EDITORIAL
Lawmakers have role in pension fund woes

The dozen state lawmakers who have asked for a management audit of the state pension fund are dead on target.

They want to know, as should taxpayers and pension beneficiaries present and future, why the fund retained a poorly performing investment firm with ties to a former ERS administrator, against their investment adviser's advice.

The lawmakers say there are other questionable practices, but the retention of 3Bridge Capital, whose top officials include former ERS administrator Stanley Siu, draws attention like a lightning rod.

At the very least, it appears the trustees were being sentimental instead of the hard-headed, prudent fiduciaries they're paid to be.

An audit is warranted, as a spokesman for House Speaker Calvin Say put it, because of "the fund's need to maximize its investments, given the fact that the number of retirees is growing." The pension fund has about 90,000 members, including 29,000 retirees.

While they're waiting for the results of the next audit, they should reread the one completed by state Auditor Marion Higa in May of 2000, which criticized sloppy accounting and poor administrative practices that cost the fund — and its beneficiaries — millions.

That last audit did not suggest that the ERS overall was doing a bad job. It did find "serious deficiencies" resulting from management that did not completely "fulfill its operational responsibilities."

Lawmakers should now want to learn whether fund management has improved or slipped further since then.

But if they are entirely honest, they will also need to take a very hard look at their own past treatment of the retirement fund. Higa pointed out in that last audit that poor administration is not the only threat to retired public workers. She wrote that the raid on ERS funds by the Legislature in 1999 — in effect trimming the contributions by the state and counties by any amount earned by ERS investments above 10 percent — "was detrimental to the system's unfunded actuarial liability."

Between questionable administration of their money and a governor and lawmakers bent on raking off the earnings of their more profitable investments, ERS beneficiaries must wonder just who their friends are these days.