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illustration: Shoshana Gordon/Axios

Pennsylvania's $64 billion teachers pension fund is under fire for misstating its investment returns.

Why it matters: The dispute impacts whether or not around 100,000 active Pennsylvania teachers need to increase their annual pension contributions.

Background: PSERS is legally required to increase employee contribution rates if it doesn't meet certain investment benchmarks. In this case, it's 6.36% over the prior nine years.

  • PSERS appeared to have just cleared that hurdle, in December reporting a 6.38% rate, which meant teacher contributions would remain flat.
  • In March, PSERS announced that its outside consultant had made a "calculation" error, and that the correct nine-year performance figure was 6.34%. Thus, teachers would need to pay more — with the new rates in effect through at least July 2024.

The big question, of course, is if this was just an honest mistake or an intentional effort to keep PSERS below the threshold.

  • Under normal circumstances, PSERS would get the benefit of the doubt. But the pension is under federal investigation related to around $13.5 million in real estate investments near its Harrisburg headquarters, and it's possible that the probe also extends to the portfolio performance figures.
  • Just yesterday, a PSERS board member hired an outside "transparency council," after being unable to obtain satisfactory answers about how the returns were calculated.

Collateral damage: The controversy also has stirred up animus toward alternative investments, in which PSERS is very heavily involved.

  • Just check out this N.Y. Times story that somehow manages to conflate all of the above troubles with PSERS also backing a buyout fund whose portfolio includes a prison payphone operator.
  • It seems the tenuous argument goes something like: Alternative investments are more exotic and more secretive than are public equities, so more prone to book-cooking

The bottom line: PSERS needs to get its house in order.

Go deeper

Updated 6 mins ago - Politics & Policy

Biden lays out $1.75 trillion "framework" before Europe departure

President Biden in Kearny, N.J., on Oct. 25. Photo: Michael M. Santiago/Getty Images

President Biden announced Thursday a "framework" for $1.75 trillion in social program and climate change spending after failing in prior efforts to win over his fellow Democrats on a much broader and costlier package.

Why it matters: Biden is gambling that by proclaiming the broad contours of the proposal, which he immediately began selling in a meeting with House Democrats before jetting off to Europe, progressives will vote for his $1.2 trillion infrastructure plan if and when House Speaker Nancy Pelosi brings it to the floor.

Economy slows in third quarter amid Delta variant

Data: FRED; Chart: Axios Visuals

The U.S. economy increased at an annual rate of 2% in the third quarter, the Department of Commerce said Thursday.

Driving the news: The gross domestic product figures for July through September come in much lower than the 6.7% increase in the second quarter, reflecting the "continued economic impact of the COVID-19 pandemic," according to the Bureau of Economic Analysis at the Department of Commerce.

Top Dem says Big Oil put Earth on "brink" of catastrophe

Illustration: Annelise Capossela/Axios

Don't expect a sedate House hearing Thursday on allegations that Big Oil has intentionally sown doubt about climate change.

What they're saying: "For far too long, Big Oil has escaped accountability for its central role in bringing our planet to the brink of a climate catastrophe. That ends today," Rep. Carolyn Maloney, chairwoman of the House Oversight and Reform Committee, intends to say in her opening remarks shared with Axios.