FBI Investigating Reporting Fraud at $62 Billion Pennsylvania Public Pension Fund, PSERS; Returns Allegedly Falsified to Avoid Increased Worker Contributions

Frankly, it’s surprising that it’s taken this long for an investigation of a public pension fund over allegations that it lied about its returns. But it’s not a surprise that it took Federal investigators, as in the FBI, to saddle up, in this case against a Pennsylvania Public School Employees’ Retirement System, aka PSERS.

Readers regularly lament how CalPERS regularly and obviously runs roughshod over the law and board members openly violate their fiduciary duty by not even pretending to oversee staff adequately and undermining anyone who dares to do so. That’s because CalPERS has the deficient governance structure that is pervasive among US public pension funds: boards captured by staff and a dearth of other local or state supervision and enforcement. So things have to get really bad, as with CalPERS former CEO Fred Buenrostro taking bribes, to get the FBI to go after misconduct. And yes, Buenrostro is now in Federal prison.

The incentives are obvious: most public pension funds base staff bonuses on investment performance. But a second, powerful motivation is that raising pension contributions to shore up pension funding is deeply unpopular. Even at CalPERS, where any increases fall on employers and not on the paychecks of beneficiaries, the giant pension fund clearly regards more realistic funding assumptions, which would mean higher employer contributions, as anathema, and so is moving slowly and reluctantly in that direction. [Clarification: The mechanism is more complicated. CalPERS sends annual contribution requirements to employers. While the employer can/does pass costs on to employees, they are also required to “bump” employee pay in “classic” CalPERS contracts. This is at risk of being rescinded in collective bargaining. The typical short-term adaptation is to cut government staffing, usually of the most junior employees].

By contrast, at PSERS, who bears the pain of shortfall is more complicated and is directly tied to the fraud allegations.

As the Philadelphia Inquirer, which broke this story, explains, even in the event that the PSERS’ investment performance meets or exceeds its investment target, only taxpayers will be on the hook to make up for a funding shortfall. If it falls below the target, both employees and taxpayers pony up. As the Inquirer explained:

PSERS must abide by a so-called risk-sharing rule that requires public school workers to pay extra when the pension fund falls short of an investment target. If the target is met, but the fund still needs more money, taxpayers alone pay more.

We don’t yet know how big the adjustment was but it pushed the returns just over the line:

The target was a return of 6.36%. In December, the board endorsed a report from the plan’s experts that the fund had actually grown by 6.38% — just enough to spare teachers an increase.

State and local taxpayers are expected to pay $5 billion to keep PSERS finances on an even keel this year, slightly more than last year. School staff were to pay $1.1 billion.

And the article explained which population was being protected via these bogus figures:

The mistake, if uncaught, could have improperly spared 100,000 teachers and other employees from a hike in pension paycheck deductions, leaving taxpayers to cover more of the rising gap between the fund’s assets and future payments to working and retired public school staff…

Any bump in payments into the pension system by teachers and other education employees would only apply to staff hired after 2011 — about 100,000 of the 250,000 workers paying to support the fund. This focus on newer employees reflects legal bars on changing the state contracts with older ones.

PSERS is trying to depict the performance overstatement as an error but its body language says otherwise. It has launched an investigation of its three top staff members and has gone from denying that PSERS has any information that anything criminal had taken place to ducking the question.

The Inquirer described how three of PSERS’ 15 board members voted against a staff effort to say the return numbers were fine after some sort of not fully disclosed brouhaha with an outside consultant. This section comes close to saying the majority of the board chose to lie:

In its December meeting, the board acknowledged investment profits had not met the system’s own target, but found them just barely good enough under state law to avoid an increase in teachers’ deductions.

WTF? This earlier section gives just a tad more color:

The Pennsylvania Public School Employees’ Retirement System also disclosed it is investigating an error by an unnamed outside consultant as well as the response by the consultant and its own staff once the error was discovered.

