arizona | Pension360

Judge Orders Arizona Fund to Release Federal Subpoena to Public

There are so many scandals surrounding Arizona’s Public Safety Personnel Retirement System—illegal raises, large severance packages for fired personnel, allegations of sexual harassment—that it’s easy to forget that one has outlasted them all.

The longest running scandal dates back to last year, when the three high-level investment personnel mysteriously quit the fund—presumably in protest of something.

It didn’t take long to find out why. Allegations soon surfaced that other investment staff at the fund had inflated the value of real estate assets in order to trigger large bonuses for themselves. A federal criminal investigation is still ongoing.

But back in March, watchdog group Judicial Watch asked the fund to release the federal grand-jury subpoena related to those allegations to the public. The fund refused, and so the matter went to court.

A judge ruled Wednesday that the subpoena is a matter of public record, and PSPRS has to release it. From the Arizona Republic:

Judicial Watch filed a public records request for the documents after The Arizona Republic in early March reported that PSPRS had received a federal grand jury subpoena as part of a criminal investigation into whether pension-trust managers inflated certain real-estate investment values. PSPRS has denied the allegations.

The trust refused to release the records, prompting Judicial Watch to sue. The trust claimed it was not in its best interest to release the records and that disclosure might interfere with a federal grand jury investigation.

However, the judge said “PSPRS does not show any specific, material harm that would result from disclosure of this federal grand jury subpoena.” He also ruled that “although the public records law does not mandate disclosure of every document held by a state agency, a document with a ‘substantial nexus to government activities’ is a public record. … Clearly there is such a substantial nexus here.’ “

The judge gave no timeline for the release. But PSPRS Chairman Brian Tobin said he will release it to the public sometime Monday, after a meeting with the system’s board of directors.

Arizona Fund’s Strong Performance May Lead To Bigger Retiree Benefits—But Not This Year

Tens of thousands of Arizona retirees were hoping to begin receiving larger benefit checks in the coming months. That may happen eventually for the 120,000 retired members of the Arizona State Retirement System (ASRS), but it won’t happen this year.

That’s because benefit increases, such as COLA increases, are tied to the fund’s long-term performance. And despite posting the second-best annual investment return in the last decade—18.6 percent net of fees—the ASRS still has work to do to meet the benchmarks that permit it to increase benefits.

From the Arizona Republic:

For a permanent benefit increase to kick in at ASRS, the trust must produce a rate of return in excess of 8 percent — the assumed rate of investment growth — for 10 years and generate a pool of excess earnings.

Simple averaging shows that benchmark has been met, but there is another caveat: The formula to pay cost-of-living adjustments uses a “geometric and actuarially smoothed average,” which takes into account compounding.

That formula, dragged down by heavy investment losses during the 2007-09 recession, puts the 10-year rate of return at 7.6 percent, [ASRS Chief Executive Paul] Matson said, which is below the trigger.

“We are certainly getting closer to it,” Matson said.

The funded status — a measure of the amount needed to pay current and future pension liabilities at ASRS — is projected to be 76.6 percent. Less money is needed from employees and employers the closer the figure is to 100 percent. A funded ratio of 80 percent is considered “healthy” in public retirement systems.

Arizona’s other major pension fund, the Arizona Public Safety Personnel Retirement System, posted an annual return of about 15 percent gross of fees.

The performance of the ASRS may not warrant benefit increases, but the fund’s investment staff may still be in line for bonuses. From the Arizona Republic:

Matson said it is unclear if his investment staff will receive bonuses, even with the exceptional financial returns. He said there are other benchmarks that must be met, and a determination won’t be made for eight to 10 weeks.

Matson said bonuses are needed to retain quality staff to oversee the portfolio and garner solid rates of return.

“Without good staff, there are detriments to performing well,” he said.

Pension360 has previously covered the controversial bonuses given to the investment staff of the other major fund in Arizona, the APSPR.

Photo by: “Arizona-StateSeal” by U.S. Government. Licensed under Public domain via Wikimedia Commons

Arizona Is State Most Reliant on Pension Income

Arizona pensioners receive higher benefits than the average pensioner in the U.S., and the state itself is more reliant economically on pension benefits than many states in the country, according to a new report.

From the Arizona Republic:

Traditional pensions help more than 140,000 Arizonans make ends meet in retirement by providing an average income of $1,923 a month, according to a study estimating that more than 24 million Americans receive such benefits.

The report by the National Institute on Retirement Security, which used 2012 data, suggests that Arizonans rely a bit more heavily on pensions than Americans generally. The average Arizona pension amounts to roughly $23,074 a year, compared with average yearly benefits of $19,678 across the nation.

In terms of overall pension income, economic output generated by pensions and associated tax revenue, Arizona ranks 20th among the states. It is 17th in another measure: the number of jobs supported from spending by retirees who have pensions.

In general, every $1 in pension benefits generates nearly $2 in economic output, according to the report. Retirees support the most jobs in restaurants/food services, health care and retailing.

Screen shot 2014-08-04 at 10.19.21 AM — Credit: The National Institute on Retirement Security and the Arizona Republic. (Data is from 2012.)

Higher pensions are economically beneficial to the state because retirees spend large portions of their checks on food, medicine, housing or even luxury items such as cars. Higher benefits, according to the report, leads to higher economic output.

Photo: “Entering Arizona on I-10 Westbound” by Wing-Chi Poon – Own work. Licensed under Creative Commons Attribution