State agency says hiring outside pension fund managers would be illegal

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State agency says hiring outside pension fund managers would be illegal

Associated Press via Newsday news
October 29, 2003

A proposal to have private advisers manage some of New Jersey 's pension funds is illegal, according to a review performed by a nonpartisan state agency.

The opinion issued Tuesday, October 28, by the Office of Legislative Services said state law prohibits the Treasury Department from delegating investment decisions to any outside party. It comes weeks a consultant recommended that private managers be hired to take over some investment decisions.

The review, which cites two state attorney general's opinions, says the state Investment Council _ which oversees the $62 billion in pension investments _ does not possess the power to "delegate management discretion and investment decisions to a private outside entity."

State Treasurer John McCormac stressed that no decision has been made regarding the hiring of private managers, a plan that could require legislative approval. The agency's opinion had been sought by state Sen. Peter Inverso, R-Mercer, who had some concerns about the proposal.

"This should end this issue once and for all," Inverso said. "If the governor and treasurer pursue this issue, we have solid legal standing to prevent it."

McCormac revamped the investment council last year after the pension funds lost $20 billion over a three-year period. He has said the state needs to diversify the funds' portfolio, which currently includes 65 percent stock holdings, to increase earnings and guard against steep losses in the future.

The proposal has been panned by the Communications Workers of America Local 1033, which represents state employees. They fear that the proposal could cost some state workers their jobs.