We’ve written before about where public pensions get their money: the employer and the employee both contribute to the pension fund, that money gets invested, and the investment returns provide the majority of money used to pay retirement benefits to teachers, firefighters, and other public employees. Those funds don’t invest themselves, however. Public pension funds are managed by professionals that responsibly invest the contributions of workers and employers. Those professionals are ultimately overseen by a board that is responsible for the overall direction of the public pension fund.
Public pension boards look slightly different in each state, but they are typically made up of individuals with years of experience in investment, public finance, and public management. The median number of board members is nine, but it can be as few as five and as many as nineteen. As fiduciaries of the fund, they are responsible for looking out for the best interests of the workers and retirees that will rely upon the pension for their retirement security. Unfortunately, political meddling can sometimes interfere with the professional expertise of the pension board.
In Kentucky, Gov. Matt Bevin recently attempted to remove the chair of the Kentucky Retirement System, despite the fact that the board chair has several years remaining on his term. In his place, Bevin has attempted to appoint a medical doctor with no investment experience- a direct contradiction of state law that specifies appointees to the board must have at least a decade of investment experience. Not only does Bevin’s appointee lack the necessary experience, but the appointee also wrote a column last year in which he attacked Kentucky’s public pensions and the working families that depend on them for their retirement. It’s likely that this dispute will end up in court, which is disappointing, especially in light of the recent good news that Kentucky is increasing contributions to the pension funds this year.
A somewhat similar situation happened in Texas, where Gov. Greg Abbott appointed Josh McGee to be chair of the Texas Pension Review Board. If that name sounds familiar, it is because McGee is John Arnold’s right-hand man. A noted pension opponent, McGee also lacks the qualifications needed to serve on the Pension Review Board. The members of the Texas PRB are supposed to fill different expertise roles. Gov. Abbott appointed McGee claiming he has expertise in “Securities Investment, Pension Administration, or Pension law.” However, McGee’s only experience in this area is writing biased research that is funded by John Arnold and backed by the ultra-conservative Manhattan Institute. McGee has no investment background, is not a lawyer, and has never before been involved in pension administration. It is clear that this is a political appointment meant to push an ideological, anti-pension agenda.
Both of these appointments continue a worrying trend of politicians meddling- or attempting to meddle- in the responsible administration of public pensions. Several states have recently added politicians or political appointees to their pension boards. These members may lack the knowledge or experience to understand how pension funds work. Further, as in the McGee instance, their appointment may be intended primarily to drive an ideological agenda. An attempt in Oklahoma to get the state treasurer- a noted pension opponent- added to the pension board was fortunately defeated. Public employees must remain vigilant about who is serving on their pension’s board- their retirement security is at stake.