Action, not posturing, needed for pension board reform

Not only do Louisiana legislators want to close the barn door after the horse got out, they seemed surprised, despite repeated warning signs, that it did. And on this issue of retirement system management, those that have done the most to obstruct solutions to the financial deterioration of the state’s pension funds, not surprisingly, manufactured the most outrage over the administration of these.

Legislators on the House Retirement Committee last week expressed bewilderment over the investment decisions made by the Municipal Employees Retirement System, one of the baker’s dozen of retirement systems with statewide coverage. This formed part of the debate over HB 12 by panel chairman state Rep. Kevin Pearson, which would empower two more state officials to vote on its governing board otherwise comprised of a majority of representatives of municipalities.

For years, MERS’ former executive director engaged in a number of questionable practices that culminated in his resignation last year. In addition, under his guidance the board approved very questionable investments. The bill would make voting members out of the statewide officials, in addition to the respective House and Senate committee heads, who more often than not do not attend meetings given they act as voting members for all 13 systems.

State Rep. Sam Jones, during debate, read out a list of bad MERS investments, including the notorious Fletcher Asset Management debacle that caught up a couple of other systems as well. Other committee members expressed surprise and concern as if they never had known of problems. Pearson said he had voiced objections at some of these decisions, and noted that Jones has attended some of these meetings where he could have gathered information. Jones claimed those meetings induced comas and therefore more direct oversight should have occurred.

Further irony of Jones’ protestations should not have escaped observers. While Jones, who with the ascension of Gov. John Bel Edwards to his current job has become perhaps the biggest blowhard in the House, has served on the committee with Pearson during this period, not only has he never offered anything in the way of legislation to change the governing of these boards, but he also has done perhaps more than any other legislator to exacerbate the UAL of several systems, which among all of these total around $20 billion and cost taxpayers roughly $1.5 billion extra a year. This unwise legislation includes his bill last year, fortunately vetoed, that would have undone reform efforts to lower the aggregate UAL. He also did his best to defeat efforts to move away from the inefficient defined benefit systems, which would have gone a long way towards reducing the UAL to acceptable levels over the next couple of decades. Regrettably, the Louisiana Supreme Court ruled it unconstitutional on a questionably-arguable technicality.

And it’s not like the foibles of several of these systems have not come to public attention over the last several. Others suffered from highly speculative investments if not criminal behavior that received widespread publicity in this space and others. Why Jones did not seem to follow up on his stated past curiosity, if not outrage, or why legislators only now seem interested in discussing structural changes in these bodies, remains a mystery.

However, Jones’ professed outrage did not appear to move him to do anything constructive, even with this tepid bill, with his initial desire to defer the it. Eventually, the matter did come to a vote and he joined the rest of the committee members present in its approval, if in his case apparently reluctantly.

Such posturing does not reflect the attitudes of at least one committee member. State Rep. Barry Ivey has introduced a raft of bills that would stabilize the systems and potentially improve their governance and investment decision-making. Perhaps the best is his HB 917, which would create a separate board for investment purposes for all systems with a mixture of elected official oversight and non-officials with investment experience. While this does not really reduce the bureaucracy and only marginally the duplication that going to a single system would, it represents a distinct improvement over the current obscurantism and inexpertness featured on the boards.

Legislators need to do something like this to close the barn door. Then they can indulge in whatever surprise they can muster and try to score as many political points as possible on this issue, but it was evident many years ago to all willing to pay attention that fundamental reform of governance and administration of Louisiana’s retirement systems urgently needed enactment.