America's Talking - Wisconsin's highly paid state investors pay others to do most investing

Episode Date: October 22, 2025

(The Center Square) – Wisconsin has paid billions of dollars in recent years for outside investors to manage most of the state's retirement funds even though it has an expansive team of highly paid investment employees, according to state data. State auditors this year urged the state of Wisconsin Investment Board to create specific plans that might shift more of that management to state employees "because external management is more expensive," a recent report by the Legislative Audit Bureau said. Support this podcast: https://secure.anedot.com/franklin-news-foundation/ce052532-b1e4-41c4-945c-d7ce2f52c38a?source_code=xxxxxx Read more: https://www.thecentersquare.com/wisconsin/article_26aa4669-4177-409a-9b8a-9c03bee52d5c.html Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to America's Talking. My name is Art Kane. I'm Investigations and Enterprise Managing Editor at the Center Square. And I'm joined by Jared Strong, one of the investigative reporters there who was looking into the Investment Board in the state of Wisconsin. Jared, you found some pretty high salaries, but also the fact that the people who were getting those salaries farmed out the work. Tell me a lot about what you found. Yeah, well, yes, you're right. They're the highest paid employees in state government in Wisconsin.

About 40 of their staff of 300 had annual compensations recently of more than 500 grand. Three of them were more than a million dollars. And even with that high pay, I think the total salaries paid to the department was about 45 million in 2024. but they spent $1.2 billion to pay outside investors to manage most of that money, 61% of it. So what does this agency do for the taxpayers of Wisconsin that they pay them so much? Well, they manage about $150 billion of retirement funds for the Wisconsin pension system, which benefits the vast majority of public employees in Wisconsin.

It's a fully funded pension system. It gets great marks. But state auditors have said over time that, you know, perhaps the investment board should develop a plan to get some more of that investment in-house to cut down on, you know, those high fees that are paid to outside firms. You found that they actually are exceeding what they're allowed to for the outside firms. Is that right? Well, yeah, sort of. I mean, I guess they were previously capped by state law at investing no more than 20% of the total funds with outside firms. But there was a law change about 15 years ago.

And because of that, the investment board believes that it's no longer beholden to that limit. That belief is backed by two separate opinions from two separate state attorneys general. But it hasn't been tested in court yet. I don't know if it will. There's no penny litigation regarding it. The law now basically says that the board is required to, quote, manage the money and property with care, skill, prudence, and diligence. So there were a number of requirements that limited how they could invest that money before. And because of that law change, they're basically saying that they can ignore almost all.

How did, do they justify paying a million dollars to some? someone who is a government employee will get a pension. 80% of a million dollars is $800,000 so you can live on that for a while, I think. Did they talk to you at all? How did they justify those kind of salaries, especially when 60% of their work is farmed out to private advisors who get even more money? Well, the board spokesperson who responded to me justified the pay by saying that it, you know, it's meant to be competitive with other investment jobs inside and outside of government. they pay these folks performance bonuses as well,

that total, I think, about $30 million in a recent year in 2023. So they're basically saying that this needs, they need to be competitive to retain workers. And, yeah, that's how they justify the high compensation. But then why not, why don't these workers just do all the work instead of then paying another billion out the door? Or did they justify what skill set these million dollar workers don't have that they have to then farm it out to people who have that skill set? Not specifically.

They've kind of vaguely said that using his outside firms allows them to tap into different investment opportunities, private investment funds. And they justify doing it by saying, hey, it works, you know, even with the 1.2,000, even with the 1.2,000. billion dollars that ended up getting paid in base fees and performance fees to these outside investors. You know, the money they got back was still considerably higher and well ahead of their benchmark goals. And so what money is this? Is this taxpayer money? Is this money given that the workers contribute, which I guess is still taxpayer money because they get paid by taxpayers, but at least it goes into their pockets and then out store, or is it a combination above. As far as I'm aware, it's contributions from the employees themselves.

And like I said, the state isn't directly paying these outside firms, these fees. You know, they invest, they give them a pot of money to invest. And then the investment firms more or less hold on to part of the earnings in the end. What about the salaries of the state employees? Where does that come from? Yeah, that's taxpayer dollars. That's what that's, what goes to pay the state employee salary is just like any other employee for the state. And pensions and benefits and things like that. So is your sense that anybody's looking at this or wants to reform it or just because it's funded,

it's one of the few pensions that are well funded, no one wants to touch it? Well, yeah, it's well funded and it's doing well. It's likely going to take some sort of investment snafu, I suppose, before people might start poking their nose around and seeing what's going on there. Me again, yeah, I, you know, asked the board how they're planning to proceed in the future, whether they're going to develop plans to keep more of the investing in-house. And they just basically said, we're not telling you. you know, they just fight it by saying their investment strategies are private and they're not going to disclose them. So it's taxpayer money, but we're not going to tell you what we're doing with it. Okay, well, Jared, I'm glad you found this story. Keep digging.

And this has been Jared Strong and Arcane for America's Talking. Thank you very much.