Teachers serving on the Pennsylvania Teachers’ Retirement Commission expressed concerns Thursday about reforms proposed by the state’s Democratic treasurer and a Republican lawmaker.
A brief, civil disagreement over how to reform the transparency and approval of travel expenses in the Public School Employees Retirement System is in response to the fund’s undisclosed travel expenses, first revealed by Capital-Star in December.
Some board members, like Democratic State Treasurer Joe Torsella, are vehemently opposed to the board’s status quo and say the costs show the need for reform.
During Thursday’s board meeting, Torsella proposed a policy change that, among other things, would require the pension fund to cover all travel expenses incurred by board members and employees.
“People who do business with the system and have a vested interest in our money should not have to pay for travel,” Torsella said during the meeting.
Torsella added that the board and the public should at least be aware of any such expenses.
Torsella, who is running for re-election this year, was joined in the process by Lebanon County Republican Frank Ryan. They both serve on the board’s audit committee, which has asked for a full accounting of travel expenses March.
Instead, last month the committee received only a partial report that cited Travel costs are $160,000paid for with retiree dollars.
But more vital is what is still missing – the amount spent by PSERS’s investment partners, such as hedge funds or private equity firms, to purchase hotel rooms, meals and transportation for traveling staff. Such expenses are often included in the contracts that PSERS signs with companies.
For example, public records reveal that expenses for seven trips to Los Angeles totaled just $1,392. The reported costs of all seven trips are lower than PSERS estimates for just two trips.
The trips included at least one stay in a five-star hotel, paid for by a private equity firm in which PSERS has invested billions.
The hidden costs raised alarm for Torsella and Ryan, and last month the policy prescription was revealed.
In addition to requiring the system to cover all travel costs, the policy would require tiered approval of all intrastate, interstate and international travel, quarterly expense reports and a review of the past two years of spending.
Reports on potential investments would include information on who paid for any travel necessary to prepare the report.
But at the meeting, rank-and-file teachers expressed concerns that Ryan and Torsella were rushing into implementing the policy without thinking about the unintended consequences.
For example, teachers questioned whether the workload of travel approval should fall on board members. They also asked whether the policy could limit travel required for due diligence for check-in for $63 billion in investments.
“We need to make sure there is something to prevent this from happening,” said Jason Davis, a social studies teacher in the Pittsburgh area.
“It’s not about whether travel is recommended or not,” Ryan shot back. “We want to make sure this is disclosed.”
Davis wasn’t alone. Two other teachers on the board, including board President Chris SantaMaria, a Montgomery County educator, expressed concerns about the policy.
Another concern raised by the pension fund itself was that the policy would require pensioners to double-entry travel expenses.
Some private equity firms include travel expenses to annual meetings of vast investors such as PSERS in their fees as part of each investment agreement.
These additional “partnership costs,” which cover more than just travel costs, amounted to $46 million in 2019, according to the data PSERS report.
The fact that PSERS covers its own travel despite these agreements could mean the pension will be paid twice, PSERS executive director Glen Grell said during the meeting.
According to a review of 11 retirement travel rules by the Pennsylvania Department of Banking and Securities, at least two pension funds, including neighboring Ohio, completely prohibit payments to third parties for any travel – such as PSERS’s trip to Los Angeles.
Washington only bans travel expenses from companies willing to do business with its pension fund. Meanwhile, other states, such as California and Wisconsin, allow reimbursement of outside costs only under certain circumstances or if reporting requirements are met.
Under the rules of the Pennsylvania Municipal Retirement System, which manages $2.6 billion for 14,000 pensions across multiple municipalities, counties and local governments, employees cannot accept anything other than meals from existing investment partners.
Commenting on the review, Department of Banking and Securities policy analyst Alan Flannigan said PSERS travel practices “would be prohibited in many other public pension systems.”
PSERS has repeatedly said it did not violate Gov. Tom Wolf’s gift ban, which prevents state employees from accepting “a gift, tip, favor, entertainment, hospitality, loan, or any other thing of monetary value” from most individuals or organizations outside of family and friends.
“I disagree with the notion that PSERS’s travel policies and procedures are somehow inappropriate or inconsistent with most similar institutions,” retirement spokesman Steve Esack said in an email. “In fact, PSERS rules appear more stringent than some of the plans cited by Banking and Securities.”
After half an hour of back-and-forth, the committee decided to refer the matter to the board’s separate internal rules committee. Board members agreed to adjust and adopt the policy by the next regular board meeting in August.
