On February 25, 2014, the Joint Committee on Public Service will be holding a public oversight hearing on the MBTA Retirement Fund. Below, please find an overview of the applicability of the public records law and state ethics law to the MBTA Retirement Fund and Board.
PUBLIC RECORDS LAW APPLICABILITY
In May of 2013, Senator Brownsberger explained in a forum post on this website that a Supreme Judicial Court (SJC) decision in 1993 (“Board II”) had held that the records of the MBTA Retirement Board, which considered itself a private trust, were not public records, as defined in the public records law codified in Section 10 of Chapter 66 of the Massachusetts General Laws. At the time, the law defined public records as records that were “made or received by any officer or employee of any agency, executive office, department, board, commission, bureau, division, or authority of the commonwealth, or of any political subdivision thereof, or of any authority established by the general court to serve a public purpose.” In concluding that the Board was not a board subject to the public records law, the court relied on a previous case from 1993 (“Board I”) in which the court had considered the following factors in reaching its conclusion that the MBTA Retirement Board did not constitute a “board” within the public records law: “(1) the means by which the board was created; (2) whether the board performs some essentially governmental function; (3) whether the board receives or expends public funds; (4) the involvement of private interests; and (5) the extent of control and supervision exercised by government officials, agencies, or authorities over the board.” Relying on Board I, the Supreme Judicial Court in Board II considered each of these factors, and found none of them to point towards a finding that the Board’s records were public.
The definition of public records, however, has changed in the past year. Senator Brownsberger filed standalone legislation this legislative session, as well as amendments to the transportation financing bill, to make public the records of the MBTA Retirement Board, but it was the FY14 budget, signed into law by the Governor as Chapter 38 of the Acts of 2013, that ultimately served as the legislative vehicle that codified the change to the public records law.
Representative O’Connell filed a budget amendment related to this issue during the House budget deliberation, and it was further amended by Representative Straus. You can see those amendments here:
|Shaunna O’Connell||Transparency in the MBTA pension system||Precluded by adopted further amendment|
|William M. Straus||Further to 835||Adopted thus precluding amendment #835 Roll Call #93|
Senator Brownsberger then filed an amendment during the Senate budget deliberations, mirroring the language adopted by the House, that ultimately was passed as part of the FY14 budget. The relevant section of the budget effecting the change to the public records law is Section 4:
SECTION 4. Section 7 of chapter 4 of the General Laws is hereby amended by inserting after the word “purpose”, in line 137, as appearing in the 2010 Official Edition, the following words:- , or any person, corporation, association, partnership or other legal entity which receives or expends public funds for the payment or administration of pensions for any current or former employees of the commonwealth or any political subdivision as defined in section 1 of chapter 32.
On February 13, 2014, the Supervisor of Records in the Public Records Division of the Office of the Secretary of the Commonwealth issued a letter to an attorney for the Hearst Corporation in response to their petition appealing the response of the MBTA Retirement Fund to requests for public records. (Letters of decision by the Supervisor of Public Records are available here.) Shawn A. Williams, the Supervisor of Records, reasoned in his letter that the records of the MBTA Retirement Fund do not constitute public records, even in light of the new definition of public records. He based his reasoning on the Supreme Judicial Court’s evaluation in Board I of “whether the board receives or expends public funds,” concluding that the SJC had held that the Board does not receive or expend public funds. In the actual case, the SJC did find that the factor (“whether the board receives or expends public funds”) did not point towards a finding that the Board was a public instrumentality; the SJC did not, however, state explicitly that the board does not receive or expend public funds. Instead, the SJC found that once the Fund receives public funds, the funds become private in nature. (Note, on page 589 of the SJC’s decision, that the court actually describes its analysis in terms of public funds received, as one focused on “the use of the public funds received by the entity in question, taking into consideration the private interests involved.”) The Supervisor of Public Records concluded that the amended portion of the Public Records Law did not apply to the Fund or its Board because 1) the amended language of the public records law is tied to the receipt or expenditure of public funds, and the Supervisor of Public Records’ found that the SJC had held that the MBTA Retirement Fund neither received nor expended public funds, and 2) the legislature had chosen not to adopt existing legislative proposals that specifically identified the Fund as an entity whose records were subject to disclosure.
ETHICS LAW APPLICABILITY
The 1993 SJC decision mentioned above that determined that the state ethics law did not apply to the MBTA Retirement Board, Massachusetts Bay Transportation Authority Retirement Board v. State Ethics Commission, or “Board I,” utilized a four-factor test, utilized by the State Ethics Commission, in its determination: “(1) the means by which the board was created (e.g., legislative or administrative action); (2) the board’s performance of some essentially governmental function; (3) whether the board receives or expends public funds; and (4) the extent of control and supervision exercised by government officials or agencies over the board.” (To the third factor utilized by the State Ethics Commission, the court added an analysis of the involvement of private interests, which the SJC in Board II and the Supervisor of Public Records identified as a fifth factor). No one factor was considered dispositive in the analysis.
The court found that all factors pointed towards a finding that the Retirement Board is not an independent state instrumentality within the scope of the state ethics law. First, it found that the means by which the fund and board were created involved no action by the Commonwealth. (Specifically, it found “there is no statute, regulation, or executive order which addresses the establishment of the fund or board”- no “legislative underpinning” whatsoever.) Second, it found that the Board did not perform an essentially government function; instead, the SJC concluded that the Board’s functions, administering the pension plan and managing the fund’s assets, are fiducial in nature. Third, the SJC found that the analysis of the factor reviewing the receipt or expenditure of public funds requires a focus on the “use of the public funds received by the entity in question, taking into consideration the private interests involved” (emphasis added). The SJC concluded that once the public funds contributed to the Fund each year by the MBTA are transferred out of the MBTA’s custody, they are irrevocable and become private in nature. The SJC found that the private interests of the pension fund members and their beneficiaries outweighed the public or governmental interest in the funds contributed by the MBTA. Fourth, the government was not found to control or supervise the Board because the MBTA employees have equal power over the Board as the employee appointees. In Board I, the SJC held that the state ethics law did not apply to the MBTA Retirement Board.
Anne Johnson Landry
Committee Counsel and Policy Advisor
Office of State Senator William N. Brownsberger