MPERS, which municipalities may
participate in to have managed retirement investments to pay out in pensions
for their law enforcement employees, gained infamy for its investments in
questionable real estate and golf courses. A neglectful board trusted its
administrator on these matters, who later was convicted of fraud, whose flights
of fancy caused significant dollar losses to its portfolio, meaning higher
costs to law enforcement agencies and, ultimately, to taxpayers.
But MPERS almost seems conservative
on this account compared to the absurdities committed by the board and
management of the New Orleans Fire
Fighter and Pension Relief Fund. Among other “investments” made by this
group, the agency that deals with the pensions of these public safety personnel
in New Orleans, were buying golf courses and lending to a hotel, an office
building, a garage, and to movie production companies. NOFF also went further
in investing with an advisor who promised indefinite outsized returns now under
investigation for what authorities equate to running a Ponzi scheme.
In the statutes that established NOFF
and the other 20 known extant local pension funds – the state has four “state”
and nine “statewide” systems most of which may invest for local government
employees, but are not tied to one geographical area – they dictate that
prudence must encompass financial decision-making. How anybody could think the
items above represented anything but high risk seems incredible, especially in
the case of NOFF as while MPERS had a $1.8 billion portfolio much more able to absorb
losses in the tens of millions of dollars that those items accrued, NOFF’s
portfolio was less than a tenth of that size while these risky investments made
up a considerably larger portion of the whole. In fact, the amount it put into
real estate alone over the last few years about equals the most recent entire
value of the fund.
Typically, these systems have a
board whose membership approves of such deals, comprised of a mix of government
representatives and those elected from participating members. Having inexpert
plan members on these entails risk, but government representatives presumably
are there for their expertise and can curb any unwise enthusiasm of the others.
This appears not to have happened in NOFF’s case, which in part explains why
courts have ruled that New
Orleans is on the hook to make up for shortfalls in pension payments,
meaning of course its taxpayers, and led to its suing NOFF to avoid these.
This
space has noted previously that consolidation of state and statewide funds
like MPERS could reduce the probability of bad decision-making and bad
investments causing major taxpayer headaches. The same should apply to the 21
local pension systems, although in many cases that has happened by default. For
example, the Monroe Police Pension Fund essentially over time has gone out of
existence, leaving the city with a few hundred thousand dollars in reserve, and
the Ouachita Parish’s Firemen’s Protection District No. 1 Pension Relief Fund
(that is, concerning Ouachita Parish’s Fire Department) has become subsumed into
Ouachita Parish government that does not report separately on it.
However, if lawmakers make no
effort to disband the obsolete or to merge the relevant systems into statewide
systems already existing, the least that can be done is to increase the
transparency of these. Few, like NOFF, report their own numbers, and even if
the numbers aren’t large for most of these, it’s still the people’s and active
and inactive members’ money that they should know of, and more sunshine might
lead to more prudent investing.
Unless measures like these get into
law, simply stated more examples like MPERS and NOFF will rear their ugly heads
from time to time, and more waste of citizens’ and members’ money will occur.
It’s time to stop this madness.
No comments:
Post a Comment