FL Pension Fund Buys Into Edison Schools

September 26, 2003 (PLANSPONSOR.com) - Through one of its money managers, Florida's state pension fund is investing $174 million in for-profit school management company Edison Schools.

The investment by the $92-billion fund was made by Liberty Partners, one of several money managers that invest the pension fund’s money, in a move to take the public company to a private one.   Even though Liberty Partners exercises full control over its $1.8-billion portfolio, questions were raised since the pension board is the only investor in Liberty Partners, according to a St. Petersburg (Florida) Times report.

This puts the fund that provides for the retirement pensions of Florida teachers and other public employees as the de facto owner of a company that has played a leading role in privatizing school management, drawing heavy criticism from the American Federation of Teachers and the Service Employees International Union.  Union members said they were “astonished” to learn their retirement money is being used to finance the buyout of a private company that manages public schools – potentially costing some union teachers their jobs.

California Concerns

Similar concerns have been raised at the nation’s largest public pension fund the $145 billion Public Employees’ Retirement System (CalPERS) (See  CalPERS Seeks To Curtail Investment in Companies Privatizing Services ).   The CalPERS board announced earlier this month considering restricting investments in companies that take over government services and thus could ultimately lead to the loss of jobs among CalPERS members.   As evidence of the potential devastating effect of privatizing government jobs, these groups point to a small school district that hired a private bus company – that one CalPERS fund has an investment stake in – three years ago and ultimately laid off 48 unionized drivers.

However, all of the board is not behind the decision.  California State Treasurer Phil Angelides , who sits on the board of CalPERS and the California State Teachers’ Retirement System (CalSTRS), cautioned his CalPERS colleagues about hamstringing the fund.  “This policy could be fraught with peril. It’s very important … that we retain access to the top-tier investors in this country,” Angelides said. “We have to be very careful about how we fight this. There may be instances where jobs can be best provided by the private sector.”

Additionally, Adam Tucker, a spokesman for Edison Schools Inc., called the criticism misplaced. “People assume that we contract to run schools and eliminate jobs. We do not eliminate jobs. That is a misconception. It is disappointing that CalPERS would consider eliminating an (investment) option that has proven to help students, districts and schools.”