Retirement systems keep tying to deceive the LA public
Although they were able to stave off any meaningful changes to retirement policy this past legislative session, Louisiana’s over 20 retirement systems overseen by it know they have to keep vigilant in maintaining an aura of competence or else very necessary and long overdue reforms will happen. Thus the public relations campaigns and extraordinary measures continue to try to prevent the public from understanding the fundamental problems that exist with the systems.
On the legal front, three of the smaller systems continue to try to rescue themselves from their own stupidity. The Municipal Employees Retirement System, the Firefighters’ Retirement System, and the New Orleans Firefighters’ Pension and Relief Fund presently are attempting Hail Mary legal maneuvers in foreign courts to try to claw back over $100 million all together in funds invested with Fletcher Asset Management years ago. The company refused, initially, to pay off a partial cash out, and, now, the entire amounts.
Idiotically, they allowed the investment adviser (of dubious worth) with which they retain to con them into thinking they would get a minimum of 12 percent return on investment. News flash for the tyros that comprise the governing boards: unless inflation is running rampant for an extended period of time, nobody can guarantee that return. Only fools, made the worse that it was not they but Louisiana taxpayers that bore the risk, get taken in by deals like this. Fletcher filed for and got bankruptcy protection earlier this month, amid calls it had been nothing more than a Ponzi scheme, a month after the Legislative Auditor issued a report critical of the practices of the three funds.
Meanwhile, one of the largest systems continues to try to spin its way out of having to admit it has deceived taxpayers with its continued underperformance. The Louisiana State Employees Retirement System patted itself on the back for being designated one of the higher performing state pension systems over the past decade, achieving what it said was a rate of return of 6.17 percent from fiscal years 2002 through 2011.
Nice, but consider going back to 1998 its rate of return was only 4.92 percent through fiscal year 2011, considerably below the Standards and Poor’s 500 index return of 7.55 percent for that period. The S&P 500 return for the period in the funds self-congratulatory announcement was 6.12 percent. So was it worth all that taxpayers spent to eke out a 0.05 percent higher return than if the state had just kept chunking all of the contributions into the S&P 500?
And what the announcement did not say was that the return was over two points below the target rate established by the system over that time, 8.25 percent (recently lowered a quarter of a point). This unrealistic forecasting is one reason why such a large unfunded accrued liability has cropped up in that and other similar funds: by keeping this fictitious higher rate of return, it meant the state and employees underpaid into the system, already beset with extravagant benefits paid and promised to employees and retirees. That means taxpayers get stuck with making up the difference.
Posted by Jeff Sadow at 10:30