Round-Up: Governor Wolf Prioritizes Returns and Costs Savings over Wall Street

March 23, 2015

Harrisburg, PA – In his budget address, Governor Wolf proposed pension reform that works by prioritizing returns and cost savings instead of paying extravagant Wall Street fees, which will save hundreds of millions each year. Every year Pennsylvania spends nearly $700 million on fees to Wall Street firms to manage our pension funds, more than most other states. By reducing the fees we send to Wall Street, we will save taxpayers hundreds of millions per year.

Check out the coverage of Governor Wolf’s plan to cut Wall Street fees and tackle Pennsylvania’s pension funding problem:

Bloomberg News: Pennsylvania’s Wolf targets Wall Street fees in tackling pension.
“To ease Pennsylvania’s pension obligation, Governor Tom Wolf isn’t targeting public workers…He’s eyeing payments to Wall Street. The first-term Democrat is calling for Pennsylvania’s two pension systems to reduce investment-manager fees that are higher than the average U.S. public plan. He’s also counting on Wall Street banks to market bonds the state would use to bolster one of the funds… In his first budget address this month, Wolf said Pennsylvania ‘has been wasting hundreds of millions of taxpayer dollars on Wall Street managers.’ Across the country, pension funds are examining their relationships with investment firms, said Greg Mennis, director of the states’ public-sector retirement systems project at the Pew Charitable Trusts. They’re reconsidering their strategies after expanding higher-cost alternative investments, such as hedge funds, he said…Pennsylvania’s task is to make up for years of underfunding rather than trim benefits, [Budget Secretary Randy] Albright said.” [Bloomberg News, 03/19/15]

Sharon Herald: Wolf wants pension funds to cut payments to Wall Street.
“The state’s two major pension plans paid almost $1.4 billion over the last two years to fund managers on Wall Street and financial capitals around the globe. Gov. Tom Wolf says that’s too much. He wants the pensions to cut annual fee payments by $200 million as part of a larger plan to pull the financially teetering retirement programs back from the brink… In 2013, the State Employees Retirement System paid at least $1 million in fees to each of more than 40 fund managers. The school employee pension paid at least $1 million to each of more than 130 fund managers. The state employee pension’s biggest fees – $8.2 million – went to The Blackstone Financial Group in New York. The school employees pension paid that firm $7.7 million. as well. The school pension plan paid $46 million in fees to just one firm – Blackrock, also based in New York.” [Sharon Herald, 03/20/15]

Philadelphia Inquirer: Wolf unhappy with who manages Pa.’s pensions.
“Gov. Wolf is trying to push Wall Street out of Harrisburg. He wants the two big employee retirement systems, SERS (for state workers) and PSERS (for public school staff), to reverse their long reliance on high-fee managers. These firms collected more than $600 million in fees from the plans last year – plus a share of liquidation profits from the state’s private-equity investments, which Pennsylvania doesn’t count. Despite all the creative investing, years of underfunding have left SERS and PSERS with multibillion- dollar gaps between the assets they own and the checks they will owe. The shortfall has been addressed in recent years by increasing taxpayer ‘contributions,’ which Wolf wants to stabilize. In his budget proposal, Wolf calls for ‘pension investment reforms to significantly reduce excessive management fees and over reliance on high risk investment strategies,’ in favor of ‘less costly passive investment approaches where appropriate.’” [Philadelphia Inquirer, 03/22/15]

MEDIA CONTACT: Jeff Sheridan – 717.783.1116

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