State Treasurer Alexi Giannoulias promises a huge upside for the state and its employees with his plan to streamline how state government invests its pension funds.
But he acknowledges there are still some questions about how it would work — including how many workers might lose their jobs. And he predicts a tough fight to get legislative approval for the plan.
“But it doesn’t mean that it’s not the right thing to do,” Giannoulias said Tuesday in an interview with The State Journal-Register’s editorial board.
The state has five pension boards, with three boards overseeing the investments of employees’ money for their retirement. Giannoulias wants to merge the three investment boards into one.
One of the funds, the Teachers’ Retirement System, is entangled in a federal investigation into campaign fundraising kickbacks for investment work. The treasurer said his proposal is the best way to improve investment returns and clean up the retirement systems’ sullied reputation.
Here’s a look at some of the areas Giannoulias touched on Tuesday:
The treasurer says creating a single investment board will save the state $50 million to $80 million a year, although some of that will be eaten up by the cost of transitioning to the new system.
Giannoulias says personnel savings as a result of the merger will come to about $2 million. But he doesn’t know how many layoffs might result.
“But if we have the chance to save tens of millions of dollars a year into the underfunded pension system, that’s something that we need to do.”
The three boards that handle investments have more than 300 employees, but only a fraction of those actually deal with investments. Giannoulias said his plan would affect only the investment side.
Giannoulias’ proposal calls for scrapping the current setup of boards appointed by the governor.
His plan calls for a board made up of a mix of the five chairmen who now serve on the pension boards, plus others with significant investment experience but no ties to companies doing business with the pension systems.
An oversight board of pension annuitants and ethics commission appointees would watch over the board of trustees. The governor would have no appointments on the new boards.
Some critics say the current three boards all have different investment strategies, and combining those strategies could create a problem. Others worry the new arrangement could limit investment opportunities for female- and minority-owned firms.
Giannoulias said his proposal will call for those firms to get 12 percent of investment business.
“We think beneficiaries will be excited about what we’re trying to do,” Giannoulias said. “There really is no reason not to do this.”