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The best way to improve state treasurer’s office? Give it less to do
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Business New Haven
4/17/2000
By: Laurence D. Cohen
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Remember all those impassioned press conferences and solemn promises to “reform” the state treasurer's office in the wake of the Paul Silvester scandal?
That's all sort of gone away, as the General Assembly stumbles along in virtual gridlock over other issues, and as the boys and girls devote themselves to a ban on certain video games that allow children to fire laser guns at make-believe cartoon characters.
The only folks who were really interested in the unpleasantness at the treasurer's office wanted to use it as an excuse to ram through public financing of state election campaigns. The public doesn't much care for that idea; the politicians are either indifferent to it or hostile. To most legislators, Paul Silvester was just a little too stupid or a little too greedy. The treasurer's office is a plaything for the well-connected and the state employee unions to sort out.
For decades the treasurer's slot was a sleepy outpost designated by both political parties as the “black” spot on the election ticket for the African-American of the moment. When through a miracle of nature white-guy Republican Chris Burnham actually ousted a black Democratic incumbent, Burnham dutifully marched to the General Assembly with a modest, common-sense reform package that was ignored.
Burnham left, Silvester was appointed, embroiled in scandal and ousted by (of course) a black Democrat - this time, a woman. Any talk of serious reform today is met with simple-minded complaints that she is being attacked because she is black or because she is a woman - or because she is a black woman.
Oddly enough, the easiest way to reform the treasurer's office isn't through slow, careful incremental steps. The politicians don't care enough, or have the patience for, devoting much time and attention to an office that seems to run on automatic pilot. What would truly reform the system - and actually improve state government - is a revolution. The state treasurer should be appointed, not elected. And, more importantly, Connecticut should get out of the pension-investment business.
There's no perfect model for all this, but Connecticut would do better with some different choices. Some states elect treasurers, some states don't. In some states the treasurer manages employee pensions, in some states they don't. (In no other state does the pension administrator have as much freedom and as little oversight as in Connecticut.)
The election of Connecticut's treasurer has almost nothing to recommend it. Short of scandal or sex crime, by what criteria should the butcher, baker and candlestick-maker decide whom to vote for? Their position on abortion and gun control? Perhaps for the first time ever, Chris Burnham's 1994 campaign intimated that he would dump most of the money into index funds - a relatively safe, simple-minded approach that at least mentioned investment philosophy as a campaign issue. Imagine being the CEO of a major corporation with billions of dollars in assets (or the governor of a state with billions of dollars in assets) without the power to pick the bean counter.
The real “reform” of the treasurer function in Connecticut would be to scrap the old-fashioned, unnecessary, “defined benefit” pension system that treats state employees as if they were children and obligates the state treasurer to be investment nanny.
Several states have begun to switch to 401(k)-type individual retirement accounts that empower state employees to do their own retirement investing - or at least offer that alternative as an option. Not only does it ease the state's open-ended, difficult-to-calculate promise to provide specific retirement benefits, but it frees employees to leave state service without losing their pension benefits. The money belongs to them. They can take it with them if they leave.
This is particularly attractive to young employees interested in a short stint in state service. It would provide a bit of fresh air in a system that encourages drones to sneak into state service, keep their heads down, and hang on for however many years are needed to become vested or comfortably retired.
Connecticut could reform the treasury function a bit with an oversight board and restrictions on cronyism in the selection of investment advisors. But that assumes a status quo that more progressive states have escaped from, that many other states are revising, and that the private sector has increasingly abandoned. Instead, give the money to the employees and let them invest it themselves.
Laurence D. Cohen is a senior fellow at the Yankee Institute of Public Policy.
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