The question of whether public retirement plans should be defined benefit or defined contribution is the dominant pension-related issue in many states as the Nov. 7 elections near.
In only two states — South Carolina and Iowa — are there contentious pension and investing issues that have nothing to do with a debate over DC plans vs. DB plans.
South Carolina voters will decide on a change to the state constitution allowing state-operated retirement funds to invest in international securities. South Carolina is the only state that still restricts its pension funds' investments to domestic holdings. If the referendum is approved, it still must be approved by each house of the General Assembly before the next election.
The state's Republican candidate for treasurer, Thomas Ravenel, has made the referendum an issue in his campaign, charging incumbent Grady Patterson with being against the change. But Trav Robertson, a spokesman for Mr. Patterson, denied the charge. "Mr. Patterson has come out in favor of that referendum … Mr. Patterson's only concern is that we make sure we're not funding … terrorist countries or organizations."
Michael Sponhauer, a spokesman for the $26 billion South Carolina State Retirement System, Columbia, said the fund's investment staff is not backing either candidate, but does want the referendum passed.
In Iowa, Democratic gubernatorial candidate Chet Culver's call to use state pension fund money for local venture capital investments has prompted Republican opponent Jim Nussle to run ads asserting "You can't trust Chet Culver with your financial security."
For all the controversy in Iowa, the idea isn't an entirely novel one. For example, in June, the $15 billion Indiana Public Employees' Retirement Fund created a $105 million Indiana Investment Fund to make Indiana-based private equity investments.
As for the DB vs. DC issue, while the debate doesn't always break down along strict party lines, Republican candidates in several states have taken the lead in touting defined contribution plans this year.
In New York and Massachusetts, Republican gubernatorial candidates John Faso and Kerry Healey have called for new public employees to be enrolled in defined contribution plans. While their platforms are less specific, Ron Saxton, the Republican nominee for governor in Oregon, and Anne McCarthy, the GOP candidate for Maryland's comptroller, say that idea should be studied.
In Illinois, where Democratic incumbent Rod Blagojevich and Republican challenger and state Treasurer Judy Baar Topinka have traded charges over who bears responsibility for that state's $39 billion public pension funding gap, Ms. Topinka also has mentioned the need to study a defined contribution plan option, according to spokesman John McGovern.
Susan Del Percio, a spokeswoman for Mr. Faso, said introduction of a defined contribution system would be a step toward achieving budgetary predictability for New York's counties and municipalities, paving the way for property tax relief while limiting the scope for sweetheart deals by special interests.
Mr. Faso's opponent, prominent state Attorney General Eliot Spitzer, didn't return calls. Mr. Spitzer has a comfortable lead in the polls, and critics say he hasn't taken up the pension question. Mr. Spitzer has "paid as little attention to (that issue) as possible. ...The fight has not been joined," said Edmund J. McMahon, a senior fellow at the Manhattan Institute, a New York think tank which favors defined contribution plans for public employees.
Around the country, the push to "privatize" public pension funds is getting "very little traction," said Richard C. Ferlauto, the director of pension and benefit policy with the American Federation of State, County & Municipal Employees, Washington. "Any attempt to replace a DB plan with a DC plan is seen as a direct attack on people's ability to retire with some modicum of economic security," he said.