According to a Legislative Finance Committee (LFC) report, the Educational Retirement Board (ERB) fund investments last year were bad enough to rank the ERB among the worst performing funds of its kind in the nation.
But, on July 1, state lawmakers began forcing education employees to put more of their hard-earned money into the ERB, the worst performing fund of its kind in the nation, by increasing retirement deductions with HB 854.
Legislators and Gov. Richardson passed HB 854 during the previous legislative session, and the law went into effect July 1.
HB 854 increases education employees' retirement paycheck deductions by 1.5%. If 854 is not repealed, then $42 million a year for two (2) years will be taken out of education employee and state employee paychecks. In total, $84 million of increased retirement deductions will be sent off to the ERB and PERA to be invested in Wall Street.
The ERB fund did so poorly that the LFC warned its ability to meet obligations to education retirees is in jeopardy if performance doesn't improve.
The decline lowered the ERB's 10-year return to 1.8 percent. ERB requires a long-term growth rate of 8 percent to accumulate enough money to honor commitments to retirees, according to the LFC.
The ERB funds ranked in the 85th percentile, meaning that 84 percent of similar funds performed better.
The ERB is under fire for having hired out-of-state consultants. These consultants have been indicted on 127 separate counts in the State of New York for pay to play allegations. These same consultants recommended that ERB funds be invested in highly risky hedge funds, resulting in one loss of $90 million.
ERB's worst performing assets were hedge funds. The hedge fund assets under-performed "by a staggering 1,920 basis points," according to LFC.
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