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What the Hall is going on? Legal issues surrounding the Hall and Parker cases against EORP and PSPRS

From this July, 13, 2015 Arizona Republic article by Craig Harris, Arizona Supreme Court picks five judges to hear pension case , we can now...

Wednesday, June 1, 2016

What's next for PSPRS now that Proposition 124 has passed and other questions we would like to see answered

Now that Proposition 124 has passed, what happens now?  The transparency-challenged organization that is PSPRS has deigned to give us this bit of information:

PROPOSITION 124 What does it mean to the retired membership?

On May 17, 2016, the State of Arizona voters had an opportunity to cast their ballots on Prop 124, regarding a COLA (Cost-of-Living Adjustment) for the Public Safety members of the pension fund. The Proposition passed and the new law itself determines the payment schedule and defines the calculation of the new COLA payment. Please note that the passage of Proposition 124 does not affect the members of the Elected Officials’ Retirement Plan (EORP) or the Corrections Officer Retirement Plans (CORP). Here are some questions and answers as to the timeline and other information concerning the COLA:

  • When should we expect to see the first COLA payment? 

  • The first payment will be made with the July 2018 benefit check.

  • Why do we have to wait until July 2018?

  • Proposition 124 becomes law August 6, 2016. The law states that we must prefund this new COLA with a full year of contributions before any payment is made to the members.The contribution rates that will reflect this prefunding will not be published until mid-to-late fall 2016, effective for the fiscal year beginning July 1, 2017. One full year of these contributions ends June 30, 2018. So, the first time we are legally able to pay this COLA will be with the July 2018 benefit check.

  • How is the COLA amount determined?
  • The COLA amount is determined by the change in the Consumer Price Index (CPI) for the metropolitan phoenix-mesa area for the calendar year ending just prior to each July payout.

  • What is the CPI?
  • “The consumer price index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.” (www.investopedia.com)

  • What percentage or dollar amount will be awarded?

  • The law states that the COLA is up to a 2% cap. For example, if the CPI is 1.8% for theyear, we will award the COLA at 1.8%. If the CPI is 5.2%, we will grant a COLA of only 2% due to that cap. Understand that this means that the percentage, or COLA, will fluctuate each year with the CPI results.
    Jared A. Smout

    My favorite part of this series of FAQ's is the last question, which amounts to Mr. Smout telling retirees that they are assured of becoming slowly poorer through their golden years.  If we go to US Inflation Calculator, we can see that between 2001-2015 inflation has been over 2% nine out of the fifteen fiscal years with only one year showing deflation.  In the ten years prior to 2001, inflation was over 2% nine out of the ten years.

    Mr. Smout does not mention that COLA's will now be calculated on a retiree's individual benefit, not the average normal retirement benefit.  This means that those retirees with smaller benefits will no longer see their checks increase at a higher percentage rate than those with higher benefits as the average normal retirement benefit increases over the years.  A benefit check will never change in terms of purchasing power, except that everyone will see their spending power decrease at the same rate via the capped COLA.

    We should also keep in mind that the Federal Reserve's official inflation goal is 2%.  This is the Fed's rationale for this 2% target inflation:
    The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve's mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public's ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling--a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.
    While this seems justifiable in the macroeconomic sense, this will be of no comfort to those living in the most microeconomic of worlds: retirees on fixed incomes.  So what happens if the Fed overshoots its target and inflation is 3%, instead of 2%?  That extra 1% means that after 20 years an item that cost $100 the first year will be $122 in year 20.  If inflation is 4%, the extra 2% will add over $48 to the cost of the item.

    As we have discussed here before, inflation is great if you are a debtor like PSPRS, which owes billions of dollars to its members.  Inflation will allow it to pay back retirees with cheaper dollars, while it reaps the benefits of higher returns on less risky investments.  Inflation is the magic elixir that will cure all of PSPRS' underfunding.  Of course, it will be on the backs of its retirees.  The defunct excess earnings formula took into account the potential devastation of high inflation, but it was horribly designed and sat like a ticking time bomb that would (and did) eventually wreak havoc on PSPRS.  Now we have another time bomb, only this one will blow up in the face of retirees.

    I did not see the film version of Michael Lewis' excellent book The Big Short, but the book tells how one of the protagonists would refuse to commit to a trade until the salesman explained to him how he was going to f*** him in the deal.  Well, the last FAQ in Mr. Smout's list should have been this same question.  So how is PSPRS going to f*** retirees? The answer is with inflation and a capped COLA.

