Jul
13
Written by:
William Lutz
7/13/2010 3:48 PM
Over the weekend, the Austin American-Statesman’s Kate Alexander
published a story on the Teacher Retirement System that is well worth reading. She chronicles the history of the Teacher Retirement System’s move toward more alternative investments, such as hedge funds and private equity. This move has garnered significant controversy, and – as the article notes – has been sunset by the Legislature in 2012.
Here are a couple of key pieces of background information. First, in 2005, the Legislature exempted a lot of information from public disclosure about the identity of private equity and other alternative investments the state makes. The return is public but in many cases, the identity of the private equity investment is not. The investing community is often an enemy of open government at the Capitol, and the 2005 bill I reference was pushed by private equity and venture capital firms.
Second, the Teacher Retirement System has been the subject of multiple allegations of political manipulation the past several years. A divided board past over a long-time civil servant and appointed a member of the governor’s staff as deputy director of the Teacher Retirement System.
One thing I’ve learned about politics – whenever someone is trying to shield things that involve the public’s money from public disclosure there is almost always a dishonorable reason why. The Sharpstown scandal resulted in the governor and large numbers of legislators being involuntarily retired. It was, in part, over stocks and other investments. Hopefully, this never gets to that point, but it's worth asking: Could the next big scandal in Texas politics come from one of the state investment funds?
It’s a fair question, and politicians of all political stripes would do well to make sure the funds are managed in a transparent and apolitical manner.