Three years later, MBTA pension fund still has no permanent leader
Nearly three years after its director resigned, the MBTA Retirement Fund’s board has yet to name a permanent replacement, adding to the uncertainty surrounding a $1.5 billion system that’s long wrestled with criticism of its management.
The lack of movement comes as the MBTA pension board has been consumed by a separate debate over whether to hand management of its investments to the state’s $69 billion pension system — a move Governor Charlie Baker and his administration’s appointees have long pushed.
Should it ultimately transfer some oversight to the state’s Pension Reserves Investment Management board, the responsibilities of the T retirement board’s executive director could change drastically.
And that potential has appeared to table any serious progress toward conducting a leadership search.
None of the board’s formal agendas from 2017 or 2018 includes a discussion about a new director, even as the fund’s financial picture darkened. And copies of its meeting minutes from the same time frame — some of which are heavily redacted — give no indication the board debated naming a replacement.
The board never held a vote, or considered a candidate in open discussion either, meeting minutes show.
That’s left John P. Barry, a former MBTA rail repairer who first joined the pension fund as deputy director in 2006, to lead the system with an interim tag for the past 33 months. Barry replaced Michael Mulhern, who announced his resignation from the fund’s top position in June 2016 before ultimately leaving two months later.
Steve Crawford, a fund spokesman, declined to comment on board deliberations Tuesday.
Barry’s management has drawn praise from union representatives who serve on the board. But fund critics say the gap between permanent leaders appears to be a byproduct of the protracted back-and-forth over whether to transfer investments to the state, as allowed under a law Baker signed in 2017.
“The thought was, if the governor’s behind this, why replace Mulhern if this transfer is going to happen so quickly? I don’t think what was anticipated was this foot-dragging,” said Mark T. Williams, a Boston University professor who has previously questioned the fund’s financial health and professional management.
“It’s highly unusual to see a pension fund go three years without having someone [permanent] at the top — and to have a board that is clearly not on the same page about the direction of where the fund should go,” Williams said.
Like his predecessor, Barry is an MBTA retiree, taking $46,000 each year in pension benefits on top of his $196,000 fund salary. He has an MBA in finance from Suffolk University, and before being hired in 2006 had served as a trustee of the MBTA Retirement Fund when he was secretary treasurer of the Boston Carmen’s Union Local 589.
James O’Brien, president of the Carmen’s Union and a fund trustee, said Barry has excelled in leading the fund, including making the fund more transparent. Under Mulhern, the fund was often criticized for secrecy.
Barry has “provided increased accountability, and demonstrated a commitment to the long-term success of the fund,” O’Brien said in a statement.
But his tenure has also been marked by heightened scrutiny of the fund’s finances. The system’s unfunded liability gap has ballooned to $1.4 billion, and in 2018 it reported taking a $151 million hit amid a volatile market. That came after reporting a 15.8 percent return on its investments in 2017.
The fund has also continued to rely on ever-increasing financial help from the taxpayer-and rider-funded MBTA, where officials are openly fretting about the payments’ growing share of their own payroll costs.
The T was on track to contribute $103 million to the pension system this fiscal year, more than triple what it gave in fiscal year 2007.
In a statement, Barry touted the fund’s progress in his tenure, noting that in the past three years, it’s had gross investment returns of 9.25 percent, compared with 9.5 percent for the state pension fund.
“I am pleased to serve the active members and retirees of the MBTA Retirement Fund on an interim or on a permanent basis,” Barry said, arguing that under him the fund has “achieved consistency in performance and transparency.”
That hasn’t quieted the calls for the fund to transfer its investments to the state. The Pension Reserves Investment Management board has historically outpaced the T fund in several areas, including in private equity.
A fund-commissioned report showed that, as of mid-2017, the Pension Reserves Investment Management fund had an 11.4 percent net return over 10 years in that asset class, far above the MBTA system’s 7.39 percent, the Globe has reported.
Crawford, the fund spokesman, said both the administration’s and union appointees support “moving portions of the retirement fund’s investments.”
But the T and the fund remain at odds about what steps need to be taken before a vote can even happen. The T and its largest labor group, the Boston Carmen’s Union Local 589, remain locked in monthslong negotiations over a new pension agreement, one of the documents the union says must be amended before any vote can happen — a point on which the T’s management disagrees.
Even for some at the T, the search for a permanent leader isn’t viewed as the fund’s top priority.
Brian Shortsleeve, a former MBTA general manager who now serves on the agency’s control board, said the fund’s trustees should be primarily focused on shifting management of its assets to the state.
“The taxpayers of Massachusetts pay millions of dollars to PRIM to manage the state pension fund,” Shortsleeve said Tuesday. “The focus on the T pension board should be to get the assets into PRIM.”