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Gov. Wolf puts critic back on $60 billion pension board

Gov. Tom Wolf has named former state treasurer Joe Torsella to represent him on the PSERS board, where Torsella will join a growing number of fund critics.

Joe Torsella, former Pennsylvania State Treasurer at his home in Flourtown, Pennsylvania, on Friday, January 29, 2021.
Joe Torsella, former Pennsylvania State Treasurer at his home in Flourtown, Pennsylvania, on Friday, January 29, 2021.Read moreALEJANDRO A. ALVAREZ / Staff Photographer

One of the toughest critics of Pennsylvania’s giant pension plan for teachers appears headed back to its board.

In November, Democrat Joseph Torsella lost his position as an overseer of Pennsylvania’s $60 billion school pension fund when he lost reelection as state treasurer. But on Thursday, Gov. Tom Wolf tapped Torsella to return to the PSERS board as his representative.

The appointment, which requires majority approval by the State Senate, would restore Torsella to a growing reform bloc on the 15-member board for PSERS. That stands for Public Schools Employees’ Retirement System, which sends checks to about 250,000 retired teachers and other former school workers.

During his single four-year term as treasurer, Torsella, by dint of his position, served on the PSERS board and that of its smaller, $30 billion sister fund for state employees, known as SERS.

Both funds are underfunded, short a collective $65 billion of what they need to pay all future promised benefits. The gap remains despite large and growing funding from taxpayers and cuts in benefits for recent hires.

Critics, most notably a blue-ribbon commission led in part by Torsella, says the funds’ investments have done poorly in recent years and their outside money managers are vastly overpaid.

Torsella, unavailable for comment Thursday, was a passionate, if at times lonely, voice for change at both funds.

He voted against high-fee contracts to Wall Street money managers recommended by the funds’ staff and consultants, and called for more transparency in the funds’ often secretive proceedings. He said the plans should merge redundant investment staff.

He pushed for full disclosure of private investment managers’ own profits from investing state money and sought to cut back investments in private companies not traded on the stock market.

For its part, PSERS issued a statement to the Inquirer recently in which its administrators praised Torsella as a reformer but also noted he was “intractable” at times and mistrustful of its data.

A frequent Torsella board ally, state Rep. Frank Ryan, a Republican from the Harrisburg area, said that the former treasurer had left many at PSERS upset. As Ryan told the Inquirer in an article published Sunday, “He pulled a Band-Aid off a wound. The person who does it is not always appreciated.”

When the teachers’ fund voted on key issues, Torsella, Ryan and their supporters were often outvoted by representatives connected to the statewide teachers’ union and retiree groups.

This reform group grew recently with the appointment of freshman State Sen. Katie Muth, a Democrat from the Philadelphia suburbs who ousted a veteran Republican there in 2018. Democrats in the state Senate named her as their caucus’ PSERS board appointee.

Stacy Garrity, the Republican who narrowly defeated Torsella to become treasurer, has also said she favors pension-fund transparency and simplicity. She and Torsella will serve together at PSERS.

On Wednesday, Garrity signaled her independence from staff recommendations by casting the only vote at a SERS meeting against giving a San Francisco private investment firm another $125 million She said the firm, Hellman & Friedman, was being paid too much and lacked internal auditing and other controls.

“She is very concerned about private equity investments due to the high costs and inherent risk,” her spokesman, Erik Arneson, said. “She would like to see the fund make further progress in reducing the level of high-cost, illiquid investments.”

As for Muth, she said in an interview that her constituents in Berks, Chester and Montgomery counties are concerned about the social impact of PSERS investments. And teachers, she said, worry that they will face higher pension payments if investments don’t make more money.

“We know that paying higher fees doesn’t get us higher performance, so we need to do everything we can to keep those dollars in the Commonwealth and away from Wall Street,” she said. “And we know that transparency is the best fight against corruption.”