Senator Joe Pennacchio (R-Morris and Passiac) called for creation of a bipartisan Senate oversight committee to hold hearings on how the state is investing its dwindling $71 billion in pension funds. The committee should have an equal number of representatives of both parties to ensure that the results are not politically tainted, Pennacchio said.
His request comes after reports that the Division of Investment independently invested $49.5 million in a faltering hedge fund. The investment was designed to fall just short of the $50 million limit on how much money can be put at risk without the approval of the State Investment Council. The council later voted to put another $94 million into the hedge fund, which is run by BlackRock Inc. The investment was emergency capital needed to prevent the fund from posting losses on an earlier state investment. The state now has invested about $544 million in the fund.
“The $544 million investment may turn out to be a good one — or another disastrous $115 million loser like the state money put into the failed bailout of now bankrupt Lehman Brothers,” Pennacchio said. “It doesn’t make any difference. The Division of Investment and State Investment Council are not being open with the public about the investment process.
“Next year, legislators will work on a budget that likely will require cuts in services or tax increases or both to make up for billions of dollars of pension fund shortfalls. How can any one of us vote without reviewing the procedures being used to invest billions of pension money?
“It is the sworn duty of elected senators to oversee the activities of unelected officials like those on the Investment Council and within the Division of Investment. We are responsible for making sure they are doing the best possible job at investing the money provided by taxpayers, workers and retirees. Yet the council, treasurer and governor have been unresponsive when asked probing questions about risky investments such those in Lehman and BlackRock.
“A legislative review of how investment decisions are made is long overdue. I join with other senators in a bipartisan call for public hearings to determine whether state money is being invested responsibly. I urge that these hearings begin immediately.”
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November 17, 2008
