| From yesterday's USA Today (page 1B): The sole trustee of New York state's public pension fund on Wednesday imposed new restrictions on awarding investment business from the $117 billion fund to anyone who makes a campaign contribution to incumbents and challengers for his post. State Comptroller Thomas DiNapoli's order bars the awards for two years after any contributions are made.
This follows the USA Today investigation of the relationship between contributions and pension fund awards. (As an aside - WHO ELSE but newspapers DOES this sort of investigation? Huh? - Sorry...I digress but I think this sort of research is IMPORTANT and no one else is doing it...). From the report: More than two dozen firms that have surfaced in a broad corruption investigation of public pension funds gave at least $1.97 million in campaign contributions to officials with potential influence over the funds' investments, a USA TODAY analysis shows. [...] The analysis of donations since 1998 showed the money flowed in 30 states to incumbents and candidates for governor, treasurer and other posts that influence billions of dollars in pension fund awards.
The interactive map and list of donors and recipients is here. The payoff for relatively small contributions is huge. Take The Blackstone Group: Principals and their spouses gave well under $100,000 to a number of New York campaigns and then: Blackstone has received about $1.74 billion in private equity- and real estate-related investments from the New York pension fund since 1993 and has been paid about $20 million in fees, said Whalen, the state comptroller's spokesman.
For those of you who may believe that $100,000 is NOT a relatively small contribution: would you mortgage, borrow, cash in, whatever if the payoff was $20 million? And then... Stephen Schwarzman [one of the Blackstone principals] gave $11,000 to Pennsylvania Gov. Edward Rendell's races in 2002 and 2006, campaign finance records show. Pennsylvania's governors by law appoint six of the state pension board's 11 members. Blackstone's relationship with the Pennsylvania pension fund dates to at least 1994 and includes more than $2.8 billion in private-equity, real estate, stock and other investments, a state summary shows. The deals have paid about $129 million in fees.
You can read the report, and you'll see that the contributors don't discriminate by political party. It's all about the money. As an aside, if you look at the financial stability of most public pension funds (state, county, municipal, education) they are in TERRIBLE shape. There is not enough money in reserve to pay future claims beginning in the next ten years, which will result in massive tax increases or benefit cuts, or both. If you keep track of you own 401(k)s and 403(b)s, you know that a fee of 1.2% compared to a fee of .75% can make a difference of tens of thousands of dollars over a few decades of "growth". It's the same with pension funds. Therefore, any collusion on the part of pension fund companies, investors and public officials can greatly impact what regular people end up receiving in pensions. If elected officials are handing out contracts to their donors, there is no way to ensure that those pension companies actually ARE the best deal in terms of overall pension investments, fees and returns. |
