A limit to pension investing oversight as political donations from executives can go unchecked

A limit to pension investing oversight as political donations from executives can go unchecked

MAY 27, 2014, 11:10 PM    LAST UPDATED: TUESDAY, MAY 27, 2014, 11:11 PM
BY MELISSA HAYES AND JOHN REITMEYER
STATE HO– USE BUREAU
THE RECORD

Last year, nearly 2,000 businesses doing $6.4 billion in public work reported — as required by state law — that they made $10.1 million in contributions to New Jersey’s various political parties and candidates.

But when it comes to New Jersey’s pension fund — and the increasing share of the nearly $77 billion in assets going to hedge funds, private equity and venture capital funds — such disclosures aren’t so clear-cut.

The pay-to-play law makes it clear that executives and their employees working on the state’s pension fund investments cannot make political contributions to New Jersey candidates and political committees. But those venture capital firms and hedge funds often take the state pension dollars and invest them in other companies whose executives do not have to disclose their political donations.

Now the pension fund’s directors are putting more money into those alternative investments. The complex nature of those investments, the inability of the pay-to-play law to cover all their financial relationships and the lack of any accompanying public database like the one for state contractors make tracking political connections difficult. That comes as Governor Christie has built a national fundraising network that includes donors with backgrounds in the finance industry.

And the state Department of Treasury relies on the investment firms themselves to determine which employees are covered by the law, and to disclose any political contributions made by them. The Election Law Enforcement Commission, which regulates other businesses with state contracts, also relies on companies to self-report contributions. But the commission also maintains a public database of campaign donations and state contractors that allows for increased scrutiny of the donors doing public business.

The council that oversees the state’s investments will meet today for the first time since Christie announced last week that he would cut nearly $900 million from this year’s pension payment to close a budget gap.

The New Jersey State Investment Council, which manages the $76.76 billion pension system, is set to discuss three alternative investment proposals and get an update on its plan for the coming fiscal year. The meeting comes as questions have been raised over the legality of Christie’s scaled-back pension payments and amid claims that the state awarded investments to campaign contributors who support the governor.

From the council’s agenda, it’s unclear whether it will discuss Christie’s reductions or the pay-to-play allegations. A spokesman did not respond to a request for comment Tuesday.

The New Jersey Education Association and the Communications Workers of America, which represents state employees, are already threatening to sue Christie after he signed an executive order last week setting the pension payment for this year at $696 million, down from $1.58 billion. The governor is also calling on lawmakers to approve a $681 million payment for the fiscal year beginning July 1, down from the $2.25 billion the state was supposed to contribute under phased-in payments Christie signed into law in 2010.

The governor said the state cannot afford to pay for the “sins of the past” and acknowledged that the contributions he agreed to are too burdensome. Christie said he plans to announce additional changes to public employee pensions next month.

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