Several years ago, my wife and I were in the market to buy a house. As is customary, we had an inspection completed on the house we wanted to purchase. Minor things were noted here and there on the report, but one thing in particular caught our eye. Somehow the wires got crossed when the outlets were installed. The electrical outlets still functioned, and we were told it probably would not be a problem. However, the home inspector suggested we be cautious about plugging any large appliances in the outlets until we had an electrician fix the polarity.
The problem our home inspection revealed was below the surface. It wasn’t causing any noticeable problems today. Down the road, however, it could have caused a fire, resulting in irreparable harm.
Recently, Michael Rathbone and I performed an inspection of our own—not on a home, but on Missouri’s teacher pension systems. Similar to my home inspection, we found something troubling just below the surface. Missouri’s teacher pension systems have shifted to riskier assets. This shift has not caused any noticeable problems as of today; and like my reversed polarity, may not ever cause any harm. Of course, an increase in risky assets also increases the possibility that the house could burn down.
Imagine if upon receiving my home inspection, I had yelled at the inspector, “You just hate houses!” As ridiculous as that might seem, that is exactly the reaction Michael and I have received. In response to a recent op-ed in the Springfield News-Leader, in which we called for increased transparency so that the problem could be monitored, we were vilified. One pensioner even claimed that we dislike public education. The author of the response to our op-ed then went on to list several facts that were not germane to the point we made.
Somehow it seems our message has been lost. Therefore, I want to reiterate the point of our paper, “Betting on the Big Returns: How Missouri’s Teacher Pension Plans Have Shifted to Riskier Assets,” one more time. Missouri’s pension investments are becoming more risky. In other words, the house isn’t on fire, but it is becoming more flammable. It would be wise to monitor the investments more closely and plan for these increased risks.