It’s a math mistake that should have the attention of hundreds of thousands of working and retired educators.
It already has the attention of the U.S. Securities and Exchange Commission and the FBI.
And it’s a mistake that should have the attention of every Pennsylvania taxpayer.
That’s because Pennsylvania’s biggest pension fund — the Public School Employees Retirement System — is under scrutiny for the board’s adoption of a false figure for its financial performance and about improper “compensation and gifts” possibly offered to staff.
PSERS oversees a pension plan worth $70 billion — that is billion with a “B” — for more than 500,000 working and retired educators.
We’re talking serious money here, and with serious money comes the possibility of serious corruption.
The story, however, hasn’t gotten the play it deserves during a news cycle devoted largely to mask debates, vaccine hesitancy and a possible government shutdown and debt default.
Let’s start with the basics.
The math mistake: The FBI and federal prosecutors launched a criminal probe of the PSERS plan in March immediately after the fund’s board issued a brief statement revealing its belated doubts about the figure it endorsed in December for financial results.
Prosecutors’ subpoenas ordered top PSERS officials to turn over information to a grand jury about the mistaken calculation (the math mistake) and, in a seemingly unrelated matter, the pension fund’s more than $5 million appropriation to buy real estate near its headquarters in Harrisburg.
The board’s math mistake on its financial performance was no minor error. Under state law, many school workers must pay more into the pension system when it fails to meet certain financial targets.
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In December, the 15-member PSERS board said profits were just barely good enough to spare the teachers such a hike. Then, in April, it reversed course and adopted a new, lower figure. This triggered an increase in payments for more than 100,000 teachers and other school employees hired since 2011. More veteran teachers were given a pass.
Lack of transparency: The pension fund has said almost nothing about the calculation mistake beyond acknowledging the error six months ago. In internal reports, the incorrect result was traced to nothing more than “clerical data-entry mistakes” by its staff.
Taxpayer-supported PSERS has denied a request, filed under the state’s Right-to-Know Law, for documents about the mistake.
The lack of transparency is troubling.
Also troubling is the fact that PSERS relies so heavily on outside consultants and money managers, despite the fact that the fund’s results have lagged behind those of other pension funds.
The SEC probe: The SEC has joined the FBI in the probe into the math mistake and about improper compensation and gifts possibly offered staff. State employees are rightly forbidden from accepting such gifts under a ban imposed by Gov. Tom Wolf.
Until this year, the fund permitted outside firms to book extravagant travel arrangements for the fund’s 60-member investment unit. The money managers would front the cost and PSERS would later pay them back.
The SEC pursues civil complaints. It has broad power to impose fines, discipline financial players and order reforms. Unlike the FBI, however, it can’t put anyone in prison.
Keep an eye on the story: Where all this will leads is uncertain but the facts that have emerged are concerning.
It’s a story that we can’t afford to let slip under our radar. There’s simply too much money at stake and, as always, remember to follow the cash.