The two main Chicago daily newspapers have been aggressively reporting a scandal involving a pension fund of the Chicago Housing Authority. The Securities and Exchange Commission filed civil charges against its director, discovering some $12.5 million, or one-third, of its $37 million in assets, were fraudulently invested. One story even quoted our editor, seeking his expert views on investing in Hollywood. But that's as far as the reporting has gone in putting the mess into a much broader, and more valuable, context for the public, including taxpayers and beneficiaries.
The papers have missed a bigger story about the controversial management and underfunding at a lot of other public pension plans in the city. For perspective, that CHA fund has only 0.2% of the $15.1 billion in total assets of nine major city-related pension funds.
The neglect by the press of the larger story points to the problem in the way the Chicago media - and most media across the country - cover pension fund issues. It explains why in large part public pension plans nationwide are in poor financial condition, mainly due to poor funding and management, rather than a sensational scandal like that at the CHA. A major reason the public pays little attention to taxpayer-supported pension funds is because it has little information. Pension funding becomes an easily neglected, or little understood issue in any public policy debate.
In the CHA situation, the $12.5 million loss at the pension fund - however significant for its beneficiaries - pales in comparison to the much bigger "loss" at other city-related pension plans because of fragmented management, underfunding and poor actuarial practices.
Last year a study by Miriam Santos, city treasurer, suggested four of the city's pension plans - whose assets total $5.9 billion - spend at least $14 million unnecessarily. That's an annual cost, more than the loss from this one CHA scandal. The study noted pension contributions consume 42% of the city's annual property tax revenue. Yet, this serious, 158-page study with significant proposals for reform elicited only a brief story in each of the papers. The papers examined the issue no further.
In fact, they haven't reported, in a major way, on any of the public funds in at least recent years. Yet, on the CHA scandal the two papers have published 25 prominent stories from June 22 when it first broke through July 18.
Without being explicit, the news stories give the impression the CHA fund is otherwise well managed, if only this scandal was rooted out. They have focused on the sensational particulars of the loss and the extravagant lifestyle of John D. Lauer, CHA director-risk management and benefits, implicated in the scandal. They make no mention of the other CHA pension assets, or their allocation, or money managers, or returns. They give no details on the plan's funding status, or contributions, or benefit payments, or expenses. They fail to put any focus on the CHA trustees' responsibility, or internal controls, or external custodian, or audits.
By implication, reporters' neglect over the years of the other public pension plans gives the impression they are well managed, too.
Worse, some CHA coverage has spread misinformation. One story quotes Rep. Bobby Rush, D-Ill., saying the scandal "exemplifies Wall Street, not the CHA. He [Mr. Lauer] is the entrepreneur type at its worst. They are about profits, not people." Yet, no reporting questions this outrageously wrong and inflammatory remark. The scandal exemplifies the lax controls of public authorities. Mr. Lauer didn't work on Wall Street. He didn't deal with Wall Street (though one wishes for taxpayers' sake the CHA had). He was the antithesis of an entrepreneur, sqandering wealth, not creating it.
Mr. Lauer may incur fines or ultimately a criminal indictment. But residents will be no wiser on the issue of improving public pension policy. Many of the city's other, far larger pension plans are rotting, poorly funded, much to the ignorance of these big-city reporters.
