Arizona Gov. Doug Ducey has allowed so many vacancies on the board overseeing the nearly $35 billion retirement pension fund covering the majority of state, city and county workers that it has been unable to do any substantive work since November.
The Arizona State Retirement System board has only four of nine seats filled. Because it lacks a quorum for meetings, it cannot formally sign off on major investment changes if managers believe they are warranted or other legally-required items like overseeing the system's director or signing off on audits and operating budgets.
Board member Dennis Hoffman, an Arizona State University business school professor on the panel since 2010, said the vacancies mean the pension fund is unable to oversee strategic decisions.
"We did have a discussion at the last meeting and I went on record, I said it was imprudent, arguably irresponsible, that we're left like this not being able to carefully vet investment decisions around $35 billion," Hoffman said. "I don't want to unsettle the teachers, I don't want to send the message that in my opinion the agency is running (amok) or whatever."
Both Hoffman and former board member Kevin McCarthy said fund director Paul Matson is a trusted and highly capable fund manager. But an operating board is needed to oversee the direction of the fund. McCarthy was reappointed by Ducey in 2015 but left in November because he was never confirmed by the Senate.
Matson said in an interview Monday that much of the day-to-day operation of the fund is already delegated to him, and said he could even make changes to allocation goals requiring board approval if a consensus of the sitting members agreed. He said such a decision requiring board approval came up last month.
"A situation like that has occurred and we acted," Matson said. "The four board members that were there listened to us, they individually said yes they believed that is prudent. I then walked out of that meeting and advised my staff to change the strategic asset allocation."
Two new members were appointed in 2015, but never confirmed by the Senate and by law left after a year. McCarthy and two others were reappointed but also were not confirmed, and left by November. Ducey has not acted to replace them, although spokesman Daniel Scarpinato said Monday that appointments are likely soon.
The board oversees investments that fund pensions for nearly 575,000 current and former state and local employees, including teachers and university workers. It sets investment policy and allocation goals, approves audits and oversees Matson.
Police, corrections officers and elected officials have a separate plan.
Hoffman, McCarthy and Matson agreed that a long-term lack of a board authority is not good.
"Yeah, it becomes problematic," said McCarthy, who noted he's gotten no answers for the cause of the delay from the governor's office. "I think everybody's interested in what's driving the delay."
Scarpinato could not explain why the board was allowed to drop to four, but said the governor is not intentionally leaving the board short-handed.
"The governor takes the appointments to this board very, very seriously," Scarpinato said. "Especially with his background as state treasurer, he very much believes that having the right people in place there is critical."
Sen. Steve Farley, D-Tucson, said Ducey has been speeding through other appointees, especially judges and members of judicial appointment panels, "because I guess his top priority is to partisanize the judicial process.
"You'd think he would use that same amount of speed to try to take care of the nest eggs of Arizona employees," Farley said.