PERA Board Votes to Investigate Massive Raises at Agency. Executive Director Probst in Trouble?

January 9, 2019

 

- One employee got 196 percent in raises over four years

 

- The beginning of the end for Wayne Probst?

 

- Probst gave himself as 2 percent raise in 2018 that some board members say he wasn't entitled to

 

- All money for PERA salaries crome from its $15 billion pension fund, not the state's general fund

 

The 12-member board of the New Mexico Public Employees Retirement Association fired a broadside at the agency's executive director Tuesday by voting unanimously to investigate and audit five years of massive and questionable raises he has given to agency employees, all apparently without board approval.

 

The investigation, or audit, will also look at whether PERA Executive Director Wayne Probst broke state law by giving himself a 2 percent raise last year that some board members say he wasn't entitled to get. Probst took the 2 percent, across-the-board raise that was given to rank-and-file state workers. But Probist is an at-will employee who serves at the pleasure of PERA's 12-member board, and some board members say the board must approve any raise he gets.

 

Several board members were also angered by $630,000 in raises that Probst handed out last year to 30 of the agency's employees. Those raises ranged from 6 to 59 percent, and some board members said the increases should have gone to the board for approval. But they weren't.

 

(Photo: Wayne Probst.)

 

And, those large pay increases were handed out at a time when PERA is facing a $6 billion long-term shortfall in its pension funds and while it is proposing to eliminate 2 percent cost-of-living-adjustment increases to its 40,000 retirees for three years.

 

Some of the raises over the last five years are indeed eye-popping. Employee Kristin Varela went from making $20.90 an hour as a financial analyst in fiscal year 2015, to making $61.88 an hour as the agency's deputy director in FY18. That's a 196 percent increase.

 

Here are the 2018 raises that Probst gave to PERA workers.

 

Here are four years worth of raises that went to PERA workers.

 

Exactly who will conduct the audit/investigation into the raises wasn't immediately clear. Nor was the exact scope of what it would cover. But one retired public employee, Dan Klein, said the audit has to be thorough and done by an independent outsider who has no ties to the PERA staff. The audit also must look at whether Probst has the legal authority to had out raises on his own without first going to the board for approval.

 

“The audit must be independent of the PERA executive staff; they cannot be allowed to interfere,” Klein said. “The audit must answer the question of whether these salary increases and questionable promotions were legal. If they were not will they be refunded?

 

“How can PERA executive staff hand out huge raises over the last few years, while at the same time Governor Martinez had frozen all state workers salaries?”

 

Klein continued: “How can PERA executive staff claim the PERA fund is in trouble and that small COLA ($50 / month or less) increases will drive the fund into insolvency, yet at the same time hand out tens of thousands of dollars in raises to PERA staff? All paid for out of the same PERA fund? Is this what PERA staff calls being a good fiduciary?”

 

Tuesday's meeting was a blow to Probst in several ways. He had wanted to attend the executive session the boartd went into to discuss his handling of the raises. And so was PERA's General Counsel Susan Pittard. But some board members objected and Probst and Pittard were barred from the executive session.

 

The executive session, which lasted about an hour, wasn't pretty. Board members accused each other of lying, at least one member demanded that Probst be fired, and at least one member suggested that the board cover up any potential wrongdoing by Probst by retroactively approving his 2 percent pay raise.

 

“Let's just fix this,” one board member is reported to have said in an attempt to convince his colleagues to basically ignore the potential wrongdoing. Some other board members also thought it was proper for the board to return to regular session and retroactively vote to approve Probst's 2 percent raise.

 

But at one point the board's fiduciary attorney put an end to such talk by loudly asserting, “You can't fix it.” That's when a majority of board members decided that they had to ahead and investigate or audit what Probst has been doing over the past five years.

 

Those raises that Probst has given out are important because the money for them comes from the PERA's investments funds, not from the state's general fund. In other words, those salary increases have come out of retirees pockets. And, the salary increases and job reclassifications weren't approved by PERA's 12-member board, because, apparently, the board isn't required to approve them.

 

The 2 percent COLA costs PERA about $20 million a year on top of the $1.2 billion it pays out in pensions each year.

 

Pittard said previously that PERA Executive Director Wayne Probst has authority to hire all PERA employees and to give them raises. Those raises must be approved by the state's personnel department, the Department of Finance Administration, and, basically the state Legislature. The PERA board approves recommended budgets and then the Legislature must approve them, Pittard said. In addition, the Legislature must approve any new positions Probst and his team want to add.

 

“The only position that the board hires and fires is the executive director,” Pittard said. “The executive director hires and fires all the employees for the agency. The executive director is in close communication with the chair and vice chair regarding all personnel issues.”

 

Since 2014, PERA has been budgeted for between 80 to 87 positions each year, and since then the agency's annual salary costs have increased from $4 million to $5.3 million, according to the state's Sunshine Portal.

 

PERA has faced solvency issues in the past. In 2013, the state Legislature approved a solvency fix that included reducing COLA payments from 3 percent to 2 percent a year, increasing the amount of employer and employee contributions, and stricter retirement eligibility guidelines for new hires.

 

The problem that PERA is facing is that yearly contributions from employers and workers aren't enough to pay for future accumulated benefits. And Probst has said that investment income isn't enough to make up for the shortfall.

 

The PERA board has recommend a new solvency fix that includes eliminating the COLA for three years and increasing the amount that employees and state and local governments contribute to the fund. For general state workers the amount of their salaries that they contribute to their pensions would rise to 10.42 percent from 8.92 percent. Government—meaning taxpayer—contributions would rise to18.74 percent from 16.9 percent.

 

The average yearly PERA pension is around $29,000.

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