ROCKVILLE, MD (May 9, 2017) — Pennsylvania Governor Tom Wolf and Treasurer Joe Torsella are using findings from the Maryland Public Policy Institute to call for reforms to their state employee retirement system.

Governor Wolf and Treasurer Torsella recently urged the boards of two state employee retirement systems to reduce the fees they pay to Wall Street firms to manage pension investments on behalf of retired state employees. Their letter cites research from the Institute showing that their State Employee Retirement System’s (SERS) expense ratio for money management is well above the national average. 

“Pennsylvania is joining states and counties across America in starting to put the interests of retirees ahead of Wall Street money managers,” said Christopher B. Summers, president and chief executive officer of the Institute.  “Every dollar pension systems save by shifting to low-cost index investments is a dollar in the pocket of state retirees. We applaud Governor Wolf and Treasurer Torsella for the leadership and hope for similar action in Maryland, where fees to money managers may run to nearly $600 million annually.” 

Only 60 percent of Pennsylvania’s pension liabilities are funded, according to the Pew Research Center. That is worse than neighboring Delaware (92 percent) and Maryland (71 percent.) Despite this shortfall, SERS pays an estimated $167 million annually to money managers.

Research from the Institute in 2015 found that state pension funds with the highest fees as a percent of assets recorded inferior investment returns versus states with the lowest fees. This conclusion contradicts the assumption that Wall Street advice helps state pension funds achieve superior returns. The full report can be found here.

The letter from Governor Wolf and Treasurer Torsella is below.

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About the Maryland Public Policy Institute: Founded in 2001, the Maryland Public Policy Institute is a nonpartisan public policy research and education organization that focuses on state policy issues. The Institute’s mission is to formulate and promote public policies at all levels of government based on principles of free enterprise, limited government, and civil society.  Learn more at mdpolicy.org.