Secrecy at the MBTA Pension Fund
Secrecy at the MBTA Pension Fund
(This post was originally published on the New England First Amendment Coalition blog, click here.)
The MBTA Retirement Board recently voted to deny a request to turn over records relating to a controversial deal that cost the pension fund $25 million. The vote was tied 3-3 with directors loyal to Governor Deval Patrick voting in favor of making the records public, and union representatives voting against. An “honorary member” selected to break the tie, unfortunately, sided with the union representatives against disclosure.
This episode was the latest salvo in a long-running battle over whether the pension board is subject to public records and ethics laws. The MBTA pension system considers itself a private trust and not a public entity subject to these laws. The Supreme Judicial Court agreed with the board in 1993 and ruled that it was indeed not subject to the public records law or subject to the oversight of the public State Ethics Commission. Those decisions form the basis of today’s impasse.
Lawmakers tried to rectify the situation last summer enacting language aimed at bringing the board under the public records law. But on February 13, 2014, the Supervisor of Records issued a letterdenying a WCVB-TV’s appeal of a records request, ruling that the new language was ineffectual and that the MBTA Retirement Board was still not subject to the law.
Officials continue to be concerned. State Sen. Will Brownsberger, a leader in the effort to increase MBTA transparency, convened an oversight hearing with Public Service Committee Co-Chair Rep.Aaron Michlewitz in late February. A day prior, Attorney General Martha Coakley sent a letter (.pdf) asking the board to adopt rules consistent with the public records and ethics laws.
So what’s at stake? As Sen. Brownsberger notes in a blog post on the subject, the MBTA derives two-thirds of its $1.9 billion budget from state and local taxes. It contributes $71 million per year to pay pensions for its workers. Historically, MBTA pensions have been very generous, and the board has been no stranger to controversy.
In December, for example, media reports highlighted a failed $25 million investment in a Fletcher Asset Management hedge fund that is now bankrupt and appears to be a Ponzi scheme. The man who sold the Fletcher investment to the Retirement Board was Karl White ” the former executive director of the board, who had left to work for Fletcher in 2006. If the fund followed the ethics rules that apply to state agencies, it would not have been able to do business with Fletcher for at least one year.
It’s not clear where this saga will end, but lawmakers thankfully seem determined to keep the pressure on. With apparent abuses like the Fletcher investment, the stakes are high, and not just for taxpayers and T riders, but also for employees who may not be getting the pension returns they deserve. Transparency and tough ethical standards are standard practice for pension funds across the country and here in Massachusetts. They should apply to the MBTA as well. If the MBTA retirement board does not voluntarily adopt rules, more legislation is in order. A terrific bill recently released by the State Administration to update the public records law could be an appropriate vehicle. Lawmakers could include new language in this bill that would accomplish what was intended last summer. Stay tuned.
Pam is executive director of Common Cause Massachusetts.