Conventional wisdom says: “You get what you pay for.” But a wise economist will tell you that’s not true. In the real world, you get no more than what you pay for. Such is the case with the massive (tens of billions of dollars) public pension funds run by the state and local counties in Maryland.

Active money managers charge investors for their market knowledge and expertise. The expectation is that they will be able to make wise decisions that yield higher returns. But they don’t.

In fiscal year 2014, sub-par investments recommended by money managers cost the state of Maryland over a billion dollars in lost income. Over the past ten years, this regular trend of over-promising and under-performing resulted in $3.22 billion in lost income and hundreds of millions of dollars in fees.

The problem is not unique to Maryland—nearly every state in the U.S. has drank deeply from the Wall Street Kool-Aid, resulting in massive annual wealth transfers from state taxpayers and public employees to money management firms who don’t deliver.

Local counties aren’t immune. While the funds (and consequently the losses) are smaller, they aren’t any less significant. Spending more money to get less back doesn’t make sense any way you slice it. Below is a quick sample of a couple Maryland county funds compared to the state fund.

Is a difference of 0.19 percent significant? It certainly is when we’re talking about 0.19 percent of $55 billion. Add to that the almost $385 million in fees for 2014 alone. This isn’t a cheap mistake. And it’s safe to say that these three aren’t the only counties spending extra money for returns that are—at best—slightly worse than cheap indexing options.

The solution is clear and would take less than a year to implement. Pull money out of expensive actively managed funds. And then build balanced portfolios based on an index like the Wilshire TUCS. The savings and increased returns over time would be a major boon to public employees and local taxpayers.