Gov. Sarah Palin has proposed using $12 million in retirement trust money related to an investigation and litigation on behalf of those funds.
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The administration says it's to sue Mercer Human Resource Consulting, the former actuarial consultant. But this appropriation, as written, is essentially a blank check for a myriad of investigative uses.
Investments make up 75 percent of all retirement funds. Mercer didn't invest the money or tell the State Pension Investment Board how to invest. State retirement investment managers and their consultants lost billions - equal to 10 years' worth of contributions. These consultants and investment managers are still employed, but none of them are to be sued?
Health care costs are also a major prong of retirement system costs. That is no different than the Social Security and Medicare unfunded liability of $72 trillion (a calculation from 2004). Mercer didn't write the health care promises into the statute (the executive branch and the Legislature did), and there is a separate professional health care consultant used by the retirement division that obviously should have been aware of any supposed mistakes. But they are not to be sued either, and they still work for the system.
Actually, as the bill is written, nothing prevents using the money to investigate the decisions of the investment board, investment managers, health benefit consultant, etc., and then litigate. But the testimony excludes them. Why?
But there are other possible uses.
Tier 4 contains many mistakes that need correction. Some of this money could be used to "investigate" those issues.
But one also can use this money to conduct a serious legal "investigation" that can be used to determine potential challenges to present retiree benefits, as part of the investigation for litigation. Now that could go a long way to solving the liability! Cha-ching!
All parties will profusely deny that, but nothing in this appropriation, as written, prevents the use of the money to further investigate those issues. In fact, they have to if they are to properly support their case. And how is anyone going to know what really happens when it comes to the blanket secrecy around potential litigation?
Interestingly, the retirement division paid money to Mercer to design a new tier (including health issues - this was after it calculated the liability for which it will be sued). The division also paid Mercer to do some work on the defined contribution plan. The system management even used Tier 1, 2 and 3 fiduciary money to initially pay Mercer (but that was hastily appropriated back to the system to mute this "mistake").
Further, in this time of new employee negotiations, the administration will have a fund of money to "investigate" employee benefit issues. As written, nothing really prevents that.
The manufactured hysteria over retirement contribution rates has been quite unnecessary. If it was so important, why have years passed with doing little more than to build the biggest operating and capital budgets in state history? There is no real lack of money. The unfunded liability is no greater than other plans when you compare them on the same basis. The whole country is dealing with it. In fact, Alaska is in far better shape than most.
That is the way the world really works. It may be a popular feel-good issue for the administration and legislators, but it's little more than another diversion to set the problem aside and use it as a wedge issue against employees and retirees at negotiation time.
Plan members deserve better. They deserve to see what the money is actually used on, to know why other consultants or managers are not included in the investigation or litigation, and to know that none of this money will be used to develop any information to attack present retiree benefits, etc.
Unless you actually write that into the law, it's just a fund with many possible uses. Follow the money, connect the dots.
Anselm Staack is a certified public accountant and an attorney who teaches accounting and private/public financial management subjects for the University of Alaska Southeast. The above views are his own.