NJ pension chief warns on danger of firing political donors: Updates

UPDATE: New Jersey state pension officials say they are worried the state will lose money if it has to fire money managers who are also political donors, writes the Inquirer's Andrew Seidman here. The state pension system reported investment returns of 7.25% in fiscal 2014, just below its 7.28% annual target: see P. 21. Corrected.

[NJ returns last year fell below those of Pennsylvania's largest pension fund, the Pa. School Employees' Retirement System (PSERS, which returned 8.8%) and the Montgomery County pension plan (invested mostly in Vanguard index funds, Montco returned 7.8%), though N.J. did manage to beat the Pa. state workers (SERS) plan, which returned 6.4%. Those three Pennsylvania funds all set a 7.5% annual performance target.]

EARLIER: "The administration of Gov. Chris Christie is considering investing tens of millions of dollars of New Jersey pension money in a firm whose chairman was among the largest donors to the Christie-run Republican Governors Association (RGA)," writes David Sirota in International Business Times here. (See links in Sirota story to earlier examples of Christie donors hired to help run N.J.'s underfunded pension system.)

Statement from Christie's spokesman Joseph Perone: New Jersey's Division of Investment, which oversees pension funds, "will present a memo to the State Investment Council on the benefits of the proposed investment to the fund at today's SIC meeting. Donations by investment management professionals to the RGA are not required for disclosure and are permissible under SIC regulations. Irrespective of that distinction, investment decisions are made by career Division of Investment professionals on the merits of those investments."

Back to Sirota's story: "The proposal is the latest in a series of lucrative pension deals proposed by Christie officials for firms whose executives have made significant political contributions to GOP groups affiliated with the governor. Those deals have coincided with New Jersey paying hundreds of millions of dollars in new fees to the financial firms managing the pension money.

"According to New Jersey Treasury Department documents, the governor's State Investment Council on Wednesday will review the administration's proposed $100 million investment of pension money in KSL Capital. That firm's chairman and founder is Mike Shannon, who along with his wife made $2.5 million worth of donations to the RGA in 2013 and 2014. Campaign finance records show that $500,000 of that came in 2013, when Christie was the vice chair of the group and it was spending heavily on his reelection campaign in New Jersey. Another $2 million worth of donations came in 2014, when Christie was chairing the group.

"In all, Shannon and his wife were together the sixth-largest donor to the RGA in the 2014 election cycle, according to the Center for Responsive Politics. Shannon had not contributed to the RGA before Christie became the group's vice chair and then chairman, though his wife, Mary Sue, gave $25,000 to the RGA in 2012, according to data from PoliticalMoneyLine.com. Shannon and his wife wrote a $1 million check to the group four months after Christie became chairman."

As I wrote here last year, federal law since 2010 has restricted money managers like KSL from collecting fees from state and local governments if their principals have given money to candidates for elective office in those governments; but donations to federal  political committees like the RGA are still allowed; the Christie administration approved changes in N.J. state rules to make this explicit.