The sudden resignation of Christopher Burnham as Connecticut state treasurer - and sole trustee of the state's $15 billion in state retirement and trust funds - shows voters in Connecticut need to demand an end to the system of placing the authority for managing the investments with a single person.
The controversy ought to raise a similar reaction in the few other states with a single trustee for the state pension fund - particularly New York. All these states should adopt a board of trustees, dispersing power. This distribution of authority doesn't guarantee a better run fund, or more altruistic trustees. But it provides a better structure for public oversight and accountability than a sole trusteeship.
Mr. Burnham is quitting after serving only 21/2 years of a four-year term as the elected treasurer of the state. While abrupt, such a departure is hardly unique in Connecticut.
As a Pensions & Investments report noted, every Connecticut state treasurer since 1958 has left office in midterm.
Mr. Burnham will join Columbus Circle Investors as president and chief executive officer. Columbus Circle was hired by Mr. Burnham to manage $150 million of the Connecticut fund. Columbus Circle officials resigned the portfolio a month before Mr. Burnham announced his plans.
Columbus Circle is owned by PIMCO Advisors L.P., which also owns Pacific Investment Management Co., also a manager for the Connecticut fund. Mr. Burnham increased the assignment of PIMCO, which was an existing manager when he became treasurer. At the request of the governor, PIMCO resigned as a manager following Mr. Burnham's resignation.
Resignations from office, such as Mr. Burnham's, show the weakness of the sole trustee arrangement.
Rather than give greater accountability through an elected officeholder, the system is left highly vulnerable. There is a lack of continuity and potential costly shifting in investment strategy as a new state treasurer feels compelled to remake the fund.
The system doesn't ensure accountability when the sole trustee can jump over to a lucrative-paying job in the investment management industry. The system doesn't ensure accountability when the sole trustee decides which investment companies to hire and fire, perhaps talking with them about future, very-well-paying employment opportunities.
A system with a board of trustees will serve the taxpayers and participants better. With a group voting a decision, it would be more difficult for a single trustee to use the pension funds to seek personal opportunities.
In New York, in particular, state Comptroller H. Carl McCall - sole trustee of the New York State Common Retirement Fund, which has some $80 billion in assets - has been the subject of Pensions & Investments reports for his lack of openness in the funds he oversees. He closes the meetings of his investment advisory committee.
Information about the fund's investments has been difficult to obtain, but Mr. McCall in recent months has been more open about discussing manager hirings and terminations. An elected officeholder, he has accepted thousands of dollars in campaign contributions from firms hoping to do business with those funds.
There is no need for rhetoric about electing the right person who is willing to maintain the public trust or the integrity of the pension funds.
There is a need only to end sole trusteeship.
