EDITORIAL
Changes needed at state retirement fund

If you're at all like us, you're having a hard time deciding whom to believe:

• State Auditor Marion Higa, who's blasting the state Employees' Retirement System for management problems, questionable investment decisions and serious inefficiencies in meeting their obligations to retirees.

• Or ERS officials, who say Higa's latest report is riddled with inaccuracies because she and her staff lack the expertise to understand the complex retirement system.

There are indications, however, that the new governor and the Legislature had best pay heed to Higa's report:

• ERS officials also disputed Higa's last audit, in May of 2000, which criticized sloppy accounting and poor administrative practices that cost the fund — and its beneficiaries — millions of dollars.

In her latest audit, Higa found a number of deficiencies that hadn't improved or got worse in the interim.

• There's no disputing the unacceptable level of service in processing new retirees. There's no legitimate reason beneficiaries must wait 18 months to learn how much they will receive in their monthly pension checks.

They do get paid during that period — with estimated benefit checks, which often require substantial adjustment a couple of years later.

• The processing delays have gotten worse since Higa's last report. ERS officials say Higa and her staff lack the experience necessary to understand the computer's problems.

It's not Higa's job to fix the computer. It was ERS' job to find someone who could — years ago.

• ERS has an investment adviser that has financial relationships with most of the fund managers, most of who have been handling ERS funds for more than 15 years with below-average results. How much expertise is needed not to like that?

• One repugnant feature of the present ERS management is a hangover of "old-boy" behavior that caused the hiring and retention of 3Bridge Capital, a money-losing portfolio manager whose top officials include former ERS administrator Stanley Siu.

Beside the obvious appearance of conflict in this relationship, ERS officials made the astonishing claim that 3Bridge Capital deserved a second chance — conclusive demonstration of what often happens when people handle other peoples' money. How many of these officials would give 3Bridge a second chance with their own money?

ERS clung to 3Bridge more than two years after Higa drew attention to this inappropriate relationship.

ERS, of course, has troubles not of its own making, including a nasty bear market and a Legislature prone to rake off its earnings. But the 93,000 state and county employees, retirees and beneficiaries who depend on ERS deserve better from those who run it.