    Finally, I have one last question for Mr. Smout and Chief Investment Officer (CIO) Ryan Parham.  If you remember, Mr. Parham penned an editorial for the Arizona Capitol Times in December 2014 entitled, "The truth about PSPRS investment performance."   It includes this revealing passage by the man in charge of PSPRS investments:
    PSPRS wants its retirees to enjoy increases, but we are incentivized to seek lower returns in the range of 9 percent to maximize earnings that can be applied to cover – and hopefully reduce – unfunded liabilities.
    It is this flawed mechanism that serves as the main contributor to PSPRS’ funding drop, and unless changed by a vote of the people or the Legislature and upheld by the courts, we are powerless to slow the decline.
    The insistence on assigning blame on PSPRS investment performance – and by extension our employees – for diminishing funding ratios is inaccurate and misleading and a disservice to policymakers, our beneficiaries and the public alike.
    Given the evident constraints they must operate under, our nationally and internationally recognized investment team deserves appreciation for its service to our state, not derision that has no basis in fact.
    Let us ignore the obvious questions about fiduciary duty contained within the CIO's admission that PSPRS was trying to lowball its own investment returns to circumvent the payment of COLA's under the old excess earnings formula.  I think what every PSPRS stakeholder would like to know is: when will Mr. Parham and his crack investment staff begin to produce the higher returns he implies they are capable of achieving now that the excess earning formula is no longer holding them back?

    Mr. Smout and Mr. Parham, we await your answer.

    Friday, May 27, 2016

    PSPRS investment returns through March 2016

    The following table shows PSPRS' investment returns, gross of fees, versus the Russell 3000 for March 2016, the ninth month of the current fiscal year (FY), with the fiscal year end 2014 and 2015 returns included for comparison:

    Report PSPRS PSPRS Russell 3000 Russell 3000
    Date Month End Fiscal YTD Month End Fiscal YTD
    6/30/2014 0.78% 13.82% 2.51% 25.22%
    6/30/2015 -0.73% 4.21% -1.67% 7.29%

    7/31/2015 0.13% 0.13% 1.67% 1.67%
    8/30/2015 -1.43% -1.31% -6.04% -4.47%
    9/30/2015 -1.02% -2.31% -2.91% -7.25%
    10/31/2015 1.95% -0.36% 7.33% 0.08%
    11/30/2015 0.37% 0.09% 0.55% 0.63%
    12/31/2015 -0.95% -0.86% -2.05% -1.43%
    1/31/2016 -1.41% -2.26% -5.42% -7.00%
    2/29/2016 -0.35% -2.61% -0.52% -7.52%
    3/31/2016 3.45% 0.84% 7.04% -0.48%

    PSPRS did not provide monthly investment returns for October 2015 or February 2016, and returns for those months are estimates based on the prior and following months' returns. There is usually about a two-month lag in PSPRS reporting its investment returns.  PSPRS finally crossed into positive territory in 2016.  PSPRS is also showing a positive return for the fiscal YTD while the Russell 3000 is still showing a loss for the fiscal YTD.

    Looking at the breakdown of PSPRS' returns YTD, PSPRS has shown positive returns in only four of its ten major investment classes with the bulk of its gains coming in two asset classes, private equity and real estate, earning fiscal YTD 12.65% and 7.71%, respectively.  Private equity has the second highest concentration of assets at 15.73%, behind only domestic equity at 16.31%.  Real estate makes up just over 11% of PSPRS’ total assets, making it the fourth highest concentration of assets.

    I was interested to see the specific breakdown of PSPRS' individual investments in the private equity and real estate classes.  However, PSPRS did not give such a breakdown in the private equity, absolute return, real assets, and real estate classes, though it does give such breakdowns of the other six major categories.  Valuations of private equity and real estate investments are less straightforward than classes like equities and fixed income investments, and with private equity and real estate making up over a quarter of PSPRS' total investments, full disclosure of these portfolios would show whether PSPRS' returns are too reliant on one particular investment or too concentrated with one particular firm.

    You would think with PSPRS' sketchy past history with its real estate investments the powers that be would be more open about all their investments.  Past Boards of Trustees (and the Fund Managers that preceded the institution of the Board) were abysmal in their oversight of PSPRS' investments, and the current Board inspires no confidence in their oversight abilities.  This makes it all the more crucial that all information about PSPRS' investments be made public so that there are no repeats of the investment disasters of the past.

