How this government teacher managed federal investigators and board fights at Pa.’s $70 billion school pension

Just six meetings a year, they told him. Then, things got complicated.

Chris Santa Maria, a social studies teacher at Harriton High School and head of the Lower Merion union local, was asked in 2016 by a state teachers’ union officer to run for one of the unpaid trustee seats on the board that oversees the taxpayer-funded school pension system, PSERS, for its half-million working and retired members.

“It’s about six meetings a year,” Santa Maria said his predecessor told him. “You drive to Harrisburg; they send you to a few conferences; you learn about pensions; they pay for your travel and hotel.”

“Had I known what lay ahead,” he would have passed, Santa Maria said last week. Santa Maria, who retired from Harriton in June, will step down next month as chairman and leave the board. His successor will be Richard Vague, a banker-turned-investor and donor who represents Gov. Josh Shapiro on the board. Vague will be the first non-teacher to chair PSERS in 18 years.

Santa Maria said the pension board involved a lot more time, energy, and stress than he expected — especially after he stepped up as the board’s chairman in 2020, just in time for a series of shocks.

For much of his tenure, “I was on my phone daily,” overseeing an internal investigation, responding to a federal probe, scheduling emergency private meetings, brokering compromise, he said. The unpaid job sometimes took more work than his high school classroom.

By the time he became chairman, Santa Maria had already climbed what he called a “steep learning curve,” studying arcane pension topics and meeting the parade of wealthy Wall Street pros who tramp to pension boards selling private equity, hedge, and real estate funds. PSERS owned a lot more of those private and foreign investments, and a lot more U.S. stock, often with disappointing results, compared to other plans, studies showed.

That was business as usual. Santa Maria couldn’t have anticipated what else lay ahead: bad math, boardroom revolts, factional division, federal investigations, weekly secret meetings, executive departures, and market collapses that made billions disappear. “It’s been a difficult year for all of us,” he told fellow trustees in early 2022, when they urged him to stay in the post.

PSERS survived the turmoil, though it has spent more than $8 million on outside lawyers and advisers to cope with it all, and litigation continues. With funding from state and school taxpayers, the agency came out of the pandemic and the investigations bigger than ever: Assets now top $70 billion.

Having weathered a string of crises and challenges, Santa Maria says the board of public officials, school directors, and pension system members did its job — which was reassuring for a man who taught government, politics, and economics. He shared his experience of a layman learning to oversee big money for his fellow school staff in a recent Inquirer interview.

In 2019, a state pension reform commission — backed by Democratic state treasurer and PSERS trustee Joe Torsella and a group of Republican legislators but resisted by top PSERS staff — issued a report critical of the performance and costs of the pensions’ private investments.

Appointed and elected officials who in the past had worked in harmony with teachers’ union members, who hold five of 15 board seats, began pressing to replace the PSERS board’s chair, Melva S. Vogler, a long-serving teacher from the Poconos, whom they saw as too close to the system’s hired staff and their taste for expensive private investments.

Dissidents approached Santa Maria as a newcomer acceptable to both sides who was willing to take board insurgents seriously and seek compromises, even though he mostly sided with other union members in support of the status quo.

Santa Maria, like other teacher-trustees, insists union influence hasn’t translated to favoring union-supported or politically connected investments over others: “Mostly our decisions are based on how much return we are getting. ... I cannot recall we made any decision based off what it meant to organized labor.”

The next attempted putsch targeted leaders of the PSERS staff — executive director Glen Grell, a moderate former GOP state representative whom union leaders saw as a buffer against right-wing pension-defunding proposals, and James Grossman, at the time the highest-paid Pennsylvania state employee and the architect of PSERS’ private investment strategy.

Santa Maria ascribed the urgency of the reformers’ push against the pair to “Harrisburg politics,” pointing out that “we had been evaluating Glen very positively each year.”

When Vogler gave way to Santa Maria as chairman, PSERS investments had just met an important benchmark: the plan had reported that its 2011-2020 returns were just high enough to avoid an increase in how much teachers contribute from their paychecks.

But in March 2021, the agency was forced by outside counsel to make an embarrassing revelation: PSERS’ investment returns had been exaggerated, and 100,000 teachers would have to pay more after all. A federal grand jury in Philadelphia had sent FBI agents with subpoenas to Harrisburg to find out why.

By June, State Treasurer Stacy Garrity and five board allies were calling for the two leaders to be fired. But lawyers told Santa Maria the probe made it a delicate time for a public split with the top staffers.

Santa Maria and other board members worked with the two state representatives on the board, Frank Ryan (R., Lebanon) and Matt Bradford (D., Chester) to instead negotiate the leaders’ separation later in the year.

With the old leadership gone, the board approved proposals to dump its hedge funds, cut back on private equity, and sell properties accumulated by the previous staff. The government later said no charges would be filed in relation to the miscalculation. PSERS is now suing its performance consultant, Aon, which denies that the error was its fault.

Santa Maria declined to comment on the miscalculation, which remains the subject of litigation.

After the 2008-2009 stock market collapse, “PSERS invested in private assets more heavily than other funds,” in an attempt to hedge against another market collapse, Santa Maria said. But today, “state government is now funding the pensions better. And Treasury bonds are paying 5%,” so easy-to-trade debt securities are a better investment than they were, relative to private investments.

Still, Santa Maria concluded, “I don’t think we are moving to less diversity. PSERS will keep its real estate exposure and some private market exposure.” He credits Vague, who headed the investment committee from 2020 to 2022, with helping win support for the new direction.

Santa Maria praised the board for improving disclosure of investment and travel fees. Yet many investment contract details, including fee arrangements, are still not public. Sen. Katie Muth (D., Montgomery) has sued to force the state to make Wall Street pay formulas public, as it does for paving or social service contractors.

According to Santa Maria, “private equity works best if you pick the best managers” — who may want to keep payment formulas private “because they are competing with other managers.” Asked if he believes investors would actually refuse to work for PSERS if it disclosed their contracts, Santa Maria said that greater “contract transparency is worth looking at.”

The pension review commission of 2019 had urged PSERS and the smaller SERS state-worker plan to consider replacing its unpaid board of mostly investment amateurs with paid, professional investors.

“That boils down to politics,” Santa Maria said. “If you have a top-tier chief investment officer, will he want to answer to a board of five professionals? The Ontario [Canada] Teachers plan shows it can work. But it would be a huge step for us.”

Asked why a proposal to merge the separate state and school pension-investment staffs and save money never progressed, Santa Maria said, “The boards just didn’t have an appetite for yielding any power.”