The error was incorporated into a report approved by a majority of PSERS board members in December after executive director Glen Grell, investment chief James Grossman, and chief financial officer Brian Carl assured board members it was accurate. Even with their assurances, three board members who raised questions about how it was calculated declined to approve the report.

The governor is engaging in a big handwave, demanding that any trustees who breached their fiduciary duty need to resign immediately, and everyone is lawyering up:

On March 19 the board hired two law firms — one to investigate the error in its performance report, the other to review the impact of correcting the error on payments by taxpayers and teachers, and also any resulting impact on PSERS investments’ tax-exempt status.

The “impact on PSERS tax exempt status” is alarming, and it’s frustrating that the article does not probe what the issue might be.

Needless to say, expect more shoes to drop as the FBI keeps digging. A friend who was the DA for Bridgeport, the most corrupt city in Connecticut, said the FBI aren’t the brightest bulbs but are relentless and as a result generally take down their targets.

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31 comments

  1. Alfred

    We have a pension shortfall being talked about in Vermont also, and already overtaxed taxpayers are being told it’s on them. “Investment targets” not being met is a phrase that makes me a more than a little queasy. Where are the controls on how pension funds are invested?

    Reply
  2. cocomaan

    Yves has been covering CalPERS for years and I admit to not reading a lot of those posts under the assumption that it was just the crooks in California that were the problem.

    Interesting to see the staff captured board of a non profit was the issue.

    It’s also interesting and frustrating that they see it as more political palpable to go to the taxpayer for the shortfall than the pension members. I know a lot of PSERS folks, I’ll have to reach out to some of them to see if they are following it. My guess is they aren’t because it’s all pretty confusing.

    As a PA resident, I personally can’t wait to bail out these idiots.

    Reply
  3. Verifyfirst

    It seems like an odd formulation, to tie worker increases in payments to whether the Board meets certain investing targets. How does that all tie to the actuarial assumptions, which are also highly gameable, in my experience.

    Reply
  4. The Rev Kev

    With so many public pension funds having, ahem, problems in how they are run, I can only assume that this one in Pennsylvania is so blatant that they have been caught dead to rights. The FBI could have been going after certain groups in California or Kentucky but instead they decided on the easy win in Pennsylvania to get themselves some good publicity. Or maybe the politicians in Pennsylvania don’t have as many friends in Washington DC what they thought they they did. Either way, it looks like the PSERS Board is toast. So, will the other monkeys be scared after this particular chicken gets the chop?

    Reply
  5. No Name

    Evidence that local new outlets matter!

    NYT does NOT print “ALL the News That’s Fit to Print”. Please, subscribe to your local newspaper.

    Reply
  6. David in Santa Cruz

    The assertion that at CalPERS “any increases fall on employers and not on the paychecks of beneficiaries” is incorrect. Both the “classic” CalPERS and the “pension reform” PEPRA contracts call for an employee contribution — however most employers negotiated MOU’s in collective bargaining to pick-up the employee contribution for “classic” members — bumping the take-home pay of employees.

    This can be taken away in collective bargaining, so it creates a similar incentive for employee groups to encourage CalPERS to game return benchmarks and to fake returns using bogus Private Equity IRR numbers and phony real estate valuations.

    The “Feebs” must have a very good whistle-blower in PA. They could never have come up with this on their own…

    Reply
  7. Synoia

    The Fed reducing Interest rates close to Zero pushes funds investment strategies into wishful and risky investments.

    I never though in my early working years that interest rates would be reduces much below 8%.

    The result appears as an explosion of house prices, and huge increase in retail prices, especially Cars and Construction Materials, to meet Growth and ROI Targets.

    All this interest rate manipulation puts paid to the assertions that “The Market Sets Prices.” In truth the Central Banks appear to be the prime movers in setting prices, and pushing those seeking a good ROI to take ever higher risks – aka Gambling.

