Tulare Congressman Devin Nunes is pushing his pension oversight bill for the fifth time.
The Public Employee Pension Transparency Act, or HR 6290. would encourage disclosure of public pension fund’s liabilities, according to information on the Republican’s website.
These disclosures would be made available on a public website. Failure to do so would strip local and state agencies from authorizing federal tax-exempt bonds.
Introduced June 28, it is the fifth consecutive congressional session that Nunes has proposed the bill. Each previous time, it never even had a committee vote.
While the bill has support from many good government groups, many pension managers — including those who handle the city of Fresno’s funds — are leery.
The managers are concerned about federal legislation that creates new oversight, and in Robert Theller’s estimation, overregulation.
Theller oversees the Fresno pension system’s $3 billion assets. The money is collected from the paychecks of municipal employees and pooled with the city’s contributions. The money is then invested with professional money managers. The system pays out $10 million a month collectively to city retirees.
Numerous publications and analysts have described Fresno’s pension system as one of the best funded in the country. In fact, the fund boasts a large surplus.
Nunes expressed concern that a lack of transparency can lead state and municipal pension systems to insolvency and a loss of millions, if not billions, of dollars.
“The bill also expressly states that state and local pension obligations are solely the responsibility of those entities and that the federal government will not provide a bailout,” Nunes warned in an overview of a similar bill introduced in 2016.
Nunes, through his website, says PEPTA creates needed oversight.
”Public pension accounting should ideally provide citizens and government officials with a sense of how indebted taxpayers are to state and local government employees. However, the government accounting standards currently used allow states to use procedures that severely understate their liabilities,” Nunes argues.
And CALmatters columnist Dan Walters has sounded the alarm about what he perceives as a looming pension crisis at the state level in California.
Fresno Retirement System Opposes
In a letter to City of Fresno Retirement Systems members and retirees, Theller warned that if Nunes’ proposal becomes law it could double the costs for the city and its employees.
“CFRS is very well funded and shouldn’t be forced to report its liabilities as proposed in this legislation.” CFRS director Robert Theller
Theller wrote that PEPTA would “require public sector defined benefit pension systems like CFRS to calculate liabilities using the rate of return on U.S. Treasury bonds. This will raise costs for employees as well as local governments to fund Public pensions and not actually reduce any risks. CFRS is very well funded and shouldn’t be forced to report its liabilities as proposed in this legislation.”
Breaking that down, the CFRS assumed rate of return over a long period of time is about 7.25%. That is based on the advice and research of investment professionals.
A Treasury bond return on investment is about 3%. That means the city and its employees would have to pay more in the beginning to get the same desired outcome if the return rate percentage is lower.
For example, to increase an investment to $100 over a period of time, an investor would need to deposit $97.08 at 3% rate. At a 7.25% rate, that initial investment is $93.24.
Theller also argues that if pension plans are eliminated, city employees would have to invest their own retirement money, which also increases costs. He says pension systems offer lower investment fees than individual plans.
Nunes defended the bill, saying in 2016: “Many state and local pension funds are hiding vast debts through accounting gimmicks. The taxpayers — who will be forced to pay off these enormous debts if pension systems go insolvent — have a right to know the true condition of these pension plans, and the systems’ participants need to know how secure their benefits are.”
Nunes’s office did not respond for a comment on this story.
Supporters Site Transparency
The bill lists support from many good government and tax fighting groups including the Americans for Tax Reform associated with Grover Norquist, and Americans for Prosperity, affiliated with the Koch brothers.
Americans for Limited Government also supports the bill. The group’s vice president for public policy, Robert Romano, says it’s about protecting the taxpayer.
“This bill will prohibit the federal government including the Federal Reserve from providing any bailout whatsoever to those plans should they happen to go belly up,” Romano said. “The transparency in these plans has not been adequate to provide state and local pensioners the information that they need to make informed decisions about whether they’re being properly managed.”
Theller disagrees with Romano’s transparency assessment. CFRS’s actions are controlled by a board appointed by the mayor and approved by city council. Its meetings are public, with documents and agendas posted online.
Additionally, Theller said, pension funds fall under federal, state and local regulations and conform to Governmental Accounting Standards Board practices. He finds additional regulations duplicative, burdensome, and costly.
Romano countered: “Of the information that they say they’re reporting to their local board is similar to the information that they’ll be reporting to the U.S. Treasury, I’m sure they could just copy and paste it.”
PEPTA Tried Before
The bill has been assigned to the Ways and Means Committee. The committee has not set a hearing date. Nunes and co-sponsor Rep. Mike Bishop (R-Mich.) serve on Ways and Means. Congressman Chris Stewart (R-Utah), Tom McClintock (R-Roseville) and Ken Calvert (R-Corona) also co-sponsored the bill.