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PSPRS staff gets bonuses while Arizona cities go broke

Arizona Republic logo Arizona Republic 5/15/2019 Laurie Roberts
a building that has a sign on the side of a road: The League of Arizona Cities and Towns is calling for major changes to the financially troubled retirement system for first responders because its members have been hard hit by rising public-safety pension costs.© Tom Tingle/The Republic The League of Arizona Cities and Towns is calling for major changes to the financially troubled retirement system for first responders because its members have been hard hit by rising public-safety pension costs.

To the surprise of absolutely no one, the board that (supposedly) oversees one of the nation’s worst performing public pension plans has decided to retroactively approve $120,000 in bonuses for three executives.

The Arizona Public Safety Personnel Retirement System Board of Trustees on Monday unanimously agreed that now-retired Chief Investment Officer Ryan Parham and two of his deputies were entitled to the bonuses they quietly received last year. They also paid another $51,481 to the estate of a dead ex-employee.

And hey, why not?

Who cares when you have endless cash?

Who cares if the pension plan has made a lousy financial showing in each of the past five years under this crack investment staff?

Who cares if it ranked 37 out of 41 major public pension trusts on investment returns last year, according to the Pew Charitable Trusts?

Who cares about this blatant giveaway of public money to a staff that can’t seem to make even an average return on investment to help cover the soaring cost of public safety pensions?

PSPRS, after all, has an endless supply of cash: ours.

Taxpayers, through city and county budgets, have to make up whatever it costs to fund public safety pensions. I'm quite sure the cities that are cutting services or even raising taxes to pay the tab are thrilled to hear that the pension staff is getting bonuses. 

5 other nagging questions about PSPRS

Are you watching this, Gov. Doug Ducey? Do you see what’s going on, Senate President Karen Fann and House Speaker Rusty Bowers?

You three are responsible for appointing the board that (supposedly) oversees PSPRS.

If you, like everybody else, find that your eyebrows have inched up into your hairline, maybe it’s time to start asking some questions.

Here are a few to get you started.

No. 1: Why does an underfunded pension system that is sucking the life out of city budgets feel the need to regularly offer bonuses and five-figure raises to top executives?

In November, for example, the PSPRS board gave  Administrator Jared Smout a $43,147 raise, then made that 20 percent raise retroactive to Jan. 1, 2018.

Smout has since been put on paid leave pending investigation of an employee complaint. His interim replacement, Bret Parke, was given a 21 percent, $39,500 pay raise.

Even the PSPRS spokesman snagged a 7 percent raise and a $2,500 bonus last year. This, while rank-and-file state employees have seen pay raises closer to a total of 2 to 3 percent over the last few years.   

No. 2: Why was Smout last year able to quietly hand out $120,000 in bonuses from a program that was suspended in 2013 due to concerns the staff was gaming the system to trigger extra pay? Where was the board oversight?

Chief Investment Officer Ryan Parham scored his $72,134 bonus just days before he retired last summer. It was his eighth big bonus in nine years. Meanwhile, senior portfolio manager Shan Chen got nearly $28,000 in extra pay and executive assistant Mark Steed got nearly $20,000. 

No. 3: Why were those bonuses listed not as bonuses but as “confidential settlements”? Other than the obvious reason, that is – to keep the public in the dark.

PSPRS spokesman Christian Palmer told The Republic’s Craig Harris the bonuses constituted an “existing legal liability” against the trust but he provided no documentation of legal claims to back that up.

No. 4: Why has PSPRS been one of the poorest performing public trust funds in the country over the past decade – one that pays some of the highest outside management fees?

Last year, the $10.3 billion trust posted a 7.1 percent return on its investments. The Arizona State Retirement System, meanwhile, enjoyed a 9.4 percent return.

And finally, No, 5, the biggest question of all: Why not disband this irresponsible agency?

Why not turn over administration of public safety pensions to the Arizona State Retirement System, an agency that knows how to make money and is transparent in the way it spends money?

Or even better, to the state Treasurer’s Office, which already handles the state’s $16 billion in investments. The Treasurer's Office has an in-house investment team, something that could save us a few bucks on outside management fees paid by the pension trust. And it could boost the pension fund. The Treasurer's return on investment in the Permanent Land Endowment Trust Fund, for example, was 9.09 percent, according to spokeswoman Shaandiin Parrish.

Who or what are they accountable to?

The problem with PSPRS is that there is no accountability.

The staff answers to a board that seems missing in action, unable or unwilling to turn off the money tap, and the board is accountable to … who, exactly?

Certainly not to any bottom line.

Though the trust is underfunded, it cannot fail. That’s because it can always reach into our pockets.

Which are not just deep but bottomless.

Reach Roberts at laurie.roberts@arizonarepublic.com.

This article originally appeared on Arizona Republic: PSPRS staff gets bonuses while Arizona cities go broke

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