Article: Montana public employee pension fund board cancels meeting in wake of lawsuit over illegal secret meetings

"A combination of poor investment returns by the funds earlier this decade and ill-advised increases in benefits for retirees have led to the shortfalls."

Meeting canceled in wake of lawsuit

By MIKE DENNISON - IR State Bureau - 11/17/05

HELENA — In the wake of a legal showdown with Gov. Brian Schweitzer, the board overseeing $4 billion in public-employee pension funds canceled a meeting Wednesday on its decision to hire a new director.

The action came the day after Schweitzer sued the Public Employees Retirement Board, saying it held illegal secret meetings during its hiring process for a new executive director to manage the retirement system.

Schweitzer’s budget director, David Ewer, also questioned whether the board picked the best candidate to direct the debt-ridden system, whose largest fund faces a potential $500 million deficit.

Boards overseeing public pension funds need strong financial leadership, he said, and must share the blame for the entire system’s potential $1.4 billion shortfall.

“It wasn’t just bad investments,’’ he said. “It’s a combination of a lack of sufficient competency by the various boards and a lack of sufficient attention and understanding by the Legislature.’’

The Schweitzer administration is proposing to bolster the retirement funds with a $125 million infusion of cash this year.

As Wednesday’s meeting began, board President Carole Carey of Ekalaka immediately suggested canceling it. She said since Schweitzer has sued the board, there was nothing to discuss.

“Had the lawsuit not been filed, we were very willing to work with (Gov. Schweitzer),’’ she said. “We’ll let the lawsuit take place and see what happens. It was sort of taken out of our hands.’’

The meeting had been called to respond to a Nov. 10 letter from Schweitzer, who said the board may have violated state law as it chose to hire Terry Teichrow as the system’s executive director.

Schweitzer asked the board to rescind its hiring decision and re-open the position. Teichrow succeeds Mike O’Connor, who retired this fall.

The seven-member board, which voted unanimously to cancel the meeting, refused to answer questions from the public Wednesday, referring them instead to the board’s lawyer.

The board decided nearly three weeks ago to hire Teichrow to direct the Public Employee Retirement Administration, which manages eight separate public employee pension funds worth $4 billion.

Its largest fund pays benefits to 14,500 retirees and covers another 28,000 state, school and local government employees.

Teichrow had been an education specialist in the Office of Public Instruction, managing a federally funded program for homeless, neglected and delinquent kids.

Teichrow also sat for more than a dozen years on the very board that decided to hire him as executive director, and had served as its president.Teichrow declined to comment Wednesday.

The Schweitzer administration has made it a top priority to fix financial problems with PERS and the Teachers Retirement System, which faces its own possible deficit of $900 million.

A combination of poor investment returns by the funds earlier this decade and ill-advised increases in benefits for retirees have led to the shortfalls.

Ewer said Wednesday the governor’s office is continuing to investigate the PERS board’s hiring of Teichrow and will issue a report with recommendations by the end of this month.

He said the administration believes key decisions on the hiring were made at an Oct. 17 meeting of the board’s personnel committee, which had no public notice of the meeting. The Schweitzer administration has alleged the meeting was secret and illegal.