    Reply
  8. Steve Ruis

    I have been following the CalPERS articles and Lambert saying “Everything is like CalPERS” is a bit dismaying. My pension is through CalSTRS, CalPERS little brother, and CalSTRS seems to be very well run . . . or maybe it is just too small to attract the same kinds of corruptions?

    Reply
    1. Trustee

      It in fact, seems better run in part because it has a more active and questioning Board. Staff does not just run amok.

      It also tends to hide in the CalPERS shadow and gets much less press attention.

      Reply
  9. unfunded liabilities

    I think it’s a good idea when describing a pension system such as PSERS to mention their liabilities just as prominently as their assets. Without that context, there is no way to tell if the “$62 Billion” mentioned in the article’s title is a comfortable amount of assets or not. As of June 30, 2020, the reported funded percentage was 59.2%, with unfunded accrued liability (UAL) of $44.0 billion, which adds up to total accrued liabilities of $106 billion, per statement dated December 11, 2020 at https://www.psers.pa.gov/Employers/Pages/EmployerNews.aspx

    Reply
      1. even keel

        It’s ironic that the article quotes the Inquirer as saying:

        State and local taxpayers are expected to pay $5 billion to keep PSERS finances on an even keel this year, slightly more than last year.

        Wictionary defines “even keel” as

        The state or characteristic of being under control and balanced.

        I don’t consider a 59.2% funded pension system to be “under control and balanced”. In fact, whatever the size of the undisclosed investment shortfall, it probably pales in seriousness compared to the disclosed unfunded liabilities.

        Reply
  10. PSERS annual report

    Has anyone looked at the latest PSERS Comprehensive Annual Financial Report (CAFR)? It begins with a “Letter of Transmittal”, paragraph 2 of which states the theme of the CAFR. See if you can guess which of the following is what’s actually stated in paragraph 2.

    1) The theme of this year’s CAFR highlights our response to the COVID-19 pandemic.

    .

    2) The theme of this year’s CAFR highlights our strategy to stabilize the fund.

    3) The theme of this year’s CAFR highlights our unfunded liabilities, which at about $44 billion is about 85 times larger than the approximately $520 million in pension and healthcare benefits paid each month, and is about 3 times larger than the estimated $14 billion in annual active payroll for the approximately 256,000 active members.

    4) The theme of this year’s CAFR highlights the natural beauty and wonder of Pennsylvania’s great outdoors. Autumn in Pennsylvania is an exceptionally colorful display with towering mountains and lush valleys, dense forests and rolling patchwork of farmland.

    The CAFR is here:
    https://www.psers.pa.gov/FPP/Publications/General/Documents/PSERS%20FY2020%20CAFR_website.pdf

    Reply
  11. Do the math

    The target was a return of 6.36%. In December, the board endorsed a report from the plan’s experts that the fund had actually grown by 6.38% — just enough to spare teachers an increase.

    Anyone with a calculator that can do x to the y power, such as the scientific calculator on an iPhone when you turn it sideways, can check the math. Or you can use an online calculator.

    The target rates adopted by the PSERS board for annual investment returns are:
    • June 30, 2012: 7.50%
    • June 30, 2013: 7.50%
    • June 30, 2014: 7.50%
    • June 30, 2015: 7.50%
    • June 30, 2016: 7.25%
    • June 30, 2017: 7.25%
    • June 30, 2018: 7.25%
    • June 30, 2019: 7.25%
    • June 30, 2020: 7.25%

    That is, 4 years of 7.5% and 5 years of 7.25%. If you multiply these 9 values together, ignoring the percent sign, you get 63,377,497.4. If you take the 9th root of that, you get 7.36. You can use a scientific calculator, or do it online, like:
    https://www.wolframalpha.com/input/?i=9th+root+of+7.5%5E4+*+7.25%5E5

    This method of multiplying n number together and taking the nth root is called the geometric average or geometric mean.

    PSERS subtracts 1 from the 7.36 to get 6.36% as their target geometric average time-weighted rate of return, net of fees, for the nine-year period ending June 30, 2020.

