To the Source:
As a retired government employee, I am alarmed at the speed and secrecy with which Sen. Donald "Ducks" Cole's Bill No. 24-0026 and its amendments sailed through the Government Operations Committee on July 12.
The bill purports to aid the Government Employees Retirement System board in managing its "cash flow," according to the system administrator. I find this rationale to be incomplete and flawed.
The bill authorizes the GERS board to borrow up to 10 percent of the system's assets by various means: mortgaging properties, selling assets or floating bonds. Given this authority, GERS would be able to borrow in excess of $100 million. One would expect that the size of the current portfolio allows for staggered maturities to meet any obligations, especially when combined with employee and government contributions. Certainly one hundred million dollars is an exorbitant amount to meet cash flow concerns.
Attending Thursday's Senate committee meeting, I was amazed at the committee's uncritical review and the members' eagerness to fall over each other in praise of the bill, its amendments, and GERS management. After spending hours that morning considering government property leases in their usual manner, the committee members moved at warp speed to rush this bill through. I wondered if perhaps there could be another motive for the speed of the deliberations.
I was astounded by the lack of discussion of the merits of giving borrowing authority to GERS. Senators proposed a number of ideas for using this borrowed money, including taking advantage of the "rising stock market," "financing low-income housing" and providing "guarantees" for investors to aid in economic development.
A pension system's primary responsibility is its fiduciary duties to its members. Buying stocks on margin is not generally considered to be a responsible financial practice. The creation of housing and the promoting of economic development, while laudable goals, are not the province of a retirement system. Sound investment practices require reducing risks and maximizing return on investment.
Although one could follow the proceedings in person or through the news media, simply hearing that "Subsection (e) paragraph (3) is amended … by striking 65 and inserting 75" does not make one an informed listener. From that summation, the public had no way of knowing that the amendment concerned increasing legislators' pension benefits. Also, the public was not provided any opportunity to comment on any of the bill's provisions.
In a letter to Sen. Cole dated May 9, GERS Administrator Lawrence Bryan states: "Enclosed, please find the amendment which you requested that we recommend to the Committee on Government Operations." The "recommendation" Mr. Bryan offered was stating that the system's actuary had advised that the amendment would cause "no severe financial burden." This is hardly a ringing endorsement from the actuary.
Ostensibly to correct inequities, the amendment increases "the annuity of members of the Legislature from 65 percent to 75 percent of compensation" and enables them to collect benefits beginning at age 50.
Contrast this with executive branch employees (other than those covered by "hazardous duty" provisions), who must work 30 years to receive a retirement annuity of 75 percent and who would be faced with significant reductions in benefits if they were to retire at age 50 with fewer than 30 years of service.
While political machinations are to be expected in the political arena, almost 15,000 persons rely on GERS for their current and future retirement income. Members should be concerned and vigilant when attempts are made to tamper with the system. Politicians should be made aware that there is a political price to pay for using the resources of the retirement system to further hidden agendas or to create special benefits for some at the expense of the integrity of the system.
Leonard Smollett
St. Thomas
