AUSTIN, Texas - Wayne Blevins, executive director of the $38 billion Teacher Retirement System of Texas, announced that he will resign following release of a legislative report strongly criticizing the system.
Mr. Blevins had come under increasing criticism by state officials in recent weeks. Lt. Gov. Bob Bullock, for example, said Mr. Blevins misled officials about the status of the fund, and called for legislative hearings into the fund's operations.
The TRS board of trustees was scheduled to discuss the search process for Mr. Blevins' successor late last week.
The legislative study, conducted by the staff of the Texas Sunset Advisory Commission, questioned a decision by the system last fall to eliminate its investment advisory committee. The study also criticized the fund's investment performance and called for more legislative oversight of the fund's operations.
The advisory commission is a group of 10 legislators who periodically review the performance of state agencies.
The study said while the system has "solid economic underpinnings," it "seems to have lost its sense of its constitutional direction."
The report also was critical of "bureaucratic extravagance," and recommended the system's administration and operating budget be subject to the legislative appropriations process. Currently, the budget only needs approval of the system's trustees.
Mr. Blevins did not respond to telephone inquiries regarding his resignation or about the contents of the study.
TRS board member Frank W. "Bo" Camp said he does not know when Mr. Blevins will leave his position but said he hopes Mr. Blevins does not prolong his departure. "Now that he has resigned, I think he needs to move on," said Mr. Camp. He said the TRS board now needs to "face up to the fact that there are some problems and start to address them."
A spokesman for the TRS said Mr. Blevins has not set a date for his departure, but has informed the TRS board of trustees of his intent to resign.
One state official said she expects Mr. Blevins to depart "sooner rather than later."
She said Mr. Blevins' lack of rapport with top state officials may have contributed to his frequent run ins with legislators. "He had the political sense of a newt," she said.
In 1991, State Comptroller John Sharp criticized the teachers' system for the lavish furnishings in its newly constructed building in downtown Austin.
The Sunset Commission report recommends the teachers' system:
Use available assets to increase retirement benefits for older retirees and provide cost-of-living increases for all retirees. "The sunset staff saw annuity checks of as little as $1 per month. More than 22,000 retired Texas educators receive $200 a month or less," said the report.
Improve monitoring of investment performance for trustees and the Legislature. The report recommended the legislative audit committee hire necessary professionals to evaluate investment performance and help formulate uniform reporting requirements for all state pension funds.
Bring more business expertise to the board of trustees. Since trustees eliminated the outside investment advisory committee in September and appointed themselves in its place, the system's investment information now comes only from its own staff and its external investment managers, the report said. "Although the trustees are responsible for investing the $38 billion retirement fund, only two of nine trustees must have investment experience," the report said. The report recommends that five of the trustees have investment experience.
Increase legislative oversight of operating expenses.
Require system administrators to be subject to the state appropriations process.
Require investment practices and performance to be evaluated by an independent firm selected by the Legislative Audit Committee, composed of various elected state officials.
John Young, chief investment officer, declined to comment on most of the report.
But he said the outside investment advisory committee had "outlived its usefulness." He said the system is in the process of replacing the committee with a smaller group of investment professionals. He said the board is interviewing candidates for the revised committee. It will consist of "a couple" of outside experts.
Mr. Young said the outside investment committee was instituted about 20 years ago when the system "had limited staff and there was a need for them."
However, he said the board "feels it needs someone," and the system will use outside advisers, "but it won't be an investment advisory committee." The new body will report directly to the board, he said. In the past, the advisory committee worked with the TRS staff, as well as the board of trustees.
The report said the state Legislature and trustees have no independent oversight of the performance of the system's investments. It noted the state "has never conducted an independent evaluation of the fund's investment performance.... Independent evaluation of investments is needed to allow the Legislature and trustees to adequately monitor investment performance and safeguard members' money."
The commission contends the fund's operating expenses "have risen 66% faster than for the state as a whole (during the past five years) and significantly faster than pension funds in other states subject to oversight beyond their own trustees."
Among large U.S. public pension funds, the report stated, TRS had the sixth highest percentage of total expenditures used for operating costs, based on 1992 data. In addition, the report said, 12 of the 15 largest public pension funds are already subject to some form of legislative operating budget oversight or authorization.
The report said the system in 1994 spent $27 million on operating expenses, $25 million on brokerage fees and $59 million on management and consultant fees for real estate investments.
"TRS operating expenses have increased 83.5% since fiscal year 1989," the report said.
In addition, the report said, "prior management reviews of TRS by the state comptroller and state auditor have consistently identified high operating expenses as an area of concern."
According to the report, the system receives $1 billion per year from state employer contributions and about $900 million in member contributions. "While other state agencies must justify the dollars they spend, TRS has spent an ever growing amount of its members' money without standard state oversight," the report said.