There’s a bit of a tiff between the PERSI board and the Otter Administration, regarding a $100,000 fund transfer request in the PERSI budget for next year. No state general tax funds would be involved; it’s a transfer between PERSI funds that come from fees paid by employees and employers in the retirement system, which include both state and local government agencies.

Jody Olson, a Boise attorney who has chaired the PERSI board for 30 years, told JFAC this morning, “It’s amazingly difficult for us to come here and have to talk about a $100,000 item.  We have money running all around the world. We have billions in overseas investments, mostly out of London.”

The fund transfer would cover pay increases for portfolio staff if needed. Don Drum, administrator of the Public Employee Retirement System of Idaho, said, “What we experience in our agency, and it’s not just with portfolio, it’s with operations as well. Idaho is one of the most successful pension plans, and fortunately we had an extremely successful IT conversion. And we have staff that get recruited not necessarily by entities within the state of Idaho, but we have staff who get recruited to move outside the state of Idaho and work for our vendors and our peer systems. Oftentimes when that happens, those people are offered significantly more money.”

In the past year, Drum said, PERSI lost three operations employees who were offered double their pay. “We didn’t even try to counter those offers,” he said.

The portfolio staff, who manage a $15 billion investment portfolio, currently consist of the chief investment officer, whose salary is set at $300,000; an investment officer, $124,600; two senior financial specialists, $54,900 and $42,100; and one administrative assistant, $44,000. The agency noted that the state of Washington pays its retirement system investment officers between $214,000 and $294,000; and chief investment officers $348,000 to $548,000.

Gideon Tolman, budget analyst for Otter’s Division of Financial Management, told JFAC, “Even though PERSI is a dedicated-fund agency, the governor treats all agencies similarly, and with this particular request, there isn’t a lot of turnover in the portfolio management team, and the salaries are pretty comparable with surrounding states. I know in the line item description it talks about the state of Washington, but when you look at other similar states, the staff members have pretty comparable salaries. So an increase in salaries for that staff wasn’t a priority for the governor.”

Drum said, “Bob Maynard is one of the most successful chief investment officers in the United States. And I think the board’s concern is if Bob Maynard were offered a position, they want to have the ability to counter that offer if possible.”

Olson told lawmakers that over the past decades, the state has allowed the PERSI board latitude in deciding on such fund transfers. “We think we know what we’re doing here,” he said. “The current DFM director could have easily handled this administratively, and I wouldn’t be here – I’d be at my law office, making a living.”

There were no questions from JFAC members today about PERSI’s proposed budget for next year. Otter is recommending just a 1.6 percent increase in PERSI’s $7.9 million budget next year, with no general funds; the agency had requested 2.1 percent, also with no general funds.

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