10/14/2009 3:23 PM
Over the weekend, the Austin American Statesman published a must-read article by Kate Alexander on the latest political controversy at the Teacher Retirement System. Unfortunately, it appears this important story may get lost because much of the Capitol press corps is on a rampage about two non-scandals – one with the forensics board and another with the State Board of Education – and ignoring a real policy issue that might actually impact the upcoming GOP primary.
Few – if any – Republican primary voters will care about the forensics board (GOP primary voters are a law-and-order bunch who like prosecutors) nor the fact that a couple of Democrats didn’t cross a t on a disclosure form (this is nothing more than an attempt by social liberals and legislators who want to raid the Permanent School Fund to do a hatchet-job on the elected board). But the controversy at the Teacher Retirement System is different.
The Teacher Retirement System used to be right up there with the Veteran’s Land Board. Sure, it’s there and serves a really important purpose, but it is run by civil servants who just go to work and do their job and don’t create controversy or scandal.
The fund started attracting the attention of the investment community when it started branching out into non-traditional investments such as hedge funds, private equity, and emerging markets to the degree that other similar funds haven’t. And unlike the other two controversies I mentioned, Republican legislators have publically stated their concerns about some of the happenings at TRS.
And now, Perry has replaced Chairman Linus Wright, who was selected by retired teachers, with one of his own direct appointees and one of his finance committee members, R. David Kelly. The members of the TRS board appointed from lists prepared by active and retired educators have historically been most critical of the recent changes to the fund, while the governor’s direct appointees have been more supportive of these changes.
None of this – in and of itself – is a smoking gun. Many investment advisers defend alternative investments. I’m not stating or implying that anything improper is going on at TRS per se. Rather, the perception of a political agenda merits giving this agency careful attention. I’m not surprised U.S. Sen. Kay Bailey Hutchison is making a campaign issue out of this in her race for governor.
The Perry administration would do wise to tread lightly here. One in every 20 Texans is a member of TRS. Retired teachers vote in higher proportion than the population as a whole – and many of them vote in Republican primaries. Most Texans would not react kindly to politicizing the Teachers’ Retirement Fund. Payola politics has no place there, and were it to occur, there would be a massive political backlash.
This fund ought to be above politics, and the Perry administration has both an affirmative responsibility and a political self-interest to make it so. It is particularly important to avoid even the appearance of political meddling because the Legislature in 2005 passed a shield law preventing the public disclosure of which businesses state private equity funds invest in.
More significantly, this is an issue that ought to concern every Republican. In 2003, when the state budget was in the hole, the Texas Retired Teachers Association
supported Duncan’s bill to make the retired teacher health insurance program – TRS-Care – financially solvent, while the active teacher associations bashed the bill. It was not an easy bill for any educator group to support. It involved shared sacrifice – additional contributions from the state, active members, and retired members.
The active teacher unions were proposing a totally-taxpayer-funded bailout, even when the state budget had a $10 billion shortfall. The retired teachers bargained in good faith, won a compromise, and took the hard road, supporting a compromise bill. The retired teachers were there when the Legislature was facing a difficult situation and needed their help, so their concerns ought to be taken seriously now.
Another idea that’s going over like a lead balloon with GOP primary voters is Perry’s plan to invest state retirement funds on the Trans-Texas Corridor (see Texas Monthly’s BurkaBlog for more details on that issue
). The GOP platform is very critical of the whole corridor concept, even going so far as to ask the party to investigate how it got started in the first place.