A spokeswoman for the fund, Evelyn Williams, said that it was cooperating with the federal investigation and that the board had also opened its own inquiry. Beyond that, she said, the fund would not comment, because “protecting the integrity of these investigations is necessary.”
The fund’s 15 trustees have hired several law firms to deal with different lines of inquiry, plus an investment firm to assume the duties of the fund’s chief investment officer, James H. Grossman Jr.
The error in calculating returns was a tiny one, just four one-hundredths of a percentage point. But it was enough — just barely — to push the fund’s performance over a critical threshold of 6.36 percent that, by law, determines whether certain teachers have to pay more into the fund. The close call raised questions about whether someone had manipulated the numbers and the error wasn’t really an error at all.
Since the corrected number didn’t clear the benchmark, nearly 100,000 teachers hired after July 1, 2011, will have to contribute more for three years starting on July 1.
The pension fund, Pennsylvania’s biggest, has roughly 256,000 active members and 265,000 retirees. Pennsylvanians have been complaining about teachers’ pension costs since 2001, when state lawmakers sweetened all state workers’ pensions — including their own — on the thinking that the bull market of the 1990s would continue indefinitely. That mistake was laid bare a few months later when Wall Street and the economy dived after the terror attacks of Sept. 11. But lawmakers said the pension boosts couldn’t be reversed.
Today in Business
The pensions of state workers are often funded through the mysterious maze of the state budget, so their rising cost is hard to see. But teachers’ pensions in Pennsylvania are funded through local property taxes, so when the fund needed more money, homeowners felt the bite.
Taxpayer contributions to the teachers’ pension fund nearly quintupled from 2001 to 2008, causing an outcry. Then came the financial crisis of 2008, and seven years’ worth of taxpayer pain came to naught. The fund emerged from the Great Recession with even less money than it had in 2001, the year of the big miscalculation.