The Washington State Senate is considering a new bill that would give the state's three municipal pension funds the option of shifting responsibility for their investment management to the Washington State Investment Board, Olympia.
Two of the three funds, however, say they are not at all interested. Senate Bill 5240, introduced by primary sponsor Sen. Reuven Carlyle and co-sponsor Sen. John Braun on Jan. 16, said the $2.9 billion Seattle City Employees' Retirement System, $1.1 billion Tacoma Employees' Retirement System and $307 million Spokane Employees' Retirement System are too small and cost too much relative to the Washington State Investment Board's $132.3 billion in assets it oversees, which includes $102.6 billion in defined benefit plan assets.
The bill authorizes the investment board to negotiate with what it calls the "first-class cities" to manage the assets of their retirement systems.
Jeffrey Davis, executive director of Seattle's retirement system, said in an email that the pension fund is "not seeking that option" and that "similar bills have been introduced in past state legislative sessions, but have not passed."
Tim Allen, the Tacoma retirement system's retirement director and chief investment officer, said in an email that "SB 5240 is very similar to other bills that have been proposed in the past (HB 1899 in 2013 and SB 5116 in 2017) but is not something the Tacoma Employees' Retirement System initiated. As with the previous bills, I have made the TERS board aware of the possibility, but I think the legislation would have to be finalized before the board adopts a formal view."
Spokane's Phillip Tencick, the system's retirement director, said his pension fund does not support the current bill due to "governance and risk management shortcomings" of the bill, specifically how it allows for any of the city's councils to implement the transfer of assets.
"The city council is not a fiduciary for the pension plan and could enact the option against the wishes of the plan's board and participants," Mr. Tencick said. He also noted his plan and WSIB have differing liquidity requirements.
WSIB executive director Theresa Whitmarsh said in a statement: ""The WSIB has reviewed this proposed bill this year and in past sessions, and we remain entirely neutral on it. First and foremost, we always look at such proposals in terms of our commitment to our beneficiaries. We have continued to keep open communications with our investment colleagues at the three cities affected by this proposal, and we certainly respect their abilities to carefully evaluate the legislation."
Mr. Carlyle in a telephone interview said he has introduced the bill solely because "the city pensions in our state underperform the state investment board when you look at the aggregate net cost."
He said that while he believes absolutely that joining WSIB should solely be a local decision, he said the cities' officials "have a responsibility to pay attention to the math, look at the numbers and recognize at some point this warrants elevating the dialogue on behalf of the beneficiaries."