Pennsylvania’s treasurer and a lawmaker have begun a review of the state’s two largest pension funds, the Public School Employees’ Retirement System and the Pennsylvania State Employees’ Retirement System.
The Public Pension Management and Asset Investment Review Commission will look for a plan that includes $1.5 billion in cost savings for each system. It held its first meeting Wednesday with Rep. Mike Tobash, R-Pottsville, and Treasurer Joe Torsella, a Democrat, the chairman and vice-chairman, respectively.
A pension overhaul law that passed last year established the panel to conduct a comprehensive review of PSERS and SERS investment management.
The commission expects to recommend improvements to SERS and PSERS stress testing and fee reporting transparency; and analyze their assets, investment strategies and performance, fees, costs and procedures against established benchmarks.
“Pennsylvania has been an outlier on fees, and our taxpayers shouldn’t be forced to pay excessive fees,” said Torsella.
The commission has six months to complete its review, and report findings and recommendations to Gov. Tom Wolf and the General Assembly. The Treasury has retained Ashby Monk, executive director of the Stanford University of Global Projects Center, to assist with the review.
In a May 24 report that Harvard Kennedy School published, experts at Pew Charitable Trusts say stress testing can help states evaluate whether pension policies can withstand economic volatility.
From 2000 to 2016, Pennsylvania’s pension systems went from a $16 billion surplus to a $69 billion deficit. The Kennedy School report cited persistent underfunding, lower-than-expected investment returns, and one of the largest unfunded benefit increase that any state has implemented.
The funding ratios for SERS and PSERS were 58.1% and 57.3% respectively, as of Dec. 31, 2016 and June 30, 2016, respectively, based on comprehensive annual financial reports and state budget documents.
Pennsylvania has enacted two rounds of changes since the financial crisis, dramatically ramping up employer contributions to stabilize pension financing and shifting new workers to a risk-managed hybrid plan to lower taxpayer risk.