     * Returns, gross of fees, are used because PSPRS usually does not report returns, net of fees paid to outside agencies, except on the final report of the fiscal year.  Returns, gross of fees, are used in the table for consistency.  The past two years fees have reduced the final annual reported return by about a half percent.  Returns, net of fees, were 13.28% and 3.68% for fiscal years 2014 and 2015, respectively.

    Wednesday, April 6, 2016

    PSPRS and its self-serving vision of success (plus investment returns through January 2016)

    The following table shows PSPRS' investment returns, gross of fees*, versus the Russell 3000 for January 2016, the seventh month of the current fiscal year (FY), with the fiscal year end 2014 and 2015 returns included for comparison:

    Report PSPRS PSPRS Russell 3000 Russell 3000
    Date Month End Fiscal YTD Month End Fiscal YTD
    6/30/2014 0.78% 13.82% 2.51% 25.22%
    6/30/2015 -0.73% 4.21% -1.67% 7.29%

    7/31/2015 0.13% 0.13% 1.67% 1.67%
    8/30/2015 -1.43% -1.31% -6.04% -4.47%
    9/30/2015 -1.02% -2.31% -2.91% -7.25%
    10/31/2015 1.95% -0.36% 7.33% 0.08%
    11/30/2015 0.37% 0.09% 0.55% 0.63%
    12/31/2015 -0.95% -0.86% -2.05% -1.43%
    1/31/2016 -1.41% -2.26% -5.42% -7.00%

    There is usually about a two-month lag in PSPRS reporting its investment returns. There is nothing really new for this month with, once again, a smaller loss for PSPRS when the overall market shows a loss, and we should expect a smaller gain for PSPRS in February and March 2016, when the overall market had gains.  I did want to highlight a chart provided in the Board of Trustees meeting materials from March 23, 2016.  This chart shows the results of backward-looking stress tests of PSPRS' current portfolio during nine financial market stresses over the last 19 years:

    Today's PSPRS Trust
    Events Portfolio Actual
    Asian Crisis of 1997 3.2% 5.7%
    Russian/LRCM Crisis 1998 -3.7% -5.5%
    WTC Attacks - Sept 11 0.1% -11.7%
    Stock Market Crash 2002 -3.0% -21.1%
    August Crisis 2007 3.8% 1.6%
    January Crisis 2008 0.9% -2.7%
    Credit Crunch 2008 (Aug - Nov) -9.0% -23.1%
    Crisis 2009 (Jan - Feb) -4.7% -12.9%
    Flash Crash 2010 -2.8% -3.7%

    PSPRS touts the efficacy of their current portfolio by saying:
    The current Global Trust Portfolio is now able to produce positive returns in four stress scenarios.
    Downside potential losses of today's portfolio have decreased significantly.
    The PSPRS Trust portfolio is 70% less volatile than public stock markets, and we continue to invest with returns expectations which are similar to those markets.
    As the result of successful portfolio construction, the current Trust portfolio is now able to provide more positive returns in many stress scenarios.
    While all these statements are mostly true--PSPRS' current portfolio is certainly less volatile than it former equity-concentrated portfolio--as with any information that trickles out of PSPRS, we have to look at it a little more closely to get the complete story.  PSPRS is doing its stress tests in isolation. We should certainly expect to see decreased losses when an equity-concentrated portfolio, especially one that consisted of individual stocks rather than index funds, is substituted with a more risk-averse portfolio. In hindsight it would have been a great plan if I had moved all my investments into cash in 2000 and/or 2007.  However, that does not mean that I should have permanently left all my savings in cash for the obvious reason that I would never have been able to realize the market gains following the financial downturns in 2001-02 and 2008-09.

    Likewise for PSPRS.  Retroactively recalculating PSPRS' returns only when there was a dramatic financial downturn gives only half the story.  PSPRS' current portfolio would have done better than the actual portfolio during eight of the nine events, but what gains did PSPRS forgo during the periods outside of those events?  Without this full picture, PSPRS is being disingenuous about its current investment strategy.  Where would PSPRS' funded level be if the current strategy had been utilized for the entire 19-year period?  Running stress tests in isolation is like taking a handful of batting or pitching slumps from the career of a Hall of Fame player and substituting an average player into those slump periods to prove that the average player (playing averagely) would have helped the team(s) more than the Hall of Famer.  It leaves out all the positive data for the Hall of Famer that would show how much he helped his team(s) over the totality of his career.

