Political candidates are battling over pension fund social policy and investment performance issues as voters struggle with initiatives on the Nov. 8 ballot that will affect more than $229 billion in pension assets nationwide.
In New York, Connecticut, Illinois, California, Georgia, Oregon, Texas and Wyoming, candidates and voters consider crucial political battles over pension and investment related questions.
In New York, Herbert London, Republican candidate for comptroller, is accusing incumbent Comptroller H. Carl McCall, a Democrat, of intending to use the $64 billion New York State and Local Retirement Systems to influence social policy. Mr. McCall, who was appointed to fill out the term of Edward V. Regan and act as sole trustee for the pension funds, denies any charge of being a social policy architect.
In Connecticut, Christopher B. Burnham, Republican candidate for state treasurer, accuses Joseph Suggs, appointed Democrat state treasurer and co-chair of the Council of Institutional Investors, of mismanaging the $11.2 billion Connecticut Trust Funds pension fund.
In Illinois, Dawn Clark Netsch, Democratic candidate for governor, has accused incumbent Gov. Jim Edgar of responsibility for a double-dip pension plan for some state executives. Gov. Edgar claims it was he who investigated the agency in question and installed professional management to reform it.
In California, Matt Fong, Republican candidate for treasurer, claims state pension funds could invest more in California. He said they have invested about 10% of their assets in the state, while California produces 13% to 14% of the nation's gross domestic product.
Phil Angelides, the Democratic candidate for treasurer, said he suggested using California pension money for investment in California before Mr. Fong, and he recommends additional assets be invested, slightly more than the 13% suggested by Mr. Fong.
In Texas, David Hartman, the Republican candidate for treasurer, accuses appointed incumbent state Treasurer Martha Whitehead of bungling the investments in TexPool. TexPool, money managed for local governments in Texas, ranges in size from $5 billion to $10 billion.
In Oregon, Measure 8 is a constitutional amendment on the ballot that would force state employees to pay a 6% employee contribution to their retirement funds.
Ted Sizemore, executive director of Oregon Taxpayers United, Salem, which proposed Measure 8, said Oregon taxpayers already are making a 9% of salary contribution to state retirement plans.
Richard Peppers, political director of the Oregon Public Employees' Union, said the state agreed to make the 6% employee contribution "pick-up" in 1979 in lieu of a two-year pay increase.
Mr. Peppers said that switching the pay increase to a benefit helped save the state money.
In Wyoming, voters will decide on a ballot measure that will allow the state to invest up to 25% of its permanent funds in stocks. State investment professionals estimate an additional investment return of $26 million a year if they are allowed to invest in stocks.
The permanent funds, about $13 billion, are state tax money that comes from granting mineral extraction rights in Wyoming.
In East Point, Ga., voters will cast ballots on a bond referendum that would bail out the city's underfunded pension plan. City Manager Joseph Johnson said $26 million is needed to get the pension system on a sound footing.
New York comptroller
One of the hottest races involving pension funds is the one for New York state comptroller.
Mr. McCall said he has "restored the integrity of the (New York State & Local) pension funds" by having sued the governor and Legislature to stop them from using pension "funds as slush funds to bail out the state."
But Mr. London's camp claims Mr. McCall hasn't restored the pension funds' integrity. Mr. London contends Mr. McCall gave the governor and Legislature 12 years to pay back $4 billion in deferred payments not paid the pension fund, which Mr. London says is too long a period.
Steve Greenberg, campaign press secretary for Mr. McCall, said Mr. McCall and the employee unions are "very comfortable with Mr. McCall continuing as sole trustee for the pension fund.
While there probably should be more than one fiduciary for the pension system, Mr. London said, such a move would require legislative action.
In the treasurer's race in Connecticut, Republican contender Mr. Burnham is a vice president on leave from the investment banking firm Advest Inc., Hartford. He said Mr. Suggs is a former chemical laboratory supervisor who "wouldn't know a bond if it bit him in the ass."
Mr. Suggs retorted: "Mr. Burnham's pitifully poor analysis of the performance of our pension fund reflects his total lack of knowledge or experience or understanding of managing a portfolio. Mr. Burnham has never in his entire career ever been responsible for the management of a pension portfolio ... he has no performance record of his own to point to."
Mr. Burnham says if the Connecticut pension fund "had just performed as well as the bottom 25% of all pension plans (over 10 years) as measured by TUCS (the Trust Universe Comparison Service), we would have an additional $589 million in the plan."
While Mr. Burnham cites the longer term performance of the pension fund, Mr. Suggs, appointed treasurer in 1993, cites only shorter term performance, saying he cannot be responsible for the work of past treasurers.
In 1993, said Mr. Suggs, "the TUCS performance of Connecticut pension fund was No. 1 of the 30 major pension funds reporting to that comparison service."
"For the year to date, according to TUCS, the return of the Connecticut pension funds is No. 1, and for fiscal year '94, returns for the fund are No. 4 of the 30 major pension funds reporting."
In addition, Mr. Burnham said, the Connecticut Trust Funds has more money managers, at 61, than any other public pension plan in the United States, and is spending $55 million for money managers and almost $100 million yearly in money managers, brokers, lawyers, investment banks and other advisory fees for the pension fund. Mr. Suggs said other pension funds have more managers. He said the California Public Employees' Retirement System has 68; Pennsylvania State Employes' Retirement System, 72; and Illinois State Teachers' Retirement System, 62.
Mr. Suggs said the pension fund spends $22.2 million on manager fees each year, which he said was 35% below the fees of average pension funds.
If elected, Mr. Burnham said he would index more of the pension funds assets. Some 22% of the pension fund is indexed now.
In Illinois, Democratic gubernatorial hopeful Ms. Netsch said some state employees who worked for the Illinois State Toll Highway Authority got large lump-sum retirement benefits from an underfunded highway authority pension plan. The employees were given benefit credit not only for the time they worked for the tollway authority, but also the time they worked at other state jobs, said Chris Mann, a press secretary for Ms. Netsch.
So far, the Netsch campaign says, 62 people have gotten lump-sum payments from the tollway plan, with seven of the payments exceeding $100,000. The executives also got regular state retirement benefits, she charges.
Ms. Netsch also claims state pension funds are seriously underfunded because the governor and Legislature have been deferring payments to balance budgets.
Gov. Edgar denies the charge. He signed legislation to reform the state's pension system, requiring state contributions that will bring the pension systems to a 90% funding ratio within 50 years. The legislation also prevents former legislators from reaping huge increases in retirement checks by working briefly at higher salaries in other areas of government, he said.
In California, Mr. Angelides accuses Mr. Fong of having no investment experience and little business experience.
As a former financial manager, Mr. Angelides says he has investment and business experience.
Mr. Fong said he has an MBA from Pepperdine University, has a law degree, and as a Pepperdine regent on its investment and finance board, has invested money.
The treasurer is an automatic board member of the state's two largest pension funds.