Two sides in the Garden State are squaring off in a battle over possible plans to hand over investment management of the state’s $62 billion pension funds.
Both sides are flexing their muscles as they position for advantage in anticipation of a report to be issued by an outside auditor. State officials say privatization reforms are needed to bring New Jersey in line with other states and recover losses. Union officials counterpunch that and say any pension investment privatization efforts would be a boon to corruption.
The fight pits New Jersey State Treasurer John McCormac and State Investment Council Chairman Orin Kramer against Local 1033 of the Communication Workers of America (CWA), which represents investment professionals in the Investment Division of the New Jersey Department of Treasury.
The conflict has seen the union, traditionally in the corner with Democrats, endorse a Republican candidate for State Senate who opposes the plans.
Treasurer McCormac says New Jersey’s losses to its pension funds have been greater than other states. He says that the state’s pension funds, owing largely to losses in the stock market, dropped from a market value of $82.6 billion in June 2000 to $60.2 billion by August of 2002.
The union disputes that New Jersey faired badly relative to privately managed investment programs in other states and says the state ranks among the top pension programs nationwide. The union also jabs that losses in assets are due in part to an increase in pension payouts.
McCormac announced last year that the Treasury would seek the recommendations of an outside auditor to recommend changes. The auditor, Independent Fiduciary Services (IFS), was expected to produce a report in six months. The report is overdue by five months but now expected within a few weeks.
“In the past, privatization in New Jersey has taxpayers paying more for the service,” says Joseph Golowski, a former state tax auditor. “The only ones that make out are the politicians.”
Golowski cited recent scandals in Connecticut and Hawaii where officials received payments from firms that won government contracts. He charges that there is usually a connection between privatization and political kickbacks.
Tom Vincz, spokesman for the Department of Treasury, says that union claims and press reports have been exaggerated.
“The report will contain dozens of recommendations, some of which we will take into consideration and some of which we will no doubt turn down,” he says. “It’s a blueprint for moving forward.”