How You Can Audit Massachusetts’ Pension Boards
Just recently Kathy Curran led an investigation into Massachusetts retirement boards’ wasteful use of public funds. Her investigative team found that while nearly all public retirement boards in Massachusetts are not on track to be fully funded for at least another decade, numerous boards have been treating themselves to expensive dinners, five-star hotel visits, and other indulgences paid for on the public’s dime.
In the past, it has been challenging for the public to assess and compare the finances of their local retirement board to other such boards. It would take countless hours to comb through the hundred or so page financial statements in order to identify a trend that would point to potential excesses or mismanagement, never mind doing so for more than 100 of them.
To fix this problem, the Pioneer Institute has just rolled out a new transparency tool. MassPensions.com is an online database that details the performance of retirement boards throughout Massachusetts. Retirees, current and future, can see how much the boards are paying in administrative and management fees, and how much of the money is actually making it into their pockets. Some preliminary digging found multiple variances about which the public should be concerned.
The Massachusetts Housing Finance Agency (MFHA) serves 443 retirees, spending $775 per member on administrative fees. MHFA administrative spending dwarfs other boards comparable in size, serving a similar number of retirees in Swampscott, Amesbury, Winthrop, and Fairhaven, which only spend on average $253 per member. Nearly the entire $522 per person gap in administrative costs can be explained by the difference in the salaries of administrative staff. While the four other boards spend on average $71,326 per year on salaries for board employees, the Mass Housing Finance Agency spends $242,993 to do what seems to be the exact same job.
We plan to root out to the cause of this apparent excess at MHFA in a future blog. We hope to discover exactly where that extra $170,000 is going and why it is not being used to reduce MHFA’s unfunded pension liability, which is not scheduled to be fully funded until 2022.
Kathy Curran in her WCBV-TV investigation discovered, to the public’s surprise, that Middlesex County Retirement Board members have been traveling extensively. Financial data from MassPensions.com is filled with warning signs. Between 2005 and 2013 Middlesex County, which serves about 13,000 members, spent on average $22,904 annually on board travel, twice as much as Massachusetts State which serves 10 times as many people.
Previously, financial information was buried in large pdf’s under a mountain of jargon. But thanks to MassPensions.com, the data is now just a click away. With side-by-side comparisons now available, the public has much more data readily available to ask the important questions.
It is often hard to tell when government is being wasteful, because, unlike in a free market, there is no competing entity to compare it to. Here, however, is a unique opportunity. Massachusetts has 105 public pension boards, each tasked with doing virtually the same thing. We can now look at data from all of them and see which boards are able to cut costs, which find ways to reduce administrative costs, and demand that those lagging behind improve their performance.
Joshua Beck is a Roger Perry Transparency Intern studying economics and computer science at Brown University