    Furthermore, PSPRS also neglects to compare its strategy against baseline passive strategies like the S&P 500, Russell 3000, high-grade government and corporate bonds, or some combination of all of them.  This would be the middle ground between the old and the current strategies.  If PSPRS had just invested in the S&P 500 over the past 19 years or in a combination of 70% in the Russell 3000 and 30% in high-grade corporate bond funds or any other combination, what would its funded ratio be today?  Passive strategies avoid the hubris of the individual stock-picking of the past portfolio or the overly complicated academic experimentation of the current portfolio.  We know the track record of passive strategies, which go back decades through all kinds of market ups and downs, and if a non-passive strategy does not produce better gains than the passive strategies, there should be serious discussion as to why the non-passive strategy is being utilized.

    Though it would be better to compare the old strategy versus the current strategy to see which would produce a better funded percentage for PSPRS, it would not actually be possible to do this since the old strategy was essentially the stock picks of a single individual who was running PSPRS at the time.  (Though he has been criticized since he left, it has been conveniently forgotten that for most of his career he managed PSPRS' portfolio very successfully, though a passive strategy would have achieved the same results with far less risk.)  This individual may have continued to make bad picks after the dot.com crash or he may have gone on another hot streak and brought PSPRS back into the black.  And who knows how he would have done during the Great Recession.  Regardless, this is why using a comparison against a passive strategy would be the best since the data on the passive strategy is readily available. 

    I wanted to do a simple comparison with the scant data available from PSPRS, so I compared what percentage of the Russell 3000 PSPRS was achieving over the time periods available.  Here is what it shows:

    Year/Period PSPRS Russell 3000 Percent
    2014 13.82% 25.22% 54.80%
    2015 4.21% 7.29% 57.75%
    3-year 6.16% 10.55% 58.39%
    5-year 5.96% 10.40% 57.31%
    10-year 4.34% 6.38% 68.03%

    As can be seen over the past two fiscal years PSPRS and the three and five year annualized returns, PSPRS' returns have fit into a pretty tight range between 54.80% and 58.39% of the Russell 3000's returns.  All these periods coincide with the implementation of the current strategy.  Only the ten-year annualized returns show a significant difference at 68% of the Russell 3000.  Up until June 2009, PSPRS was still heavily invested in stocks and bonds, about 55% and 19%, respectively, and only about 26% in alternative investments.  The next fiscal year PSPRS began its change to its current strategy in earnest with stocks and bonds dropping to about 60% of its portfolio and alternative investments making up almost 40% of the portfolio.  PSPRS continued this transition over the years, and its current breakdown is about 37% stocks and bonds and 63% alternative investments.

    What can we make of the fact that over the 10-year period PSPRS achieved a higher percentage of the Russell 3000 than all the other more recent periods?  The period between February 2006 and January 2011 includes the horrendous downturn of 2008-09 but also the upswing after the market bottomed out.  This could mean that PSPRS missed out on a good portion of the recovery by decreasing its stock and bond portfolio and moving more into alternative investments, but it is impossible to tell from the limited data here.  It is certainly intriguing and makes it all the more interesting to know what would have happened to PSPRS if it had maintained a 55/20/25 stock/bond/alternative investment portfolio or used a passive investment strategy that included just stocks and bonds.

    Ultimately, PSPRS has to develop and implement a strategy that can earn its expected rate of return (ERR).  Actual returns matter only in relation to the ERR.  A pension not realizing its ERR is actually being underfunded, even when it has positive returns, and any deficit created will have to be made up in the future through higher contribution rates.  This is the problem we are seeing with PSPRS.  If PSPRS' current investment strategy can be expected to earn only about 55-60% of the Russell 3000, the Russell 3000 will have to average annual returns between 12.50% and 13.64% for PSPRS to achieve its ERR of 7.50%.  This is a very high bar to set for financial markets over the long run.

    As mentioned earlier, there is limited data available to test PSPRS' current investment strategy, but the past five years have shown a consistent pattern.  Furthermore, the last five years are not cherry-picked like PSPRS' stress tests or speculative like PSPRS' forward-looking numbers.  The five years of data represent what actually happened under the current strategy, and what it shows is not good for PSPRS and its members.  If the current pattern continues, PSPRS will not earn enough to meets its obligations, go further into deficit, and have to decrease its ERR.  This means higher contribution rates will be required to keep PSPRS fully funded.  This will especially hurt the new group of Tier 3 members who will have to split normal costs 50/50 with employers.  As employee contribution rates rise for this tier, new hires will opt for the defined contribution pension (DC) over the defined benefit (DB) pension,which will lead to a downward spiral and eventual demise of the PSPRS DB pension.

