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Troy University’s Johnson Center: A Poor Steward of the Truth


By Dr. David G. Bronner


A lie gets halfway around the world before the truth has a chance to get its pants on.” -Winston Churchill

On July 29, AL.com published a guest opinion editorial written by Daniel J. Smith, an associate professor of economics at the Johnson Center at Troy University criticizing the Retirement Systems of Alabama as a “poor steward” of retirement resources. The article is scandalously inaccurate and comes from an institution which is partially funded by an organization that seeks to abolish public pensions. The Johnson Center has a history of publishing debunked “studies” that are widely known to contain false claims, such as asserting that RSA is running out of money.

The Johnson Center and Professor Smith’s continued reckless perpetuation of these falsehoods only serves to confuse people and make hundreds of thousands of RSA members and their families feel uncertain about their financial security. That is wrong and we have a duty at RSA to make sure that the public and our members know the truth. Here are a few examples of the most egregious of these misrepresentations and the facts that disprove them:

Johnson Center: RSA is not solvent and retirees’ benefits will be reduced.

Truth: Between 2009 and now, RSA has paid out about $15 billion in benefits to its members and increased its assets by 46% to approximately $35 billion. Thus, today RSA has $11 billion more in assets after meeting all of its obligations than it did in 2009. RSA is NOT running out of money and there is NO CHANCE that retirees’ benefits will be reduced.

Johnson Center: RSA makes risky investments and falsely “self-report[s]” that it is financially sound.

Truth: Consistent with best practices, RSA invests its members’ assets in a diversified portfolio that is allocated among stocks, bonds, real estate and private placements. RSA’s overall investment returns have averaged almost 11 percent for each of the last five years and are calculated by an independent third party custodian – not RSA. RSA’s investment returns have been ranked in the top 13% of all major public pensions for the last three years and in the top 25% over the last five years.

Johnson Center: RSA plays “fast and loose” with members’ money when it invests in private companies.

Truth: About 80% of RSA’s investments are in publicly traded stocks and bonds. Private placements, which include investments in privately held businesses, comprise only about 10% of

RSA’s overall portfolio. In the fiscal year ending September 30, 2014, private placements earned approximately 13.5%. There is no investor who always picks profitable investments, but RSA has a proven record of picking more winners than losers. By the way, Warren Buffett thinks this is a good investment strategy: he’s purchased 100% ownership stakes in over 50 companies.

Johnson Center: RSA uses “questionable accounting practices.”

Truth: RSA’s holdings are audited annually by an independent Certified Public Accounting firm to ensure that RSA’s accounting practices comply with all applicable accounting standards, including those of the Governmental Accounting Standards Board (GASB). RSA is also audited periodically by the Alabama Department of Examiners of Public Accounts. RSA has never been found to have engaged in any dubious accounting practice.

Johnson Center: RSA is underfunded because of its bad practices.

Truth: RSA has an unfunded liability, but no more than the average public pension fund and not at a level which poses a threat to the sustainability of the system. The causes of RSA’s underfunding are the financial collapse of 2008 and numerous expensive unfunded cost-of-living increases passed by the Legislature. RSA’s situation is like a homeowner who doesn’t have all the cash in the bank to pay off his mortgage, but instead pays it off over time. RSA has implemented a plan, which is already working, to pay off its unfunded liability.

The RSA takes its fiduciary responsibility of paying lifetime benefits for its members and the many generations of future members very seriously. The RSA has modified its policies and worked with the Legislature to make changes that have made the retirement system more sustainable. The RSA’s investments in Alabama and the benefits it pays to its members help support Alabama’s economy and its citizens while earning average annual returns of 8% over the last 25 years. Rather than perpetuate misinformation about RSA, the Johnson Center and Professor Smith should concentrate on creative writing, since they are so talented at creating fiction.


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