    The actual reported rates of return, net of fees, were:
    • Fiscal year 2011/2012: 3.44%
    • Fiscal year 2012/2013: 7.95%
    • Fiscal year 2013/2014: 14.82%
    • Fiscal year 2014/2015: 3.41%
    • Fiscal year 2015/2016: 1.33%
    • Fiscal year 2016/2017: 10.20%
    • Fiscal year 2017/2018: 9.26%
    • Fiscal year 2018/2019: 6.66%
    • Fiscal year 2019/2020: 1.11%

    If you multiply these numbers together, ignoring the percent sign, you get: 1,283,477.2. Taking the 9th root of that gives you 4.77, which is substantially below the 6.36% target.

    https://www.wolframalpha.com/input/?i=9th+root+of+3.44*7.95*14.82*3.41*1.33*10.2*9.26*6.66*1.11

    In order to meet their 9-year 6.36% target, they would have needed a return in 2020 of at least 14.73%.

    https://www.wolframalpha.com/input/?i=9th+root+of+3.44*7.95*14.82*3.41*1.33*10.2*9.26*6.66*14.73

    Source: pages 8 and 9 of
    https://www.psers.pa.gov/FPP/Publications/General/Documents/PSERS%202020%20Valuation%20Board%20Presentation%20Dec%203.pdf

    Reply
  12. Do the math

    Actually, ignore my previous post!
    I think the correct way to calculate the geometric mean of percentages is to treat a percentage such as 5% as 1.05. So the geometric mean of the reported returns is:
    9th root of 1.0344*1.0795*1.1482*1.0341*1.0133*1.102*1.0926*1.0666*1.0111
    which is 1.06378, which can be rounded to 1.0638, which is equivalent to 6.38% return, as PSERS claims.
    https://www.wolframalpha.com/input/?i=9th+root+of+1.0344*1.0795*1.1482*1.0341*1.0133*1.102*1.0926*1.0666*1.0111

    Reply
  13. I am puzzled

    Page 31 of the latest PSERS annual report shows (in Thousands):
    FY2020 Investments: $57,773,701; Net Investment Income: $1,006,717;
    FY2019 Investments: $57,728,557; Net Investment Income: $3,634,950;
    FY2018 Investments: $55,902,330; Net Investment Income: $4,717,626;

    I would expect to be able to estimate the rate of return on investments by calculating Income/Investments:
    FY2020: $1,006,717/$57,773,701 = 1.743%
    FY2019: $3,634,950/$57,728,557 = 6.297%
    FY2018: $4,717,626/$55,902,330 = 8.439%

    In comparison, the reported rates of return on investments are shown on Page 8 of:
    https://www.psers.pa.gov/FPP/Publications/General/Documents/PSERS%202020%20Valuation%20Board%20Presentation%20Dec%203.pdf
    • Fiscal year 2019/2020: 1.11%
    • Fiscal year 2018/2019: 6.66%
    • Fiscal year 2017/2018: 9.26%

    So I am puzzled by the differences. My estimates for FY2018 and FY2019 are 5-10% below the reported numbers, which would make sense if say 5-10% of the investment fund was kept in cash and not actually invested. But that wouldn’t explain why my FY2020 estimate of 1.743% is substantially above the reported value of 1.11%.

    One other thing I noticed is that PSERS has an “actuarial based funded status” of 59.2% and a “market value funded ratio” of 54.32% for FY2020. The actuarial basis spreads gains and losses over a 10-year period, rather than recognizing them in the year they are incurred. The market value basis uses market value of assets, under GASB 67. The actuarial basis is useful for smoothing out annual fluctuations in the value of the fund, but is susceptible to under or over reporting the assets actually available to pay benefits.

    Reply
    1. Yves Smith Post author

      No, you have to use weighted daily averages. You also need the exact timing of the receipt of investment income and returns of capital.

      You don’t begin to have the right data.

