NJ Gov Candidates Battle over Pension Issues

August 31, 2005 (PLANSPONSOR.com) - Garden State's troubled pension funds has become an issue in the ongoing battle for a New Jersey US Senate seat with the candidates tangling over the issue of investment diversification.

While Republican Douglas Forrester has called for a slowdown in the pension funds’ ongoing efforts to funnel at least $9 billion of the funds’ $70 billion in real estate, buyout funds and hedge funds, Democrat US Senator Jon Corzine, his challenger, disagrees, according to a Bloomberg news report. Since June, the state pension fund has appointed eight managers of private-equity funds to handle $1.13 billion.

Corzine, formerly chief executive of Goldman, Sachs, asserted that it would be a mistake to wait until the state has laws in place barring pay to play problems – where investment managers can use political donations or other payments to help win pension fund contracts.

The State Investment Council, which sets policy for pension investments, has already approved strong pay to play regulations, Corzine said. “I don’t think we should slow it down,” Corzine told Bloomberg. “We should be on a steady diversification.”

In fact, part of the reason New Jersey faces a multibillion-dollar deficit in its pension funds is because of its past policy of investing in only stocks and bonds, Corzine claimed. Corzine said local governments face pension contribution increases next year because of rising benefit costs and insufficient returns.

Meanwhile, Forrester, a former state pension manager told Bloomberg that pay-to-play rules need to be put into law to prevent pensions from being exploited for political gains. Corzine said as governor he could issue executive orders that would have the force of law, instead of waiting for lawmakers to pass a bill.

Investment Council Chairman Orin Kramer, a hedge fund manager and fundraiser for Corzine’s 2000 US Senate campaign, has estimated the state’s pensions are underfunded by $30 billion. New Jersey must make up the shortfall or risk cutting benefits for teachers and public employees, Corzine said.

In a related issue, Corzine called for an elected state controller to ensure that the state gets the best value from its bond sales and pension investments. The governor is the only New Jersey official now selected through a statewide election.