By Anne White
Senator Ryan Fazio has renewed his call for significant reforms to the Office of the State Treasurer in Connecticut. This move comes in response to recent public testimony from the treasurer’s office and academic insights from Yale scholars, emphasizing the persistent underperformance of the state’s pension funds.
Research spearheaded by Professor Jeffery Sonnenfeld and Mr. Steven Tian from the Yale School of Management has highlighted Connecticut’s subpar performance in managing its pension funds. This underperformance has reportedly resulted in substantial financial losses for both taxpayers and state employees. According to the research presented at the hearing, Connecticut ranks as the eighth-worst state in terms of returns, out of 43 states that have reported data on pension assets, which are estimated to be around $55 billion.
Senator Fazio has expressed his view that the findings by Professor Sonnenfeld and Mr. Tian underline the necessity for enhanced oversight and governance of the state’s investment strategies. He argues that this is critical to safeguarding billions in state investments.
A striking feature of Connecticut’s investment governance, as revealed by the Yale study, is the unique role of the state treasurer. The elected state Treasurer in Connecticut serves as the sole fiduciary for the state’s investment funds. This arrangement is rare, with North Carolina being the only other state with a similar structure. North Carolina, incidentally, has recorded the third-worst returns in the nation over the past decade.
Senator Fazio has been proactive in addressing these concerns. Alongside Senator Kelly, he has co-authored legislation aimed at reforming the governance of the state’s pension funds. This proposal includes the establishment of a board of directors responsible for fiduciary duties, thereby diluting the sole authority of the treasurer and fostering shared responsibility.
The senator has outlined a comprehensive approach to reform, calling for regular independent performance evaluations, mandatory reporting to the legislature, and divestment from asset managers who consistently underperform. He has stressed the urgency of these reforms, arguing that they are essential for enhancing the financial performance for the benefit of state workers and taxpayers.
In his remarks, Senator Fazio also acknowledged the efforts of the new state Treasurer, Erick Russell. He commended Russell for initiating internal reforms within his first year, which have contributed to improved performance. However, Fazio emphasized the need for legislative action to further support these efforts, ensuring robust governance and accountability for future treasurers.
Senator Fazio highlighted the critical nature of these reforms. He posited that if Connecticut had managed its investments more effectively over the past decade, akin to a standard portfolio, the average family in the state could have seen a substantial reduction in their tax burden. This underscores his argument that the time for reform is now, to better serve the treasurer’s office, state workers, and Connecticut taxpayers in the long term.
