Puzzling Pension Vote Contradicts Strong Performance

Westmoreland County’s pension fund almost never makes the news. It’s rarely, if ever, controversial and certainly not political. The decisions we make are usually commonsense and straightforward. That’s why my Commissioner colleagues’ recent opposition to renewing a contract with our pension fund consultant was particularly puzzling, given that this consultant has a proven track record and is far and away the lowest cost.

Managing the county’s pension fund is the responsibility of the Retirement Board, consisting of the three Commissioners, the Controller and the Treasurer. We have the fiduciary responsibility to oversee a more than $400 million pension fund for about 1,000 retirees. It’s our obligation to make smart decisions to protect the retirement accounts of our workers, both past and present, and the taxpayers, who are on the hook for paying into the fund if it’s not performing up to its actuarial assumptions (i.e. “not making enough money”).

Over the past four years the county’s pension fund has grown to record heights, thanks to thriving financial markets and a balanced, disciplined approach to managing the money. When I first took office in 2010, the fund was valued at $306 million. Now, it’s worth $416 million. This tremendous growth was achieved using a diversified approach to not only take advantage of the record stock market, but also to protect against any unforeseen dips. The fund employs 13 separate managers (and one index fund) that focus on specific sectors of the financial markets (equity, fixed income, etc.). Helping us to manage all this money, and all these managers, is the pension fund consultant.

Our consultant, Gallagher Fiduciary Advisors, has served Westmoreland County for more than a decade. Earlier this year, we voted to publicly entertain competing offers for consulting services. Some Pension Board members were pushing hard, while others didn’t want to do it at all. In the spirit of competition, and to ensure that we were indeed getting the best value, I agreed to formally issue a Request for Proposals. The result was what I expected – a lot of interest and a lot of proposals (16 to be exact, each about two inches thick!)

Every firm that submitted proposals was professional, capable and possessed solid client references. What was striking, however, was the cost that these firms wanted to charge. Even discarding the three firms that wanted to charge $400,000, $600,000 and even a million dollars, the average price proposal was about $130,000 a year. The firm we voted to retain is charging us $48,000!

When you combine this extremely low fee with the proven performance I’ve presented above, the decision should have been a no-brainer, right?

It’s like having an employee who has met every goal you’ve set, never missed a day of work and helped grow your business to record heights. You would never dream of replacing him or her. Especially after you found out that you were paying him/her a third of what someone else would want to do the same job!

Controller Jeff Balzer and Treasurer Jared Squires joined me in voting for the best deal. Commissioners Anderson and Courtney did not.

My fellow Commissioners’ rationale, as reported in the Tribune-Review was baffling. To claim this was a “snap decision” or that we needed “to spend more time” is misleading. We’ve been reviewing these proposals for a month! (And to his great credit, Treasurer Squires had every proposal tabbed and highlighted to quickly respond to any discussion point.) It’s also worth remembering that Commissioners Anderson and Courtney had no such reservations about suitable deliberation time when they fired our human resources director on a whim and replaced him with a no-bid private management company at twice the cost.

We owe it to both the taxpayers and our retirees to make the right decisions, without bias, for this $400 million investment fund. It’s not political. It’s commonsense. The Republican Controller gets it. The Republican Treasurer gets it. It’s odd why the Republican Commissioners can’t understand a good deal – and great performance – after weeks of reviewing and discussing other proposals.