      Reply
      1. I am puzzled

        I agree that exact calculations require more data, but I think we can get a close enough approximation using the current data to see a potential problem. Mostly we need the average invested fund amount (F). If you multiply F times the rate of investment return (R) you should get the dollar amount of investment earnings (E), or at least be close. That is, F*R=E, or F=E/R.

        I am estimating F using the reported fund investments at the start of the fiscal year (S). This seems reasonable since the reported fund investments have changed by less than $2B from $55.9B at the beginning of FY2018 to $57.8B at the beginning of FY2020, as withdrawals from benefit payments have been closely matched by contributions plus investment earnings. During FY2020 investment earnings started out favorable, and then declined with the onset of Covid-19, and then recovered, but I think those positive and negative changes averaged out to something close to the balance at the beginning of the year.

        The reported data for E & R, and my calculation of F=E/R is:
        FY2020: E=$1,006,717, R=1.11%, E/R=$90,695,225
        FY2019: E=$3,634,950, R=6.66%; E/R=$54,578,829
        FY2018: E=$4,717,626, R=9.26%; E/R=$50,946,285

        The comparison of my calculated F and the reported fund investment balance at start of year (S) is:
        FY2020: F=$90,695,225, S=$57,773,701, F/S=156.98%
        FY2019: F=$54,578,829, S=$57,728,557, F/S= 94.54%
        FY2018: F=$50,946,285, S=$55,902,330, F/S= 91.13%

        I think the F/S numbers for FY2018 and FY2019 are reasonable, since the amount actually invested (F) is within 5-10% below the amount available to be invested at the start of the fiscal year (S). But I can’t come up with an explanation of why the average amount actually invested (F) in FY2020 would be substantially (57%) more than the amount available to be invested at the start of the fiscal year (S).

        Reply
        1. I am puzzled

          We can extend the above tables for the full 9 years using the annual reports, as follows:

          The reported data for E & R, and my calculation of F=E/R is:
          FY2020: E=$1,006,717, R= 1.11%, E/R=$90,695,225
          FY2019: E=$3,634,950, R= 6.66%, E/R=$54,578,829
          FY2018: E=$4,717,626, R= 9.26%, E/R=$50,946,285
          FY2017: E=$4,996,703, R=10.20%, E/R=$48,987,284
          FY2016: E= $474,047, R= 1.33%, E/R=$35,642,632
          FY2015: E=$1,328,883, R= 3.41%, E/R=$38,970,176
          FY2014: E=$7,098,022, R=14.82%, E/R=$47,894,885
          FY2013: E=$4,126,338, R= 7.95%, E/R=$51,903,623
          FY2012: E=$1,093,979, R= 3.44%, E/R=$31,801,715

          FY2020: F=$90,695,225, S=$57,773,701, F/S=156.98%
          FY2019: F=$54,578,829, S=$57,728,557, F/S= 94.54%
          FY2018: F=$50,946,285, S=$55,902,330, F/S= 91.13%
          FY2017: F=$48,987,284, S=$52,485,811, F/S= 93.33%
          FY2016: F=$35,642,632, S=$47,997,984, F/S= 74.26%
          FY2015: F=$38,970,176, S=$50,579,031, F/S= 77.05%
          FY2014: F=$47,894,885, S=$52,928,107, F/S= 90.49%
          FY2013: F=$51,903,623, S=$49,534,407, F/S=104.78%
          FY2012: F=$31,801,715, S=$48,540,849, F/S= 65.52%

          The F/S ratio for FY2020 still stands out like a sore thumb as the only one significantly more than 100%, indicating a possible error.

