State pension panel votes to hire investment adviser

But Dixon, who heads board, opposes plan

January 12, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

Over the objections of state Treasurer Richard N. Dixon, a state pension board committee agreed yesterday to accept a General Assembly recommendation to hire an independent investment consultant.

The action comes after the retirement system lost $3 billion last year, finishing last in a national ranking of the investment performance of large public pension funds.

The pension board's Investment Committee voted to begin the process of seeking bidders on a contract to advise the $28.4 billion retirement system, which covers 300,000 state employees, public school teachers and retirees.

The legislature's Joint Pension Committee voted last month to urge the system to get such outside investment advice.

The Investment Committee's recommendation now goes to the full pension board, which will decide whether to hire a consultant. But Dixon, who is chairman of the board, made clear he opposes such a move.

After yesterday's vote, he issued a thinly veiled threat to contest any contract award at the Board of Public Works, where he is one of three members.

While accepting the recommendation to hire a consultant, Investment Committee members balked at a second legislative proposal that it adopt a standard for comparing the system's investment performance against a peer group.

Committee chairman Arthur N. Caple Jr. said that the board could stop paying for the Wilshire Associates rating service, ensuring that lawmakers and the public would no longer see the Maryland system's ranking.

Caple's suggestion came after chief investment officer Carol Boykin recommended that the pension system measure its performance against the Wilshire survey, which placed Maryland's pension plan last among 38 public pension systems last year.

When the state's ranking became public, the pension system's staff joined board members in questioning the survey. Boykin said yesterday, however, that the staff concluded it can be useful to compare the system's performance with that of other public pension plans.

She said it would be inappropriate to use a peer comparison as a benchmark, as the legislative committee recommended, but added that it could be useful for informational purposes.

Boykin said no existing survey is perfect and that a custom-designed one would be costly. "If we were to choose one, it would be [Wilshire's,]" she said.

The committee deferred action after Dixon, Caple and other members stuck to their position that the Wilshire survey is a useless measure. Several members said the system should be compared only with those of a similar size and with similar investment strategies.

Caple suggested that the board might want to stop sending such surveys to General Assembly analysts, who have used it to critique the system's performance.

"If we conclude that the data is no good and that we're paying for bad data, why would we want to pass it on to anyone?" Caple said after the meeting.

Sen. Barbara A. Hoffman, chairman of the Senate Budget and Taxation Committee, called Caple's idea "hysterical."

"The facts exist whether you want the information or not," said Hoffman, a Baltimore Democrat. "If you just don't want to be measured, that's not acceptable."

The Investment Committee voted 6-2 to have Boykin draft a "request for proposals" soliciting contract bids from consulting firms. But Dixon warned he could seek to undo the panel's work.

"Depending on the size of the RFP, it's going to come before the Board of Public Works," he said.

"Is that a threat?" a committee member asked. "It's a fact," said Dixon.

Sen. Edward Kasemeyer, co-chairman of the Assembly's pension committee, said he found Dixon's position "surprising" in light of meetings lawmakers have held with the treasurer, who is elected by the legislature.

"I thought he would support it if for no other reason than in fact he is our representative," said Kasemeyer, a Howard County Democrat.

Dixon has used his position on the public works board to thwart a pension board recommendation once before. In 2000, he persuaded Comptroller William Donald Schaefer to block the reappointment of a professional investment adviser who was at odds with Dixon.

Schaefer, a member of the Investment Committee, missed yesterday's meeting.

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