Pensions are a valuable non-wage benefit that a large majority of state and local governments offer their employees as part of their compensation packages. With approximately $3.8 trillion in total assets, millions of workers rely on the promises made by governments to provide a secure retirement through a lifelong pension. In order to keep these promises, pension funds should be managed for the exclusive purpose of providing retirement benefits to workers, with pension trustees doing their best to achieve the greatest possible return on investments.
Unfortunately, many lawmakers and pension plan officials have other priorities besides doing what is best for workers. They see the billions of pension fund dollars they manage as an opportunity to advance their own agendas. Rather than investing to earn the best return for workers, they use pension funds in a misguided attempt to boost their local economies, provide kickbacks to their political supporters, reward industries they like, punish those they don’t and bully corporations into silence and behaving as they see fit.
As lawmakers and trustees knowingly make inferior investment decisions, sacrificing better returns in order to advance political agendas, pension funding declines, jeopardizing workers’ retirement benefits and leaving taxpayers to pick up the tab. This reckless decision to place political agendas ahead of what’s best for workers is known as pension fund cronyism, and it is happening every year in pension funds across the country. This report exposes these dishonest practices and shows state and local policymakers what they can do to get politics out of their pensions and focus on keeping the promise to workers and retirees alike.