Pension fund apologizes for not informing board

Senate leaders call Dixon to explain poor performance

November 07, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

After stern rebukes from pension fund trustees, a top official of the state employee retirement system apologized yesterday for failing to inform the board of Maryland's low rankings in investment performance compared with other large systems'.

Carol Boykin, the system's chief investment officer, promised board members that she would provide such data promptly in the future.

"We recognize the significance of this issue," she said.

The meeting occurred the same day that Senate leaders summoned state Treasurer Richard N. Dixon, who is chairman of the pension board, to explain the fund's performance.

"We had a very frank exchange of views," Sen. Barbara A. Hoffman, chairman of the Budget and Taxation Committee, said afterward.

There was similar blunt talk yesterday at the pension board. Several members complained they had been blindsided by newspaper reports that a national ranking service had placed Maryland's system, which lost $3.5 billion last year, last in return on investment among a peer group of 38 public pension funds in the fiscal year that ended June 30.

The same ranking, compiled by Wilshire Associates, identified Maryland's plan as a laggard over the long term as well - raising questions about the system's governance.

Dr. Ali Alemi, a trustee who represents state employees, said he was outraged to learn that top fund officials have had rating information for several years without sharing it with the board. He said he had received calls from 10 plan participants about news reports on Maryland's investment performance.

"I have to be able to answer my constituents," Alemi said. "People are laughing at me, and I don't appreciate that."

Although the board was divided over the relevance of comparative studies, the trustees agreed to draft a statement to the public affirming their belief that the system is sound.

G. Bruce Harrison, elected by state police employees, suggested that each member of the board sign the statement.

"This system is in much better shape than many plans around the United States," he said. "We can guarantee to all our retirees that at the end of the month they will receive their retirement check."

Dixon insisted that the plan is sound and dismissed the importance of the Wilshire Associates study.

He said board members last looked at the data in 1996. "We did not feel these reports were meaningful because we were being judged against unidentified plans," he said.

He was backed by Maj. Morris L. Krome, the other state police representative. "We're doing the job and doing it well," Krome said. "And whether California is doing a good job or Nevada is doing a good job doesn't amount to a hill of beans."

Maryland ranked low

But other members said it is important to analyze how the Maryland system compares with others.

The annual Wilshire surveys show Maryland ranked in the bottom quarter of large pension plans in three of the last four years - finishing last in fiscal 2001 with a negative-9.4 percent rate of return. The system also ranked near the bottom when returns over the past five and 10 years were measured.

Trustees were openly dismayed to learn that pension fund officials had been supplying the data to legislative analysts but not to them for several years.

"You give it to the legislature and you never shared it with us and never shared it with [Dixon]?" board member Carl Lancaster demanded of Boykin. "Something here doesn't add up, Carol."

Although Boykin delivered the apology and absorbed much of the members' indignation, it was clear that some members also were annoyed with Dixon.

The discussion brought into public view some grievances the board has had with Dixon, including his rescheduling of meetings to accommodate his travel plans and his insistence on acting as the system's sole spokesman.

Substitute spokesman OK'd

Harrison said the agency needs a spokesman to reassure retirees when Dixon is away. Last week, when reports of the pension fund's woes surfaced, Dixon was vacationing in Florida and unavailable for comment.

Dixon agreed that Executive Director Peter Vaughn could act as spokesman in the future.

In a victory for the state employee representatives on the board, the trustees also agreed to create a committee to study ways to improve benefits. Trustee Arthur N. Caple Jr. pointed to a recent survey that put Maryland 45th among the states in the percentage of final average pay going to retirees.

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