          Reply
  14. I am puzzled

    There seems to be more than one history of the annual rates of investment return. In the table below, column A is from
    https://www.psers.pa.gov/About/Investment/Documents/FY%20rates%20of%20return%20-%201971%20to%202019.pdf
    and column B is from page 8 of:
    https://www.psers.pa.gov/FPP/Publications/General/Documents/PSERS%202020%20Valuation%20Board%20Presentation%20Dec%203.pdf
    FY Column A Column B
    2020 n/a 1.11%
    2019 6.68% 6.66%
    2018 9.27% 9.26%
    2017 10.14% 10.20%
    2016 1.29% 1.33%
    2015 3.04% 3.41%
    2014 14.91% 14.82%
    2013 7.96% 7.95%
    2012 3.43% 3.44%

    The geometric mean of column A (using 1.11% for 2020) is 6.337%,
    https://www.wolframalpha.com/input/?i=9th+root+of+%281.0111*1.0668*1.0927*1.1014*1.0129*1.0304*1.1491*1.0796*1.0343%29
    and the geometric mean of column B is 6.378%
    https://www.wolframalpha.com/input/?i=9th+root+of+1.0344*1.0795*1.1482*1.0341*1.0133*1.102*1.0926*1.0666*1.0111

    So using column A gets you just below the target of 6.36%, and using column B gets you just above it.

    Reply
      1. I am puzzled

        An April 18 article in The Philadelphia Inquirer, “Bad math: PSERS was warned but inflated investment returns anyway”
        https://www.inquirer.com/news/psers-grell-pension-teachers-recalculation-20210418.html
        reaches the same conclusion, based on documents obtained under the state’s right-to-know law, that a significant upward adjustment of the FY2015 investment return, from 3.04% to 3.41%, was primarily responsible for calculating the 9-yr average return at just above the 6.36 target instead of just below,

        The reason for the adjustment was said to be “merely updating the numbers with late-arriving financial data from some of the fund’s “private market” investments”. But if FY2015 was adjusted significantly upwards, I would expect a corresponding downward downward adjustment in either the previous or following year, leaving the 9-year average unchanged. But the previous and following years have only slight adjustments. FY2016 was adjusted slightly up from 1.29% to 1.33%, and FY2014 was adjusted slightly down from 14.91% to 14.82%.

        It also seems like a dubious practice to update annual return figures without amending the corresponding annual reports, including updating not only the percentage annual return but also the dollar amount of the annual investment income.

        Reply
  15. I am puzzled

    Has anyone looked at the PSERS Financial Asset Listing for FY 2020?
    https://www.psers.pa.gov/FPP/Publications/General/Documents/FY2020%20-%20FINAL%20ASSET%20LISTING%20WORKSHEET.pdf

    There are some odd-looking items. For example, on p. 16, under the heading of:
    “U.S. GOVERNMENT AND AGENCY OBLIGATIONS:”
    it shows:
    B1Z76R1 US760942AV45 URUGUAY REPUBLIC OF 11,854,031
    which appears to be a mis-categorized 3.7% bond from the country of Uruguay (not the US) maturing in 2037, according to
    https://cbonds.com/bonds/11147/