    With so much at stake, is it a lot to ask that PSPRS give a full and honest assessment of its investment strategy?

    * Returns, gross of fees, are used because PSPRS usually does not report returns, net of fees paid to outside agencies, except on the final report of the fiscal year.  Returns, gross of fees, are used in the table for consistency.  The past two years fees have reduced the final annual reported return by about a half percent.  Returns, net of fees, were 13.28% and 3.68% for fiscal years 2014 and 2015, respectively.

    Wednesday, March 2, 2016

    Correction to the last post about PSPRS retiree representation

    Thank you to the reader who pointed this out.  There is a PSPRS retiree on the ten-member PSPRS advisory committee.  Here is the relevant passage from SB 1428:
    I apologize for this error and should have read the text of the bill, not just the fact sheet.  Regardless, it is still vitally important that retirees get representation on the Board of Trustees since they will be outnumbered 9-1 by government and active employees on the advisory committee, and the advisory committee members will submitted by "associations of representing law enforcement, firefighters, state government, counties, cities, and towns and tribal governments," organizations that will overwhelming favor active members.  This will further help stack the advisory committee against retirees.

    Tuesday, March 1, 2016

    PSPRS retirees: Find your voice and protect yourselves before it's too late

    While it is already too late for anything to be done about SB 1428, the PSPRS reform bill already signed by Arizona Governor Doug Ducey, or the May 2016 referendum to change the COLA formula, there is one crucial reform that needs to be implemented and is still possible to accomplish, even at this late date.

    It is imperative that retirees get representation on the PSPRS Board of Trustees and the new advisory committee.  This is to prevent a repeat of PSPRS’ past efforts to consciously work against the interests of retirees.  The current PSPRS Board of Trustees seemed to see no problem when PSPRS Chief Investment Officer (CIO) Ryan Parham wrote in this article, "The truth about PSPRS investment performance," in the December 18, 2014 Arizona Capitol Times:
    PSPRS wants its retirees to enjoy increases, but we are incentivized to seek lower returns in the range of 9 percent to maximize earnings that can be applied to cover – and hopefully reduce – unfunded liabilities.

    Mr. Parham publicly admitted that PSPRS was trying to keep its returns under 9% to avoid paying permanent benefit increases (PBI’s) to retirees.  His confession actually served two purposes: it gave PSPRS cover for its lackluster investment returns and made it look like the under-performance was serving a higher purpose.  Call me crazy but shouldn’t the Chief INVESTMENT Officer be trying to make investments that earn as much money as possible for PSPRS, regardless of the consequences to the underlying fund, and does anybody really believe that PSPRS’ investment staff can target their investment strategy to earn precisely within the sweet spot between their expected rate of return of 7.5% and the 9% threshold that triggered PBI’s?

    Mr. Parham felt confident enough in his position to tell the world that PSPRS is deliberately lowballing its returns, and the PSPRS Board of Trustees, which includes a firefighter and law enforcement representatives, expressed no uneasiness or outrage about this.  Only in such an insular, dysfunctional, and arrogant organization as PSPRS could senior personnel fail to perform their most fundamental fiduciary duty, then have the audacity to claim that it is a calculated act of good management.  While I would be the first one to say that the excess earnings PBI model was horrible and needed to go, I would never even suggest that PSPRS purposely and spitefully diminish its own investment returns in order to deny retirees PBI's.  If producing greater-than-9% returns is truly harmful to PSPRS, prove it to me by actually earning those higher returns and show me hard evidence of its negative financial impact.  I suspect that if a retiree representative had been on the Board of Trustees he might have felt the same way, and there would been a few hard questions asked of Mr. Parham and his fellow Trustees like:

    Aren’t we supposed to earn the highest return possible and let the legislature and voters change financially flawed laws and policies?
    Can we even earn 9% with the low risk strategy we’ve put in place?
    If we cannot earn 9% with your current strategy, why don’t we just admit this?
    Aren’t we violating the Fields decision and the spirit of the law by intentionally holding down returns?
    Why should retirees trust PSPRS if management and Trustees when we express displeasure about a bad policy through the infliction of financial pain on them?

