Agency: Sustain Baker veto to preserve pension system reform
By State House News Service | July 30, 2015, 15:23 EDT
Written by Colin A. Young
The agency charged with the oversight of the state’s public employee pension systems is urging lawmakers to let stand a budget veto by Gov. Charlie Baker relating to retirement board private equity and real estate investments.
The Public Employee Retirement Administration Commission last week sent letters to House Speaker Robert DeLeo and Senate President Stanley Rosenberg asking that their bodies not take up the governor’s veto of outside section 55, arguing that overturning the veto would “seriously weaken procurement requirements for so-called ‘follow-on’ funds for private equity and real estate for Massachusetts retirement boards.”
As approved by the Legislature, retirement boards would be allowed to make “follow-on” or successive investments in private equity and real estate funds that they have invested in the past 10 years without going through as rigorous of a procurement process.
Baker said he vetoed the measure because “it authorizes the state’s many retirement systems to engage in follow-on investments without the protection afforded by up-to-date due diligence.”
A veto override would chip away at the Pension Reform Act passed in 2011 and would cause “serious harm” to retirement systems, PERAC said. “These reforms were important steps toward ensuring retirement board transparency, disclosure, openness and professionalism — and they are clearly working,” PERAC Executive Director Joseph Connarton wrote. “We are confident that over time, millions of dollars will be saved by retirement boards in fees as a result of these reforms. We are already seeing significant savings in the short time since the enactment” of the reforms.
PERAC pointed to the Cambridge Retirement Board, which is projected to save about $1.75 million over five years, as one example of the “significant savings” possible under the 2011 reforms.