Pat worked for more than three decades as a nurse and educator. First as a school nurse, and then in a state hospital, she took care of the developmentally disabled and provided comfort and support for their families. She worked hard, eventually getting her doctoral degree, and came back to teach to a new generation of caregivers at a state university. Now retired, she spends the monthly pension income she earned on her home, her health care, and gifts for her grandchildren, of course.
I could tell you a lot about Pat, because she's my mom. And she's just one of the 724,000 Pennsylvanians that rely on one of our two public pension systems in the Commonwealth, PSERS and SERS.
Keeping the promises we've made to those Pennsylvanians isn't negotiable. The only question is how to do it.
Recently, it was revealed that over the last 10 years, Wall Street money managers pocketed around $3.8 billion more from our pension funds than was previously disclosed to the public. In the aftermath of those reports, some have — oddly — claimed that the $3.8 billion isn't really a fee, or a cost, or really anything to be concerned about at all. Nothing to see here, folks, so please be on your way.
Much of the $3.8 billion comes from something called "carried interest," which is a fancy way of saying it's money taken out of the profits from an investment. For that reason, many of those same people claim this $3.8 billion is actually something we're privileged to pay, because it means we made money.
The point they miss is simple: That money didn't go to the Pennsylvanians who worked all their lives to serve others, who now rely on these pensions to live in dignity in their retirement. That $3.8 billion went into the pockets of Wall Street money managers instead.
And there's another point they miss. Where I grew up, the town Pat still lives in, finance jargon like "carried interest" doesn't fool anyone. If someone keeps some of your profits, it's a fee whether they call it that or not. If a mutual fund company told my mom they would manage her money "for free"… as long as they could keep some of her dividends … she'd hang up the phone.
To be sure, we will always have to pay something to invest our public money. But Pennsylvanians deserve to know where every single dollar of their money goes and to pay as little to Wall Street as possible for the best results.
Those two positions have been painted as something radical. They shouldn't be.
Pennsylvanians need negotiators on their behalf who are brutally tough. While we will have to pay something, $4 billion in fees is not a good deal if we could have paid $2 billion for the same results.
The Wall Street money managers who pitch their services to us are not our friends, and they don't have any legal obligation to work in the best interests of Pennsylvanians. While we may decide to do business with the manager, when it comes to investment fees, every last dollar that goes to them is one that doesn't go to Pennsylvanians who need the system to be there when they retire.
The Pennsylvania nurses who cared for those who suffer worked harder than a Wall Street money manager. So have the state troopers who kept us safe, and the teachers who taught us to read. They deserve full transparency on where every dollar in our pension systems go. And they deserve every dollar we can keep in Pennsylvanians' hands.
Paying fees to Wall Street isn't a privilege. It's an unfortunate necessity. And it's time to reduce it as much as possible.
Joe Torsella is treasurer of Pennsylvania. @JoeTorsella