AZ House of Representatives – Public Safety Pension Trustees Need Oversight

Panel OKs tighter pension-board rules

By Craig Harris – The Republic | – Tue Feb 11, 2014 10:24 PM

A House panel approved a bill on Tuesday to give the Legislature more control over how the Public Safety Personnel Retirement System pays its staff, a matter of controversy last year when the financially troubled trust awarded employees pay hikes.

The House Insurance and Retirement Committee voted 4-3 to move the bill along. It would subject trust spending to tighter control under the legislative appropriations process, and would remove the trust’s exemption from some state procurement rules.

The public safety pension board in November approved retroactive staff pay raises, including one of $25,000, to four investment-staff members who help oversee the trust. The board also voted last year to give those employees and one other investment-staff member a guaranteed inflation adjustment that was to take effect Jan. 1.

In combination, the raises increased one employee’s pay by nearly 27 percent, and another by roughly 20 percent.

“The perception is, there is not enough oversight there,” said Rep. John Kavanagh, R-Fountain Hills, who sponsored House Bill 2060.

The U.S. Attorney’s Office recently began a federal grand-jury investigation into the trust, while the FBI is examining allegations that the value of certain assets was inflated to improve the bottom line and potentially trigger bonuses.

Brian Tobin, pension trust chairman and brother of House Speaker Andy Tobin, told the legislative committee that the board has provided oversight.

The raises have not gone into effect because under state law they need approval from the Arizona Department of Administration. The agency has not made a decision on the raises.

Trust Administrator Jim Hacking said after the committee vote that raises already require state approval. He questioned why lawmakers wanted to get involved. He added that if the bill becomes law, it will increase the cost to the trust because in some instances it would have to follow state procurement rules that Hacking said can be more costly.

Hacking last year sought raises for his staff because the pension board in September had suspended a bonus program for the investment team that had rewarded employees even when the trust posted losses in 2008, 2009 and 2012. Hacking at the time said investment staff had taken on additional responsibilities after the departure of three other investment employees.

Those employees and the trust’s in-house legal counsel quit in protest last year amid allegations that trust managers improperly inflated the values of poor-performing real-estate investments to improve the bottom line and, possibly, trigger bonuses. Federal agents have since interviewed some of those employees.

Trust officials have denied any wrongdoing.

The $7.7 billion trust finances the pensions of more than 52,000 people in three state retirement plans: the Public Safety Personnel Retirement System, the Elected Officials Retirement Plan and the Corrections Officer Retirement Plan. Yet, the trust only has enough money to cover nearly 59 percent of its liabilities.


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