    There are 27 odd-looking items that appear to mistakenly show their CUSIP number using scientific notation, as shown in the first column below:
    3.0219E+107 US30219E1038 EXPRESS INC 49,968
    9.0346E+107 US90346E1038 US SILICA HOLDINGS INC 134,122
    4.0416E+107 US40416E1038 HCI GROUP INC 146,483
    7.4762E+106 US74762E1029 QUANTA SERVICES INC 308,779
    2.553E+109 US02553E1064 AMERICAN EAGLE OUTFITTERS NEW 358,741
    6.2886E+112 US62886E1082 NCR CORP NEW 468,281
    1.2621E+107 US12621E1038 CNO FINANCIAL GROUP INC 473,079
    3.073E+108 US03073E1055 AMERISOURCEBERGEN CORP COM 855,537
    3.4959E+113 US34959E1091 FORTINET INC 1,053,135
    1.2508E+105 US12508E1010 CDK GLOBAL INC 1,064,908
    9.2343E+106 US92343E1029 VERISIGN INC 1,202,510
    8.9417E+113 US89417E1091 TRAVELERS COS INC 1,648,821
    2.8176E+112 US28176E1082 EDWARDS LIFE SCIENCES CORP 2,448,775
    8.7612E+110 US87612E1064 TARGET CORP 3,428,919
    4.5245E+113 US45245E1091 IMAX CORP 146,851
    6.7011E+208 US67011E2046 NOVOLIPETSK STEEL OJSC 190,248
    8.9679E+304 US89679E3009 TRIUMPH BANCORP INC 270,853
    7.0805E+113 US70805E1091 PENNANT GROUP INC/THE 298,467
    7.9546E+108 US79546E1047 SALLY BEAUTY HLDGS INC COM 299,204
    3.7959E+106 US37959E1029 GLOBE LIFE INC 415,614
    9.1359E+109 US91359E1055 UNIVERSAL HLTH RLTY INC TR SH 506,431
    3.7949E+208 US37949E2046 GLOBALTRANS INVESTMENT PLC 539,296
    2.967E+111 US29670E1073 ESSENTIAL PROPERTIES REALTY TR 687,196
    5.5027E+106 US55027E1029 LUMINEX CORP DEL 697,313
    7.5513E+105 US75513E1010 RAYTHEON TECHNOLOGIES CORP 5,182,330
    9.1912E+109 US91912E1055 VALE S A ADR 2,760,265
    5.545E+212 US05545E2090 BHP BILLITON PLC ‐ADR 3,824,234

    Reply
  16. I am puzzled

    Some more oddities. Under the heading of
    “DOMESTIC CORPORATE AND TAXABLE MUNICIPAL BONDS:”
    starting on p. 16, there are items that don’t appear to me to be domestic, although I could be mistaken, such as:

    999K34669 US999K346699 JSC ASTANA FINANCE 2,969
    107643621 US1076436211 INTERNATIONAL BANK OF AZERBAIJ 4,338,986
    BF1GM05 YES BANK IFSC BANKING UNI REGS 1,361,949
    86960BAR3 US86960BAR33 SVENSKA HANDELSBANKEN AB 2,005,840
    B1VYKW9 PERU ENHANCED PASS‐THROUG REGS 2,216,668
    BSNLR48 SADEREA LTD REGS 1,075,914
    BQR8RL8 CEMEX SAB DE CV REGS 195,500
    BFZ4R66 MEDCO PLATINUM ROAD PTE L REGS 2,432,735
    00972BAC3 US00972BAC37 AKBANK TURK AS 144A 4,225,300
    BYQNXL2 OSCHADBANK VIA SSB #1 PLC 144A 2,338,525
    01538RAF6 US01538RAF64 ALFA BANK AO VIA ALFA BON 144A 3,126,627
    316044AB2 US316044AB21 FIDELITY BANK PLC 144A 3,672,720
    92824BAA4 US92824BAA44 VIRGOLINO DE OLIVEIRA FIN 144A 15,000
    37363CAB2 US37363CAB28 GEORGIAN OIL AND GAS CORP 144A 3,507,000
    48667DAD6 US48667DAD66 KAZAKHSTAN TEMIR ZHOLY FI 144A 7,555,236
    and others.

    Reply
    1. I am puzzled

      Pennsylvania reportedly expects to sell just over $1B in general obligation bonds on or about May 5, 2021, and today Fitch Ratings rated those bonds, noting that they were monitoring recent news of federal law enforcement inquiries regarding PSERS, but that nothing revealed to date rises to the level of a rating concern.

