Who Is Really Playing Politics with Pensions?

ALBANY, NY (10/27/2009)(readMedia)-- Legislation is being floated in Albany under the guise of ending politics in pensions. Stan Winter, President of the Retired Public Employees Association (RPEA), points out that the action proposed will have the absolute reverse effect and threatens the long-term stability of the system.

The key element of the seemingly innocuous proposal is to create a 13 member board which would consist of the Comptroller as chair and nominees of the Governor, Attorney General, Temporary President of the Senate, Minority Leader of the Senate, Speaker of the Assembly and Minority Leader of the Assembly. These seven would have a majority vote of the Board providing a politically based overload. Of the remaining six members, four would represent active State and local government employees. Only two would represent retirees, one representing Police and Fire retirees and one for all of the Employees' Retirement System retirees.

The lax environment that permitted the misdeeds of the Hevesi administration is purportedly resolved by this proposal. The reality is that many of the corrective actions included in the legislation have already been instituted by Comptroller Thomas P. DiNapoli. He has established rules that have increased the "arms length" between politics and investment personnel, increased transparency of operations and installed an independent watchdog to make sure the sins of the past are not repeated.

RPEA's concern is that instead of eliminating politics from the operation and management of the Retirement Fund, this proposal has introduced it. A politically appointed 13 member board dominated by employer and employee representatives is a recipe for disaster. Recent Governors - both Democrat and Republican - have attempted to raid the Retirement Pension Fund to solve their fiscal problems. Comptrollers - both Democrat and Republican and even the discredited Hevesi - have used their responsibility as the sole fiduciary of the Retirement Fund to block these ill conceived and illegal attempts.

One might ask how a Board would change this. We only have to look at the boards that run other retirement systems across the country with a similar makeup of politicized employer and employee representatives. An alarming number of these systems are seriously under funded and facing bankruptcy. Even in New York City, a Board run system, benefits have been put in jeopardy by underfunding. Why is this happening compared to the New York State systems? Sure, bad Investment decisions by these other systems may be a reason, as are a number of other local issues, but in many cases the answer is simple. Politically appointed employer and employee board members have used these funds for their own agendas be it in exchange for salary raises for employees or to resolve unrelated fiscal problems. One only needs to look to a pension system crisis in New Jersey where funds were regularly diverted to other areas and to CALPERS, the California pension system and the largest in the country, where two Board members are under investigation for illegal activities related to pension fund investments.

Does anyone seriously think that the makeup of the proposed board would not be enticed to look once more to the Retirement Fund to solve fiscal problems elsewhere? In short, the proposed cure is far worse than the disease.

One should also remember that the misdeeds of the Hevesi administration related only to how investments were obtained, not to the investment decisions themselves or the financial stability and solvency of the Retirement Fund. A Blue Ribbon eight member Investment Advisory Committee already exists to recommend overall investment policy to the Comptroller.

Realistically, the only hope for the continued well being of the Retirement Fund is the Comptroller as sole fiduciary.

Stan Winter is the Volunteer President of the Retired Public Employees Association (RPEA) and a member of the Comptroller's Advisory Council for the Retirement System. RPEA is a not for profit organization representing the interests of State and Local government retirees in New York State.