In a job interview, a good recruiter will ask about your skills – all of them, not just the last six months of the year.
When considering contractors to repair your roof, you’ll want to look at how customers rate them – not now but in the long run.
And if you’re going to trust an investment manager with your money, you’ll want to know their track record, including their short-term and long-term financial performance.
The same should be true when evaluating how well Pennsylvania’s Public School Employees’ Retirement System (PSERS) is managed.
A lot of ink has been spilled about PSERS in the past few years, and much of the media and political analysis has missed one important point.
Over the long term, PSERS has taken a proactive approach to saving the money it has given to retired school employees — and the Pennsylvania economy.
Based on data for the fiscal year ending June 30, 2022, PSERS has outperformed its portfolio by 7% on average over a three-year, five-year, and 10-year period. Looking at three and five-year periods, PSERS’s average return was better than 95% of the peer group in public pension funds.
You wouldn’t know it if you read reports that only look at how PSERS is doing in the short term in the markets.
It is true that returns for the year ended June 30 were modest – with the economy reeling from global inflation and the looming recession. But even then, PSERS funds were in the top 1% of their peer group – with initial returns coming in at 2.28% per year, above the average of -7.6% among peers.
I’d rather have a rough year than wrong numbers any day of the week.
The question of PSERS management is a serious one – not just for PSERS’ nearly 500,000 employees and retirees but for Pennsylvania taxpayers and the state’s finances.
Retired teachers, cafeteria workers, bus drivers, and other social workers count on their pensions to survive their retirement. And let’s be clear: They’re not making much money. PSERS retirees earn a minimum of $25,992 a year, according to PSERS data.
In 2011, new pension reforms began in Pennsylvania, ensuring that progressive school employee pensions are affordable for state and local taxpayers. For all new hires since then, the annual rate of new benefits earned each year by workers after 2011 is less than 3%. The lion’s share of pension benefits after 2011 comes from employee contributions and income from PSERS.
The story does not end here.
Thousands of school leavers who rely on PSERS take their limited benefits and spend them on groceries, clothing, and other necessities. They use it to put gas in their cars. They use it to pay for doctor’s visits and prescriptions.
In other words, they put it back into Pennsylvania’s economy.
In the 2020-21 fiscal year, PSERS pensions for retirees totaled approximately $7.1 billion. Much of this went directly to governments and financial institutions.
According to a study by the National Institute on Retirement Security (NIRS), this money was wasted on the economy when retirees’ money became someone else’s money, resulting in a positive economic benefit of $14.6 billion for the state economy. This economic growth helped support more than 66,000 jobs in Pennsylvania.
There is no doubt that we all have an interest in a system like PSERS that contributes billions to our national economy. As taxpayers and Pennsylvanians, we should want to see PSERS run properly. And, of all things, it is.
Throughout my teaching career, I have recognized that pensions are a long-term investment, and that one year up or down is not something I can work on. We have to look at the long term.
PSERS has steadily grown its wealth since the Great Recession by investing in a variety of sectors. Of course, it will affect the financial problems that we all deal with. There is no way to avoid a global recession.
What we do know is that the fast and steady wins the race. And, looking back at the history of PSERS, we can be sure that things are going well.
Aaron Chapin is a social studies and reading teacher at Stroudsburg Area Middle School and vice president of the Pennsylvania State Education Association, which represents approximately 177,000 future workers, employees, and retirees and health care workers in Pennsylvania.