Pennsylvania’s largest pension fund is auditing its travel expenses after reporting by the Capital-Star revealed opaque expense records for cross-country travel.
The Pennsylvania Public School Employees’ Retirement System board’s audit committee approved the deep dive Friday during a meeting in Harrisburg.
“We’re trying to make sure there is no independence question,” Rep. Frank Ryan, R-Lebanon, and chair of PSERS’ audit committee, said. Ryan said the report should focus on “operational red flags” in the travel, paid for by taxpayers and booked by an investment partner.
The committee’s request follows reporting by the Capital-Star that revealed limited expense records of travel to Los Angeles.
There, pension officials met with Platinum Equity, a private equity fund that has been the beneficiary of $1 billion in pensioners’ dollars over the past decade. The trips included at least one unaccounted for stay at a five-star hotel in 2017.
Platinum reimburses PSERS for parts of the travel, while other costs are covered by fees included in the pension fund’s contract with Platinum.
Reimbursed travel expenses are fair game for public records requests, PSERS spokesperson Steve Esack said at the time, but costs paid for by fees are not.
Public records for seven trips to Los Angeles revealed just $1,392 in expenses, less than PSERS’s own cost estimate for two trips alone.
PSERS spokesperson Steve Esack and pension staff at Friday’s meeting both claimed the system followed the governor’s gift and travel rules.
In an email Friday, Esack added that the pension’s audit team is “happy to comply with the board’s directive to take a closer look at PSERS’ travel policies and practices to ensure we are in compliance with Commonwealth travel practices and the governor’s gift ban executive order, which PSERS voluntarily joined several years ago.”
Pennsylvania Treasurer Joe Torsella, a vocal critic of private equity also backed the audit, and was less sure if the expenses met Wolf’s new standards.
“I can’t figure out what our policies are,” Torsella said during the meeting. He called for “more disclosive, stricter and less conflict-apparent” policies around travel expenses.
A PSERS staffer said during the meeting that the travel costs audit would be done by the end of May.
PSERS, one of two state public pension systems, manages $60 billion in assets to manage the retirement of 600,000 current and retired school teachers and other personnel.
Due to systemic state underinvestment, both PSERS and the smaller State Employees Retirement System carry almost $70 billion in unfunded obligations, a constant source of political strife.
To make up for losses from the 2008 market crash and the limited state investments, PSERS has diversified its portfolio, including big bets on private firms like Platinum.
The strategy has paid off, despite the critics. PSERS reported an almost 13 percent return on investments in 2019 after fees.
As board members wait for the audit, PSERS likely won’t be racking up as many new travel expenses.
Because of concerns from the coronavirus, PSERS has banned all international travel by employees until April 17, according to a memo from PSERS Chief Investment Office Jim Grossman. Pension employees should also “use discretion” when traveling within the United States.