Cairo Association of Teachers - Newsletter

CAT Tracks for December 3, 2008 PENSION POOLING?

The original story that prompted the comments by IEA President Ken Swanson that were forwarded to CAT Tracks subscribers yesterday. (Below the article is a reprint of President Swanson's remarks for those of you not on the mailing list.)

Ill. Treasurer Giannoulias wants pensions pooled

By DEANNA BELLANDI
Associated Press Writer

Illinois Treasurer Alexi Giannoulias on Monday proposed pooling the investments of five state-funded pension systems into a new, single system to save money and ward off corruption.

Lawmakers need to approve Giannoulias' plan to create the new Illinois Public Employees' Retirement System, or ILPERS, with a combined portfolio of about $70 billion, an amount that varies depending on market value.

Giannoulias is selling his plan as protection against the influence-peddling for pension investments that federal prosecutors have exposed in investigations of state government corruption, including during the trial of convicted political fundraiser Antoin "Tony" Rezko.

"What I'm proposing is a complete overhaul of the state's pension systems," Giannoulias said at a news conference.

The state has about 270,000 pensioners and Giannoulias said his plan to pool investments would not affect their benefits. But he estimates it could shave off as much as $82 million annually in administrative and management fees.

One of those pension funds, the Teachers' Retirement System, quickly came out in opposition to Giannoulias' plan, saying separate investment pools mean more diversification, less risk and better returns. The pension fund also said the proposal fails to account for transition costs when changing investment managers.

Three boards currently oversee the five pension systems' investments. Under Giannoulias' plan, the pension systems would keep a board to administer benefits.

Giannoulias said Monday he didn't yet have a legislative sponsor for his measure but Democratic House Speaker Michael Madigan was awaiting draft legislation.

"We're anxious to work with the treasurer," Madigan spokesman Steve Brown said.

Gov. Rod Blagojevich, too, was interested in what Giannoulias was offering.

"We support increasing efficiency and transparency of state government and the state pension systems, provided that all efforts are made to ensure the diversity among investment managers and protect the interests of annuitants," Blagojevich said in a written statement.

Blagojevich has previously proposed consolidating several pension funds, but testimony at Rezko's trial indicated Rezko and alleged co-conspirators used their influence to stop the merger in 2003 and keep friends on the separate boards.

A number of government watchdog groups have backed Giannoulias' proposal, which includes of ethics requirements such as prohibiting ILPERS board members, their spouses or employees from benefiting financially from an investment, banning finder's fees and political contributions from firms with contracts over $50,000.

"It takes us up tremendously in a state that has been wallowing, dare I say beneath the bottom, for some time," said Cindi Canary, head of the Illinois Campaign for Political Reform.

IEA Rejects Plan to Combine Pension Systems

A new proposal by Illinois State Treasurer Alexi Giannoulias that would diminish the ability of Teachers Retirement System (TRS) members to control their pension system and could hurt other state-funded systems is being rejected by IEA President Ken Swanson.

Swanson said the proposal to combine the investment authority of the 5 state-funded pension plans (TRS, State University Retirement System, General Assembly Retirement System, Judges Retirement System and State Employees Retirement System (SURS) is unacceptable.

“We cannot support and will oppose any change in investment authority that diminishes the voice we have through the trustees we elect to TRS,” Swanson said.

Another aspect of the treasurers’ plan, aimed at tightening ethics requirements for those who work for and with the pension systems, is worth a closer look, Swanson said.

“IEA welcomes the opportunity to work with the treasurer and others to enact ethics reforms that are transparent, appropriate, and protects participants and taxpayers from the kinds of abuse we have seen in the past,” he said.

According to Swanson, IEA will partner with IFT and any others interested in protecting TRS and SURS pensions as well as promoting effective ethics standards for all state pension systems.

“We are totally committed to doing whatever is necessary to protect the pensions of IEA members and ensure the system can continue to invest effectively and operate in an environment of high ethical standards and transparency,” Swanson said.

TRS also opposes the treasurers’ proposal. More here.