      Of course, very little has been revealed to date, but that could change as a result of the 4/19 board meeting.

      https://www.fitchratings.com/research/us-public-finance/fitch-rates-pennsylvania-1b-go-bonds-aa-outlook-stable-16-04-2021

      Reply
      1. I am puzzled

        The 4/19 meeting agenda is:

        https://www.psers.pa.gov/About/Board/Documents/agendas/4.19.21%20PSERB%20Special%20Board%20Meeting%20Agenda.pdf

        I. Call to Order
        II. Public Comment
        III. Consultation with Counsel in Connection with Potential or Current Litigation
        …A. Executive Session if needed
        IV. Discussion on Recertification
        …A. Executive Session if needed
        V. Actions from Executive Session
        VI. Other Business
        VII. Adjournment

        note: the “Recertification” in item IV apparently refers to
        ​Resolution 2021-10 (A/C)
        Re: Engagement of Outside Special Counsel
        03/19/2021
        where the board authorized the engagement of Morgan Lewis as special counsel “…to provide guidance on the advisability and process to recertify the member shared risk contribution rate …”.
        https://www.psers.pa.gov/About/Board/Resolutions/Pages/2021-Board-Meeting-Resolutions.aspx

        Reply
        1. I am puzzled

          The Board meeting didn’t shed any new light on the FBI investigation, and nobody got publicly reprimanded, but they did reverse the previous Resolution 2020-52, effectively confirming that it was based on an erroneous 9-year performance calculation. So certain employees will now have higher contribution rates.

          There were no comments from the public. Immediately following the roll call, the meeting went into executive session, for about 2 hours, and then right back into the second executive session, for about 1 hour. After that, 3 resolutions were passed:

          PSERB Resolution 2021-14
          Engagement of investment oversight consulting firm
          involving emergency procurement of an investment consulting firm to provide monitoring and oversight of investment activities

          PSERB Resolution 2021-15
          legal services contract
          involving replacing the law firm of Sidley Austin LLP (retained under Resolution 2021-13 on 4/9/2021) with the law firm of Morgan Lewis and Bockius LLP.
          passed unanimously with no discussion

          PSERB Resolution 2021-16
          Recertification of member contribution rates effective July 1, 2021
          involving amending PSERB Resolution 2020-52, replacing its 2nd paragraph in its entirety with the following:
          Resolved Further, that board certifies
          T-E member contribution rate of 8.0%, [was 7.5%]
          T-F member contribution rate of 10.8%, [was 10.3%]
          TG member contribution rate of 9.0% [was 8.25%] (Defined Benefit rate: 6.25% [was 5.5%, Defined Contribution rate: 2.75% [unchanged])
          TH member contribution rate 8.25% [was 7.5%] (DB rate: 5.25% [was 4.5%], DC rate: 3.0% [unchanged])
          for the three-year period from July 1, 2021 to June 30, 2024 in accordance with the Shared Risk provisions of PSERS’ retirement code

          This resolution passed 12 to 1 (Sen. Brown), with Eric DiTullio not present for the vote but said he was also opposed. The only discussion was the following statement (roughly) from Sen. Brown:

          “I know we’ve been in long consultation on this, but I feel obligated to mention that it’s my opinion based on my work in 2010 to develop the shared risk provision to put it into House Bill 2497 of 2010, negotiated with all relevant stakeholders at the time, that current statute as written without amendment requires us to change the law before we are able to recertify. This is not something that was anticipated when that provision was put into law. I am hopeful that we will seek appropriate legislative remedy to ensure that this action is in accordance with our plan document, the Penn code that authorizes the collection of dollars and provision of benefits to the teachers in this Commonwealth.”

          Reply
  17. I am puzzled

    PSERS put out an interesting press release after the board meeting that starts with:

    This evening, the Pennsylvania School Employees’ Retirement System Board voted to recertify the employee contribution rates originally approved by the Board at its December 3, 2020 meeting.

    Perhaps it was written before the meeting, because the actual vote was to reverse the December 2020 decision and increase rather than reaffirm the employee contribution rates. Later in the press release that becomes clear:

    Mindful of its duty to faithfully execute the relevant provisions statute, the Board decided tonight to amend its December 2020 decision, certifying the actual nine-year performance figure of 6.34%. Based upon the statutory requirement of Act 120 and Act 5, this recertification will require additional employee contributions beginning in July 2021.

    https://www.media.pa.gov/Pages/Public-School-Employees-Retirement-System_details.aspx?newsid=140

    Reply

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