Debate continues over auditor's authority

HARRISBURG (AP) -- At times skeptical and at times mystified, judges grilled attorneys on whether state Auditor General Robert P. Casey Jr. has the authority to review the investing practices of Pennsylvania's two largest public-employee retirement systems.
The legal battle over auditing the pension funds has taken on a life of its own during the past year and led to a war of words between two of the state's top elected officials, Casey and Treasurer Barbara Hafer.
In a half-hour hearing Wednesday, attorneys from both sides were repeatedly interrupted by Commonwealth Court judges, who were unable to grasp accounting terms or incredulous that the retirement systems should be the only state commission, board or agency to escape the auditor general's scrutiny.
"Why can't the auditor general audit this money? ... It's everybody's money," the court's president judge, James Gardner Colins, asked Edward F. Mannino, a Philadelphia attorney hired to represent the two retirement systems.
If Casey wants to audit the State Employees' Retirement System and the Public School Employees' Retirement System, the Legislature will have to expand his powers, Mannino replied.
"He's a fiscal watchdog, but he's got to stay on his property," Mannino said.
Judge Dan Pellegrini questioned whether an agency that receives taxpayer money should be exempt from the state's auditor.
"Fundamentally what you're arguing is 'We are unto ourselves,'"Pellegrini said.
Casey's chief of staff, Richard D. Spiegelman, told judges that the two retirement systems spend about $250 million each year to hire investment managers or advisers.
, and that no review has been done in 25 years to find out whether pensioners and taxpayers are getting their money's worth.
It was not clear how soon the seven judges who heard the arguments might render a decision, and the losing side can appeal to the state Supreme Court.
For now, some sentiment in state government has favored Casey.
Resolution
On July 18, the state House of Representatives overwhelmingly passed a resolution in favor of the audit. And the state attorney general's office in April refused to allow the pensions to hire an outside firm to do a similar performance audit unless the auditor general's office refuses first to perform it.
PSERS has more than $42 billion in assets and a membership of more than 383,000 active school employees and retirees. SERS has more than $21 billion in assets and a membership of 197,000 active workers and retirees.
The plans are funded by a combination of employee and employer contributions and investment gains. More than $470 million in state and local tax dollars are slated to be paid into the funds this fiscal year.
Casey, the Democratic son of the late Gov. Robert P. Casey, went to court in January after the retirement systems refused to be interviewed or to hand over documents that his office sought, he said.
Hafer, a Republican who sits on the boards of both funds, accused Casey of trying to find a campaign issue for his quest to become state treasurer in next year's election.
Mannino, who once practiced law with Casey's father, repeated that accusation Wednesday.
"Every politician wants to expand his territory of operation," Mannino said. "He's no different."
Casey, in an interview later, said he's heard it before.
The accusation is "the last refuge for an agency that doesn't want to be audited," he said.