April 17, 2000

Although state employee pension fund investments are performing well, State Treasurer Denise Nappier says she is concerned about the state legislature's reluctance to fully fund the account, a practice that keeps the funds from earning even more.

Nappier, speaking April 5 to about 100 members of the University of Connecticut Professional Employee's Association (UCPEA), said the retirement fund is in good shape, topping $21 billion last year for the first time in history. And, she said, state employees need not worry that the scandal involving former treasurer Paul Silvester will affect their retirement plans.

Yet the state's unfunded liability - the difference between the cost of all state employee retirement payouts and available cash - means that, as treasurer, she has less money to invest. Nappier added that the liability issue also impacts the state's bond rating, which forces up the cost of borrowing.

"Do you know who makes up the difference? The taxpayers. You and me," she said.

Nappier is urging legislators to use some of the state surplus to build up the pension fund, and fully fund the account sooner than currently planned. Depending on the specific retirement plan in which employees are enrolled, she said, the plans are funded at only between 60 and 80 percent of the level recommended by actuaries. Overall, the gap between the suggested level of savings and the actual amount in the fund is about $7 billion.

On the bright side, Nappier said her office's investment decisions last year resulted in the state's investment gains ranking in the 42nd percentile, meaning it performed better than 58 percent of all investment funds that invest more than $1 billion.

Nappier also said she is working with legislators, asking them to institute a series of policies for the office that would help the investments and help avoid, as far as possible, a repeat of the scandal the plagued the department under the previous treasurer. She said she has implemented all the changes she is seeking from the legislature but, without statutory policies, there's no guarantee future treasurers will follow her lead.

She said she is also asking legislators not to create another board of overseers, a discussion that was popularized in the wake of the Silvester scandal. A bill suggesting such a panel was defeated in the House of Representatives April 5, but Republicans and Gov. John G. Rowland say it is likely to be resurrected in one form or another.

"I don't believe bad or corrupt decisions made by a board are any better than bad or corrupt decisions made by an individual," she said.

She would, however, like to see the legislature enact three key reforms of the office:

• That the state treasurer not be allowed to make any investment decisions not covered by a policy. The policy would be created by the Investment Advisory Council, a committee comprising representati ves of labor and business that already works with the State Treasurer's office;
  
  
• That, before any money manager is selected to invest pension fund monies, there must be a 45-day waiting period to allow the Investment Advisory Council to review the firm;
  
  
• That, during a lame duck administration, no investment decisions regarding private equity ventures be allowed without approval of the Investment Advisory Council.
  
  

"My reforms can be summed up in three words - disclosure, disclosure, disclosure," Nappier said. "The days are over when a money manager can get $1 million for having lunch with the treasurer. The days are gone when the treasurer's office will be used for political influence peddling."

Nappier also is working to make the state employee retirement system more portable, allowing state employees to continue to be part of the system should they leave state service for a job with the federal government or a local municipality, or if an employee leaves the system for a period of years then returns to the state. She says she was not allowed to buy back her state service - she worked at the UConn Health Center for three years in the late 1970s - when she returned to state service because, she was told, five years had lapsed since she left the job.

Richard Veilleux