.