Blame Minnesota Media For Epic State Pension Looting Before and On Walz's Watch
For decades, Minnesota media failed to scrutinize state pension audacious claims, emboldening officials to brazenly "cook the books." Pensions should have been double what they are today.
Despite a well-documented aggressive, preemptive effort orchestrated by Minnesota state officials (including Governor Walz and Attorney General Ellison’s offices and their industry allies) to thwart a forensic investigation of the state’s pensions —before it even began—the investigation was completed a month ago, on September 25th.
The books at Minnesota’s pensions are obviously “cooked,” I concluded in the damning expert findings of a review commissioned by thousands of Minnesota teachers who have lost trust in their state retirement system. The retirement benefits state teachers receive in the years to come will only be half what they should have been—had the pension assets been prudently invested.
The retirement benefits state teachers receive in the years to come will only be half what they should have been—had the pension assets been prudently invested.
While the state and industry effort to undermine funding and completion of the investigation failed, thus far, behind-the-scenes warnings to media to stay away from reporting on the investigation has paid off: Over the past month, Minnesota media has been mum about a story it was told was too hot to handle. Not a word has been printed locally about the unprecedented, eminently newsworthy expert forensic review and shocking findings of financial irregularities involving the largest pot of public money in Minnesota—the $146 billion state pension system.
State officials are likewise silent: no rebuttals of the investigative findings or public assurances that the pensions stand by their unbelievable numbers.
There’s no question the investment performance claims and accounting of fees paid to Wall Street by the State Board of Investments and Teacher Retirement Association are fundamentally wrong. For decades, investment performance disclosed to stakeholders has been inflated and expenses (fees paid to Wall Street) have been understated—all to make the states’ pensions appear to be performing far better than they really are. These pension reporting games began long before Tim Walz was elected Governor and became Chairman of the state pension. Nevertheless, as Chairman, he could and should have taken corrective action, as opposed to attempting to hide the glaring problems by aggressively, preemptively undermining an investigation into potential wrongdoing. (Further, as reported by CNN below, hostility “led by Governor Walz” has been repeatedly encountered by “citizens seeking transparency” through state auditor investigations into waste, fraud and abuse.) So much for “Minnesota Nice.”
These pension reporting games began long before Tim Walz was elected Governor and became Chairman of the state pension. Nevertheless, as Chairman, he could and should have taken corrective action, as opposed to attempting to hide the glaring problems by aggressively, preemptively undermining an investigation into potential wrongdoing.
So much for “Minnesota Nice.”
When stakeholders are told fees paid to Wall Street are in the millions but billions are secretly taken by money managers from the state’s pensions annually, that amounts to looting in my book. Stakeholders did not consent to the taking of billions.
When stakeholders are told fees paid to Wall Street are in the millions but billions are secretly taken annually by money managers from the state’s pensions, that amounts to looting. Stakeholders did not consent to the taking of billions.
As the Toledo Blade (let me emphasize—an Ohio, not Minnesota newspaper) wrote about Minnesota’s pensions in July—long before release of the full forensic report:
A cursory look at the Minnesota Teachers Retirement Association leads to the conclusion they’re either a world class pension or they’re cooking the books. Minnesota reported investment fees on the $26.7 billion teacher pension fund of $24.1 million. The teachers fund has a $6.6 billion private equity portfolio that would be expected to pay at least $132 million a year to fund managers. Moreover, a comprehensive study of 54 public pensions from 2008 to 2023 conducted by investment expert Richard Ennis shows fees average 1 percent of assets under management. By that metric Minnesota Teachers Retirement Association would be expected to pay over a quarter billion dollars a year to fund managers.
The national response from public pension advocacy agencies reflects the crisis these incredibly noteworthy numbers create. Either Minnesota has a special deal with Wall Street paying fees 90 percent under the going rate or an investment board made up of the governor, attorney general, secretary of state, and auditor, has massively massaged the truth.
A long term look at Minnesota’s pension math is just as perplexing. The teachers retirement fund purports to beat a composite index they created by 0.2 percent measured over 1, 5, 10, 20, and 30 years. The odds of that level of consistency over each measure of time are infinitesimal.
Then on August 10th, the New York Post (not Minnesota media) wrote:
A Minnesota retirement system for public school teachers under Gov. Tim Walz is “cooking the books” by vastly underreporting annual fees paid to Wall Street investment managers — and posting near-impossible gains tantamount to a “Madoff miracle,” a top pension investigator said.
The state-run Teachers Retirement Association, or TRA, has publicly disclosed less than 10% of an estimated $2.9 billion spent on fees in the past 10 years, said Edward Siedle, a former US Securities and Exchange Commission lawyer and independent pension investigator.
The TRA also posted gains claiming it beat its own custom benchmark over periods of one, five, 10, 20 and 30 years by exactly 0.2%, which Siedle called “virtually impossible.”
