A new, independent report says that public school teachers’ pensions are underperforming the relevant benchmarks by more than $1 billion (with a “b”), per year.
That’s what generated this provocative headline last week in the New York Post,
Minnesota teacher pension fund under Tim Walz ‘blatantly cooked,’ investigator finds: ‘Undetected for decades’
That investigator is Florida-based attorney Edward Siedel. He was hired by a group of current and former Minnesota public school teachers to look into the financial health of the state’s Teachers Retirement Association (TRA), which is overseen by the state Board of Investment (SBI).
Siedel was hired by a group under the name MN Educators for Pension Reform, which was the subject of an opinion piece appearing last week in the Minnesota Star Tribune. The headline,
Yes, transparency is needed in Minnesota government — and here’s another example
The Teachers Retirement Association of Minnesota (TRA) and State Board of Investments have denied and dismissed requests for public government data.
The central question boils down to,
why the unfunded actuarial liabilities have not decreased in 20 years, despite increased contribution levels for both employees and employers.
In other words, both employees (teachers) and employers (taxpayers) are pouring an ever-larger share of the pie into the pension fund, only to see it tread water. For some unknown reason, the fund’s investments aren’t doing their share of the heavy lifting. Teachers and taxpayers have a common interest in finding out why not.
Last month, we reviewed Siedel’s preliminary findings in this post. Siedle has now published his 110-page Minnesota report on his Substack page, “Minnesota Mirage: Sleight of Hand.”
As he documents in the report, Siedel submitted a series of data requests to TRA on behalf of his clients. TRA referred him to SBI. So far, SBI has refused to respond.
I can relate. I submit data requests under the state’s open records law to state agencies on a regular basis. I almost always get a receipt acknowledging they received the request. I almost never get a response. There are no consequences to bureaucrats or state agencies for refusing to respond.
Siedle documents (with receipts) efforts by state government to shut down his report before it had even begun (pp. 5-8 and 23-32).
As Siedle documents (p. 23), nearly 2,800 state teachers donated a total of $78,000 to his hiring. His clients are organized via a Facebook page, despite the prior existence (p. 28) of a nonprofit 501c4 named the Retired Educators Association of Minnesota (REAM).
Of interest to both teachers and taxpayers is Siedle’s calculation of the fund’s significant underperformance. Based on public data, Siedle calculates (pp. 17, 81-82) that the teachers’ pension fund has underperformed against the relevant benchmarks by more than $1 billion per year for the past 30 years.
Specifically, the underperformance appears to be concentrated in the significant private investments held by the fund, and the large amounts of unreported fees. Siedel recommends (p. 64) that fund performance be reported on both a gross- and net-of-fees basis.
Siedle makes a series of recommendations (p. 59) related to the governance of the fund. These include such obvious measures as recording the meetings of public oversight boards (Recommendation No. 2).
Serious questions have been raised about a topic of interest to all taxpayers. State government owes a response.