HARRISBURG, Pa. -- Auditor general Eugene DePasquale is looking at ways to save Pennsylvania taxpayers money.
Thursday, he spoke out on his recommendations to resolve the state's pension problem.
State Employees Retirement System (SERS) spokesperson Jay Pagni points to past economic downturns and financial decisions by state government to spend the money elsewhere which partly created the problem.
"The legislature and previous governors felt that pension dollars that were owed to the system, and to the members were better used in education, or in some other social service program," Pagni said.
At nearly 120 pages, DePasquale's audit of the states pension plans reveals the staggering figures and several recommendations to fix the funding of those plans.
"An an unfunded liability projected to be $19.5 billion dollar this year," DePasquale said.
The auditor general notes the findings not only come down to dollars and cents, but common sense.
"Prior to June 20, 2017, the SERS board bylaws did not require trustees to possess a minimum level of investment for financial knowledge, which again, is something that is absolutely crazy," DePasquale said.
DePasquale also blames costly investment management fees that eat into the pension fund's rate of return, which for 2016 was only 6.5 percent.
"The national median of 12.4 percent, which means we were roughly half of the national median, with huge fees being paid to Wall Street money managers," DePasquale said.
It's something that SERS board members are working to correct.
"We have been moving money toward more passive investments over the past several years," Pagni said.
"Since October 2016, SERS moved $3.9 billion of assets into passive investment strategies, which reduced annual external investment fees by approximately $17 million," DePasquale said.
"I've never been a proponent of putting every single dime in passive, but clearly what we're getting at SERS and PSERS, we're not getting our money's worth. When we're paying these high fees, and not even coming g close to the national average, that is a huge problem," DePasquale added.
The auditor general also recommended state employees who used their position to commit serious crimes should lose their pensions.
Some of the recommendations made in the audit will be up to the General Assembly to address.
DePasquale noted that while pension funding isn't the most exciting topic for people, it affects all taxpayers.
"It is a real challenge to get people to pay attention to this and lobby your lawmakers on the necessary reforms that I believe are needed to help make these systems solvent," DePasquale said.