TRENTON — Senator Shirley Turner on Thursday urged the governor to sign her legislation that would help keep political favoritism away from the investments of public pension funds by applying the same pay-to-play prohibitions on contributions to national political organizations by private investors that apply at the state level.
The move by the State Investment Council on Wednesday to make a $100 million investment in a firm whose managing director contributed $2.5 million to the Republican Governor’s Association while Governor Chris Christie was its chairman underscores the need for the legislation, Senator Turner said.
“Politics and political favoritism should be kept away from the public employees’ pension funds,” said Senator Turner. “Even the appearance of a conflict undermines the credibility of investments that accompany political contributions. The investments should be made in the best interests of our retirees who rely on their pensions after careers of dedicated public service.”
The prohibition would be prospective, Senator Turner said, meaning that existing investments would not be affected.
The bill would essentially reverse a March 2014 regulatory change by the Christie administration that changed the rules governing the investment council so that those associated with funds handling New Jersey investments could contribute to national and political organizations. Senator Turner’s legislation would require the investment council to put in place a rule specifically prohibiting this practice.
“The investment council operated well before the rule change,” said Senator Turner, “which contradicts any claim that the pay-to-play prohibition would be bad for investments.”
The bill would also require more transparency by the State Investment Council, requiring the public disclosure of private money managers and the fees they receive for managing pension investments.
Just yesterday, the investment council moved ahead with plans to invest up to $100 million with KSL Capital Partners, a private equity firm whose managing director, Mike Shannon and his wife, contributed $2.5 million to the RGA in 2013 and 2014. Before that, employees and others tied to private firms managing portions of the state’s $80 billion pension funds have given more than $7.1 million to the RGA and more than $3.9 million to the Republican National Committee.
“Based on what we have learned about the Christie Administration’s investment practices, these standards of accountability and transparency are needed,” said Senator Turner. “It’s not their money nor does it belong to any governor or any other political figure; it belongs to our public employees and retirees.”
State and federal laws ban money managers from collecting fees from states where they have financed political candidates, but these pay-to-play laws don’t cover national political organizations, such as the RNC and RGA. New Jersey also does not require the regular disclosure of the fees paid to the private investment firms selected to manage pension funds.
“We need to know how much we’re paying these private investment firms for managing our pension funds,” said Senator Turner. “Otherwise, we won’t know if we’re getting the best return on our investment.”
Senator Turner’s bill would require quarterly reports by the investment council detailing the investment returns of the private firms and the fees they receive. The report would have to be submitted to the governor, the Legislature and posted online to be made available to the public.