Now that the rhetoric is finally silent and the dust settled, perhaps we can rationally discuss Arizona's public pension systems. Legislation has been passed to help ensure the long-term stability of those systems. It is time we stop scapegoating public employees as the sole source of pension system ills and put the responsibility where it belongs — Wall Street's fraud and fund mismanagement.
The Arizona Public Safety Personnel Retirement System Trust — which includes public safety officers, corrections officers and elected officials — lost $2.7 billion during fiscal years 2000-2002 and 2007-2009. Those losses, about 25% of the trust fund's total assets, roughly equal the total of the unfunded liabilities we heard and read so much about.
Public employees, who pay their fair share into the systems and are most at risk when the fund loses money, are not the villains here. Nor are the taxpayers who also contribute. Retiree pensions are not breaking the system, nor will our future obligations under normal capital markets behavior.
The pension systems are really exceptionally large investment funds. As such, they have to rely on the integrity and honesty of those who regulate and run Wall Street. We know that any investment carries with it some level of risk. We accept that legitimate risk, and so did the pension funds. But the big brokerage firms were not operating, and the politicians and regulatory agencies weren't doing their jobs. Corrupt and fraudulent practices are not legitimate investment risks anyone could or should have anticipated.
Three years after the worst financial collapse in a generation, those responsible for the collapse have yet to be held accountable and the victims are being blamed by politicians who should know better.
Those actually responsible — the brokerage houses that turned bad mortgages into even worse investments, the mortgage bankers who originated mortgages knowing they could not be repaid, the regulators who looked the other way and the politicians who did nothing about any of it — continued on as if nothing had happened, all in the name of greed.
Institutional investors and retail investors, like pension funds for working men and women, took the biggest hits as the markets began to collapse.
But instead of hearing cries demanding those responsible be brought to justice, we heard that pension systems must be changed and retirees must receive less. Not only were those responsible not held accountable, the companies for whom they worked and who knowingly allowed the collapse to happen, received hundreds of billions of dollars in bailout money. The very same CEOs who drove those corporations into the ground and defrauded millions of Americans out of hundreds of billions of dollars still received their multimillion-dollar bonuses. Pension systems that were victims of this regulatory and financial malfeasance received nothing.
What settlements have been made were little more than slaps on the wrists of the wrongdoers by the courts. Not a single executive involved has been criminally prosecuted or convicted of anything.
Institutional investors, in an effort to recover monies lost when Wall Street and the big banks created their Ponzi scheme, are now leading the charge to prosecute this fraud through civil action.
Pension benefits have been reduced. As part of the employees' commitment to restore soundness to the system, their contributions are increasing by 52% to almost 12% of their wages. They are now required to work longer, pay more for benefits and receive less in return. That is a sign of the times. Everyone has made sacrifices except those who created this Great Recession in the first place.
It's time we stopped blaming retirees and current public employees for our current economic challenges and, finally, hold the culprits responsible personally accountable.
Brian P. Tobin
Deputy Chief, Phoenix Fire Department
Chairman of the board of trustees,
Arizona Public Safety Personnel Retirement System