Pension Fund Managers Receive Bonus While Pensions Remain Flat

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If you were an investment manager for the Texas State Teacher Retirement Fund you made out like a champ this year, being among a select group of fund managers who received more than $8.2 million in bonus payments. According to a report in the Dallas Morning News, teacher pension fund managers received more than double what top employees in every other state agency combined have received since 2007.

To add insult to injury, the article goes on to report that the performance pay came as 300,000 retired educators have gone a decade without a pension increase and as the state grapples with a huge budget shortfall that could cost tens of thousands of teachers their jobs.

According to the Morning News, the hefty bonuses went to 54 investment managers who direct parts of the $100 billion fund. To be fair, officials with the Teacher Retirement System of Texas say the system's portfolio was the top-performing large public investment fund in the nation last year and that the bonuses were based on specific criteria and earned only by surpassing high benchmarks.

The question being raised by critics, however, is whether such bonuses are appropriate during a budget crisis - especially when the system's investments haven't returned to where they were before the market tanked and the recession creeped in.

The market value of the retirement fund portfolios fell from more than $111 billion in 2007 to $87.7 billion in 2008, a smaller loss than experienced by comparable investors, the retirement system officials said. Managers still earned bonuses totaling $2.2 million and $4.3 million in those respective years. Those payments were deferred until the market returned to the black and are part of the $8.2 billion in bonuses paid in January, the newspaper reported.

The state's retired teachers, however, question the fairness of such rich compensation to investment managers when retirees are not receiving part of those benefits, said Tim Lee, executive director of the Texas Retired Teachers Association. He notes the fund can still pay only 81 cents for each dollar retired teachers are owed over the next 30 years.

"When you look at the performance of the teacher Retirement System, it's been good. Has it been outstandingly better than anybody else? That would be a stretch," he told the newspaper.

Texas is just one of several states giving away millions in bonuses even while slashing budgets for education and health care, the article notes.

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