Commentary –

Scrap State Pension Fund

Along With The Sheriffs

By Chris Powell

If the federal indictments issued the other day against those said to be former state Treasurer Paul  Silvester’s accomplices in the state pension fund scandal are correct, the scandal is a lot different than the impression given about it. If the indictments are correct, it is a scandal more of the greed of certain politicians rather than a scandal of Connecticut’s system of campaign financing, which, deficient as it is, is only the system that prevails elsewhere.

The indictments charge that, in exchange for management of a total of $300 million in state pension money, two investment houses kicked back about $3.5 million to Silvester and his friends through “finder’s fees” and consulting contracts.

One investment house, according to the indictments, also promised to help Silvester raise $100,000 for Connecticut’s Republican Party, some of which was to be forwarded to his campaign for election as treasurer in 1998, allowing him to evade the law barring his campaign from taking contributions from people doing business with his office.

That is, the indictments claim that 97 percent of the kickback money was for the personal accounts of Silvester and his friends, and only 3 percent for campaign financing. Indeed, the campaign financing seems to have been an afterthought.

How much of the $100,000 promised for the Republican Party by the investment house was actually delivered is not clear. Only about $7,700 from the investment house can be identified in Governor Rowland’s reelection campaign finance report. Rowland’s campaign appears to have received about $150,000 altogether from people connected to Treasury business, which is unremarkable, considering that the campaign raised about $6 million and that most campaign contributions are made by special interests currying favor with the government.

Another interesting statistic deducible from the indictments is that the corruption surcharge, so to speak, on the state pension money at issue was more than one percent, even before the management fees charged by the investment houses.

This raises questions the General Assembly has yet to pose formally.

Exactly who needs these state treasury politicians and their friends and financial houses who kick back to get pension business? Why can’t state pension money be invested in ordinary mutual funds with negligible management fees?

Indeed, why should state government be in the pension business at all? Why shouldn’t the middlemen be cut out and state employees put in charge of their own pension savings through 401-k plans, like most people in private employment?

That way state employees themselves could decide whether they wanted to pay “finder’s fees” and bribes, and the taxpayers would be rid of the liability of corruption and state government’s failure to put enough money into the pension fund to meet ever-more-generous pension promises.

With the pending constitutional amendment to abolish the office of county sheriff on account of the explosion of corruption, patronage, and incompetence there in recent years, Connecticut may establish a precedent that the way to clean up an office is to get rid of it. Such an argument may be more compelling with the pension fund functions of the treasurer’s office, where the corruption and patronage have been far greater.

(Chris Powell is managing editor of the Journal Inquirer in Manchester.)