Gov. Kate Brown has settled on a retired tech executive to be the next board chair for Oregon’s complicated, underfunded and controversial Public Employees Retirement System, despite the nominee’s apparent reluctance to immediately lead the body.
Sadhana Shenoy is the right choice to lead the board because “she’s extremely bright” and has “great technical expertise,” Brown said Thursday during a news conference.
Shenoy does have the financial management background that the state typically looks for in PERS Board members. She is the former chief financial officer of Moovel North America, which develops TriMet’s mobile ticketing app and other transportation technology. She’s a certified public accountant and has a background in information technology that could be useful in overseeing a system that has major challenges in that arena. She also has experience serving on nonprofit and community boards, with an evident penchant for environmental causes.
But Shenoy lacks any direct experience in pension management or administration. That’s experience that governor’s office originally said it was looking for in a new board chair, and background that could come in handy at a time when the administrative complexity and political profile of the system are rising. She would also be joining the board in tandem with a new agency director and another board seat about to open up.
Indeed, during a meeting with the outgoing chair, John Thomas, after the board’s last regular meeting on Aug. 3, Thomas said Shenoy told him she was eager to learn but reluctant to join the board as chair because she had no experience administering or overseeing such plans.
Shenoy did not return calls for comment. In her statement of interest filed with the governor’s office, Shenoy said, “I have the technical skills and background to lead a board oversee (sic) the management of PERS Funds with responsibility, acumen and foresight. These skills include a sound background in Finance, Accounting and Mathematics and working proficiency in modeling tools and techniques.”
Chris Pair, a spokesman for Brown, said “Shenoy was chosen to lead the board and assist the agency of tomorrow, not of the past … For the PERS system to modernize and meet the challenges ahead, the board must adopt a creative approach.”
The PERS Board was reconstituted in the wake of Oregon’s 2003 pension reforms to give majority control to independent members with no financial connection to the system. It currently has five members, including one employee representative, one employer representative, and three independents.
One of those independent seats – the chair – is open now, and another will become available at the end of the month when that board member’s second term expires. That board member, Krystal DeAsis, has agreed to stay on until the next round of legislative appointments.
Theoretically, the board is nonpartisan, with members focused on keeping the system on a sound financial footing. In practice, however, it faces strong political pressures from a variety of stakeholders, particularly to keep costs down. With Thomas’ resignation and Shenoy’s confirmation by the Senate, it would be made up entirely of Portland-area Democrats – one a union leader and two others, including Shenoy, who are donors to Brown’s campaign.
The PERS Board does not set benefit levels for retirees or manage PERS investments. Rather, it administers the system and is directly responsible for setting the pension contribution rates that government employers – and ultimately taxpayers – are required to pay to meet those benefit obligations. The board also adopts economic assumptions and funding policies that influence how big a budget hit those employers will face each biennium.
In the last few years, that’s been a very big hit indeed. Required contributions have more than doubled since 2010 and are slated to jump nearly 40 percent again next year. That will leave local governments, schools and agencies scrambling to pay a collective tab of $2 billion a year while trying to maintain services.
To ease that budget pain, the PERS Board has adopted policies to slow walk the rate increases that need to take place to dig out of the system’s $22 billion in unfunded liabilities. It faced pressure last year, and to some degree acquiesced, to maintain higher assumptions about investment earnings, which would otherwise require bigger contributions from employers. And there is periodic pressure for the board to extend the payback period of its pension debt from 20 to 30 years, which would lower employers’ required contributions but would actually increase the pension debt for the first two decades.
Debate over the system will return during the 2019 legislative session as Brown and lawmakers try to alleviate the next spike in required contributions from employers. There are ideas on the table, including new taxes and proposals to lower benefits and share costs with employees. But there is no political consensus. And that could bring renewed pressure on the PERS Board to do something.
The governor’s office has had difficulty filling the chair’s job. It backed away from its first favored candidate, who happened to be Brown’s personal accountant, this spring. Thomas said he forwarded several names to the governor’s office for consideration, including two with direct experience managing retirement plans.
All were registered Republicans, however, and it’s not clear if they were considered. One of them told The Oregonian/OregonLive he had never heard from the governor’s office.
Pair, the governor’s spokesman, said Thursday that political affiliations played no role in Shenoy’s selection or the recruitment of candidates.
Kevin Olineck, who recently took over as executive director of the PERS agency, said his staff had been preparing orientation material, and would be as supportive as possible to bring new members up to speed. He said he was impressed by Shenoy’s broad background and the due diligence she was doing. He also said there can be surprising advantages of bringing someone in fresh.
“From a governance perspective, diversity of thought and experience is a very important attribute to any board,” Olineck said. “Sometimes those who haven’t got so much experience in a field can get right to the heart of an issue.”
