New Jersey state legislators aren't shy about telling public pension executives what to do.
Year after year, legislators file proposals – many of which are repeats from previous years and many of which never emerge from the committees to which they are referred.
"In my mind, it's more they can tell their constituents that they did something," said Thomas Byrne, the former chairman of the State Investment Council, referring to the proliferation of pension-prohibition bills in general.
Some proposals "are not well-thought through," said Mr. Byrne, who served as chairman from 2016 to 2018. "They don't dig deep enough into some of those things."
The State Investment Council governs policies for the state Department of the Treasury's division of investment. The division's director is the CIO for the $91.5 billion New Jersey Pension Fund, Trenton.
Mr. Byrne recalled having little contact with legislators, testifying only once in Trenton about fees paid by the New Jersey Pension Fund for alternative investments. "Technically speaking, legislators don't ask for input from fiduciaries," said Mr. Byrne, who runs Byrne Asset Management LLC, Kingston, N.J. "A lot of times we don't know what's happening."
Since the current legislative session began in January, bills have been introduced demanding that the New Jersey Pension Fund divest from the 200 largest fossil fuel companies; stop investing in companies that make, import or sell assault firearms for domestic use; stop investing in hedge funds and derivative products; and stop investing in companies that shift ownership or operations outside the U.S. to avoid domestic taxes.
The bills, often filed concurrently in the state Senate and General Assembly, also prohibit investments in the maker or wholesale distributor of tobacco products, in companies that manufacture or provide maintenance for nuclear weapons, in Chinese pharmaceutical companies and in companies that avoid clean-up responsibilities of federal Superfund sites in the state.
Many of these bills are replays or modifications of previous proposals. An anti-hedge fund bill has been proposed in eight consecutive legislative sessions. The fossil fuel prohibitions bill (four times), the tobacco prohibition bill (three times), and the tax-dodge bill (five times) are revivals.
A bill requiring the pension fund to "prioritize" in-state infrastructure projects vs. "comparable" out-of-state projects has been offered in the last five sessions.
Most of these bills never come up for votes. One version of the firearms bill was vetoed in 2013 by then-Gov. Chris Christie. Since then, a firearms bill has been offered in five legislative sessions.
Each of the bills proposed during the current session contains some fiduciary-duty boilerplate language. This "section shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment or withdrawal of an investment," according to a typical example. The bills don't contain detailed guidelines.
Each new law requires extra work for the state pension executives to meet their fiduciary obligations.
"Our staff has limited resources to focus on investing," said Mr. Byrne, who didn't comment on the current bills. "If a mandate comes down, you have to follow it."
Mr. Byrne, a Democrat, was nominated by Mr. Christie, a Republican, and confirmed by the state Senate. Mr. Byrne resigned just before the term-limited Mr. Christie left office.
Mr. Byrne said Mr. Christie never interfered.
Still, the New Jersey pension system isn't free from politics. The governor appoints the state treasurer, who chooses a pension fund CIO in consultation with the State Investment Council. The 16-member council includes nine appointees by the governor, including eight that require Senate confirmation; four appointees by the governor from lists provided by labor unions; and one appointee by the governor from a list provided by the Senate president and speaker of the General Assembly.
Over the years, some bills have become law, often dealing with foreign countries or overseas politics.
In March, Gov. Phil Murphy signed a Russia and Belarus sanctions law that required, among other things, the New Jersey Pension Fund to stop investing in companies on a "prohibited activities" list developed by the state Department of the Treasury. At the time, the pension fund had $50 million in Russia-related investments.
In 2016, Mr. Christie signed a law prohibiting the pension from investing in companies that boycott the goods, products or business of Israel. Since then, the pension fund has made two divestments totaling $92 million.
Still on the books are requirements that the pension fund divest from companies doing business with Sudan - $2.27 billion since the law took effect in 2005 - and from companies doing business with Iran - $1.01 billion since the law took effect in 2007. The pension fund also makes an annual report, based on a 1987 state law, about investments in companies that do business in Northern Ireland to determine if they follow guidelines to reduce employment discrimination known as the McBride Principles.
