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In the wake of the fund's heavy losses, a report points fingers and calls for changes in the way it's managed.
By HELEN HUNTLEY, Times Staff Writer
© St. Petersburg Times, published August 30, 2002
Florida should revamp the way it runs its state pension fund and give employees a say in the decisions, a public employee union said Thursday in a highly critical report.
Poor management is why Florida's pension fund lost more than any other public retirement fund on Enron Corp. investments, according to the report released by the American Federation of State, County and Municipal Employees. The union represents 110,000 of the approximately 600,000 active members of the Florida Retirement System.
"Bad investment practices led to the massive loss of retirement funds for state employees and taxpayers," said Gerald McEntee, the union's international president. "Gov. (Jeb) Bush and the other trustees betrayed the faith put in them by Florida workers by putting their retirement security at risk."
The State Board of Administration, which runs the fund, is suing Alliance Capital Management, the money manager that made most of the Enron investments, which led to more than $300-million in losses. But the union says the board contributed to those losses by failing to appropriately monitor Alliance and by allowing Alliance to take too much risk.
The union said it wants a review of the board's operations by an expert who would report to the Legislature. It also wants the retirement system to operate as an independent entity with a separate board of trustees, half of whom would be plan participants and retirees. Currently the board manages other state funds as well as the $85-billion retirement plan. Supervision falls to Bush, State Treasurer Tom Gallagher and Comptroller Robert Milligan. The union said Florida's fund is one of a small minority of large public pension funds that gives rank-and-file employees no say in how the funds are managed.
"We offer one of the best-managed, fiscally sound pension funds in the United States," responded Coleman Stipanovich, the board's executive director. He said the board is reviewing its operations and has made some changes since the Enron debacle unfolded.
Previously informal performance monitoring guidelines have been made a formal part of managers' contracts, Stipanovich said. In addition, he said the board is improving its risk control methods. He said one of the union's recommendations already is being implemented: the creation of an independent auditor position reporting directly to the board of trustees. An audit committee of six people from outside the board will work with the auditor and trustees, he said.
"AFSCME's report today really is a recitation of reforms that have been undertaken over the last 18 months," said Bush spokeswoman Jill Bratina. "Ultimately they want union control of a $100-billion pension, and that won't prevent problems."
The union also called for a delay in implementation of a self-directed investment plan that is being offered to state employees as an alternative to the traditional pension plan. Instead of getting the new plan up and running, the union said the trustees and the board's staff should focus on correcting the flaws in the board's operation.
Stipanovich said a delay isn't necessary.
"This organization is not broken," he said. "We don't want to stop an initiative that's so important. It's a plan that empowers the very employees they represent. It gives employees a choice."
-- Information from Times wires was used in this report. Helen Huntley can be reached at huntley@sptimes.com or (727) 893-8230.