On August 11, the Toledo Blade (not Minnesota media) called upon Governor Walz “to explain” the seemingly impossible state pension investment fees and performance results disclosed to the public.
The Minnesota State Board of Investment claims investment management fees of just over 6/ 100s of 1 percent on a fund they say is mostly managed by external experts.
If Governor Walz presided over a deal with Wall Street that is 94 percent better than the multi-state average of 54 big pensions measured over 15 years, he should be bragging about that achievement at every presidential campaign stop.
If, however, those numbers don’t stand up to close scrutiny, Governor Walz should explain why not and reveal what the Minnesota State Board of Investment actually pays Wall Street.
There is a $1.2 billion difference between what would be the expected fee to Wall Street fund managers and Minnesota’s reported payment. That’s way too much money to ignore and should be a campaign issue whether it helps or hurts the Harris-Walz ticket.
After release of the pension investigative findings in late September, on October 4th, CNN (again, not Minnesota media) wrote about hostility from the Walz administration repeatedly encountered by the state’s auditor investigating waste, fraud and abuse:
Lack of transparency is an endemic problem in the Walz administration, which has repeatedly minimized or dismissed proven examples of waste, fraud, and abuse since the Democratic governor took office in 2019, Minnesota’s nonpartisan auditor Judy Randall told CNN on Saturday.
Despite issuing more than a dozen reports on these abuses, Randall told CNN she’s unaware of any personnel changes linked to her audits.
"The governor’s appointees across the board at almost all agencies have been hostile and uncooperative when citizens are seeking transparency and oversight through the legislative auditor," Republican state senator Mark Koran, the vice chair of Minnesota’s legislative audit commission, told CNN. "The hostility is led by Governor Walz."
On October 5th, the New York Post (not Minnesota media) wrote about the completed investigation:
A pension investigator has found the books of Minnesota’s state retirement system under Gov. Tim Walz’s oversight “blatantly cooked” and cloaked in secrecy – prompting teachers in his home state to beg the vice-presidential candidate to tell the truth about lackluster investment performance and massive hidden fees.
On October 10th, the Washington Beacon (not Minnesota media) reported for the first time that Jay Stoffel, the Executive Director of the $28 billion state teacher pension system had abruptly announced his retirement as executive director of the Minnesota Teachers Retirement Association at a June board meeting—soon after the investigation had begun. This came just moments after his fellow board members had reappointed him to serve another term, meeting minutes show. State teachers should have been told about this crucial change in leadership at the pension they depend upon for their retirement security immediately—not 5 months later. Neither the pension nor Minnesota media informed them.
State teachers should have been told about this crucial change in leadership at the pension they depend upon for their retirement security immediately—not 5 months later. Neither the pension nor Minnesota media informed them.
The burning questions that arise from the new revelations of irregularities regarding long-term state pension performance and fee reporting are:
What led state officials to believe they could perpetuate these obvious, epic lies for decades? Even Madoff never claimed to always beat the market—and certainly not by the exact same amount every period! Were they arrogant? Stupid? Supremely confident in their belief that the populace would remain clueless? After all, they could have only slightly fudged the numbers, as opposed to brazenly beating every investment and expense benchmark over every period of time.
What led state officials to believe they could perpetuate this epic lie for decades? Even Madoff never claimed to always beat the market—and certainly not by the exact same amount every period!
How is it possible that this blatant inflating of returns and underreporting of expenses went undetected for decades? Did local media lack even a rudimentary understanding of pensions? Did they assume Minnesotans had no interest in learning the truth about their pensions?
What are the implications of the manipulation of performance and expense numbers? Are there potential “catastrophic tax, regulatory or legal consequences? Do the performance and expense numbers even matter?
Most disturbing of all: Minnesota media is mum even now— a month after the damning report was released.
Decades of obvious state pension looting would never have gone unreported had Minnesota local media done its job and spoken “truth to power.” Since the state press failed to ask pointed questions and hold those in power accountable, the lying reached epic proportions. Pension stakeholders, including participants and taxpayers, have paid and will continue to pay the price—approximately $150 billion over the past 30 years. The retirement benefits state teachers receive in the years to come will only be half what they should have been.
Decades of obvious state pension looting would never have gone unreported had Minnesota local media done its job and spoken “truth to power.”
State officials told outrageous, improbable lies for decades for one reason: Because they knew they could get away with it. Blame Minnesota media for utterly failing to do its job.
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My observation after over sixty years is the average citizen does not give a d—- about pension fund fraud as it is not their money and they have no investment in the pension fund. They forget taxpayers contribute to public pension funds as do employees. Some of the fraud dollars funnel back to the individual states as campaign contributions. It definitely did in my home state of Rhode Island to Gina Rainumdo who is now Secretary of Commerce awarding billions of chip dollars.
I've studied Minnesota public pensions for years and found that leaders deliberately destroyed and bankrupted a few plans to get at massive taxpayer bailouts . There are many wrongdoings in our public pensions! dkubes