    Beginning in 2017, SB 1428 adds two more public safety members to the Board of Trustees and changes the makeup as follows:
    a)      two members representing law enforcement, one of whom is  appointed by the President of  the  Senate  and  one  of  whom  is  appointed  by  the  Governor.  A  statewide  association representing  law  enforcement  shall  forward  at  least  three  nominees  for  each  position  to the  appointing  officer.    At  least  one  of  the  members  appointed  shall  be  an  elected  local board member;
    b)      two  members  representing  firefighters,  one  of  whom  is  appointed  by  the  Speaker  of  the House  of  Representatives  and  one  of  whom  is  appointed  by  the  Governor.  A  statewide association  representing  firefighters  shall  forward  at  least  three  nominees  for  each position  to  the  appointing  officer.    At  least  one  of  the  members  appointed  shall  be  an elected local board member;
    c)       three  members  representing  cities  and  towns  in this  state,  one  of  whom  is  appointed  by the  President  of  the  Senate,  one  of  whom  is  appointed  by  the  Speaker  of  the  House  of Representatives  and  one  of  whom  is   appointed  by  the  Governor.  An  association representing  cities  and  towns  shall  forward  at  least  three  nominees  for  each  position  to the  appointing  officer.  These  nominees  shall  represent  taxpayers  or  employers and  may not be members of PSPRS;
    d)      one  member  representing  counties  in  this  state  who  is  appointed  by  the  Governor.  An association representing county supervisors in this state shall forward nominations to the Governor, providing at least three nominees for the position.  These  nominees shall represent taxpayers or employers and may not be members of PSPRS; and
    e)      one member who is appointed by the Governor from a list of three nominees forwarded by the Board.  The Board shall select the nominees to forward to the governor from a list received from the advisory board of at least five nominees.
    SB 1428 also creates a “PSPRS advisory committee” beginning in 2017 that will:
    serve as a  liaison between  the  Board  and  the  members  and  employers  of  PSPRS.  The committee  shall  be appointed by the Chairman of the Board from names submitted by associations representing law  enforcement,  firefighters,  state  government,  counties,  cities  and  towns  and  tribal governments.
    Do you notice anything missing from the board and committee?  There is not a single retiree representative in either group.  The state unions, government groups, and the Board itself will nominate members to the Board of Trustees, and they will be chosen by the Governor, Senate President, and or the Speaker of the House.  Retirees cannot even get representation on the advisory committee and have been completely shut out of any role in PSPRS oversight, despite the fact that retirees are the most reliant on PSPRS for their standard of living, especially now that COLA’s will be calculated on an individual’s own retirement benefit, instead of the average normal pension.

    The doubling of the representation of public safety unions on the Board of Trustees will not help retirees, and it is actually designed to help increase the influence of the state unions, the same ones that are shafting the next generation of firefighters and law enforcement.  As far as I know, the two public safety Trustees did nothing to speak up for retirees when Mr. Parham announced that PSPRS was trying to keep returns under 9%.  Will adding two more public safety Trustees make this situation any better?

    Let’s contrast this to the Arizona State Retirement System (ASRS).  Among ASRS’ nine board members are four public representatives, two with experience in the private investment management industry, an economics professor, and the president of the Arizona Tax Research Association, and a retiree representative.  The other four ASRS board members represent state employees, political subdivisions, educators, and members at large.  Four of PSPRS’ nine-member board will be made up of public safety with another member picked by the Board of Trustees itself.  So ASRS has four neutral board members and a retiree representative, while PSPRS will essentially have a nearly built-in majority of state public safety union members.  For an example of how things already work, the current PSPRS Board of Trustees is chaired by Brian Tobin, the former president of the Professional Fire Fighters of Arizona.  If you are a retiree, think about what will happen when you add two more public safety union representatives to the two already there, and those four have a hand in nominating a fifth.  Do you think retirees will get treated any better in the future than they have been recently?  If high inflation eats up the purchasing power of retirees, who will be there to speak for them?  No one.

    Once again, it is vitally important that retirees work to get one, but ideally two, representatives on the PSPRS Board of Trustees.  Instead of the public safety unions stacking the Board with two more members, a law enforcement and a firefighter retiree representative should be given those spots.  Otherwise, retirees will again be at the mercy of others that have only their own selfish interests at heart.  Why would we not want to follow the example of the only properly functioning state pension system, ASRS, instead of repeating past mistakes of our failed system.  The only way for PSPRS retirees to protect their interests is to have representation on the PSPRS Board of Trustees.  I don’t know if this can be accomplished, but we will never know if retirees don’t try to lobby their legislators, Speaker of the Arizona House David Gowan, Arizona Senate President Andy Biggs, or Governor Doug Ducey.  This is probably the only chance retirees will have to defend themselves.  I hope they take it for all our sake.