|
|
|
Sole Fiduciary
Denise Nappier takes the reins of the treasurer's office —
and an $18 billion state pension fund
|
Business New Haven
2/8/1999
By: BNH
|
On January 6, Denise L. Nappier became the 82nd treasurer of the state, the first female to be elected to that constitutional office, and the first African-American woman elected to statewide office in Connecticut. Before that Nappier spent ten years as treasurer of the city of Hartford. A Hartford native, Nappier holds a B.A. from Virginia State University and a master's degree in community planning from the University of Cincinnati. BNH caught up with Nappier on her 17th day in her new job.
Can you explain what is the Connecticut Higher Education Trust (CHET), and what it's intended to do?
The Treasurer's office for years has offered an investment vehicle for families to begin to save money for their children's college education. The CHET program is just a new program, replacing the college savings bond program, that allows families to put away tax-deferred contributions into the fund, which at maturity will be used to cover the costs of their children's college education.
What's the difference between CHET and the old college savings bond program?
CHET allows for more investment options. Now portions of the fund can be in equities, and not just fixed-income products. Asset allocation depends on the age of the child. Obviously, if the child is 16 years old, you're not going to put 80 percent in equities. If the child is eight months old, then you're going to have more exposure to equities than fixed-income [instruments].
In terms of state debt, where are we compared to historic debt levels?
I don't know exactly. I would say that in the last year, with all the commitments to urban development, that it's probably gone up. There was a time in the mid-1990s when we were starting to get a handle on our debt levels, but now with all the commitments to pump money into urban areas, that level has probably gone up. We do have one of the largest per-capita debt burdens in the country.
Does that leave us vulnerable in terms of things like credit ratings?
It's hard to tell. I haven't met with the rating agencies yet. Certainly if we had less debt, the rating agencies would look more favorably on it. A lot those commitments that have been made [by the administration] have yet to be authorized by the legislature. And for some of those that have been authorized, we have yet to go to the bond market.
Ralph Nader charged that the additional debt the state will incur by bonding the Hartford football stadium will lower our bond rating. Do you agree?
Collectively, if you look at all the commitments that have been made over the last year, I'm sure that the rating agencies will ask a lot of questions about how the state proposes to meet the debt-service schedule and at the same time maintain a balanced budget. They're certainly going to ask questions around that. Obviously, the real question is the underlying investment and whether the financial performance shows that sufficient revenues can be generated to meet the debt-service payments. But I have not done that kind of assessment yet.
Here's a dumb question: Where does the Treasurer's Office leave off, and the Office of the Comptroller pick up?
The treasurer has the responsibility for investing the state's pension funds. That's the asset side of the pension fund; the liability side is located in the comptroller's office. The benefits side - to determine eligibility for retired [workers] and calculate pensions - that's in the comptroller's office. Both the comptroller and the treasurer share responsibility for fund disbursements. For example, both of our signatures are on checks.
How would you define in a nutshell what the treasurer's job is?
To protect and grow the assets prudently, not only in the interests of Connecticut taxpayers, but in the interests of the beneficiaries of the pension fund in particular. The pension fund, obviously, is one of the biggest and most visible funds managed by the treasurer's office. The size of that asset is roughly $18 billion.
What are you looking at with an eye toward change?
One of the things I've done is to commission an asset-allocation study, because I want to make sure that the investment policies that have been established for the pension fund and agreed to by the investment advisory council, that the portfolio itself mirrors our investment policies. I have reason to believe that that's not the case.
How so?
The portfolio itself and the kinds of investments that we're making, the style of management, is not completely in concert with our policies. If we have an S&P [Standard & Poor's] 500 benchmark, then our portfolio of equities should to some extent mirror the characteristics of the companies that are in the S&P 500. I'm also taking a look at a lot of the activities that were taken in the last quarter of my predecessor's administration - some of which the investment advisory council was privy to, and some of which they were not - and my concern is to make sure that there was proper due diligence and that those investment decisions complement the overall portfolio. I have maintained from day one in the campaign that I support fully funded pension plans. This goes beyond my jurisdiction of growing the assets. We have been growing the assets for years now, but at the same time the unfunded liability has increased.
Why?
Partly because there's no single agency or officer that has complete control over the funding status of the plan. I need to work in concert with the General Assembly, with the unions, over things like the methods that are used to determine the state's contribution. Historically and up to the present time, when the state begins to look for savings they tinker with the methods that are used to determine the state's contribution. And when you tinker with those methods you probably do it in a way that will lower that contribution.
What's your opinion of the federal government investing Social Security funds?
Looking at it purely from the investment merits, I would say yes: Over a long period of time, historically, if you've got a large portion of your investment funds in equities, you're going to realize a greater return than if you have all of your eggs in one basket - in this case, U.S. Treasuries. I think there is a real question as to how much of the Social Security contributions should be earmarked for the stock market. And very legitimate questions have been raised over the federal government having too much control over the stock market. I mean, we're talking hundreds of billions of dollars. But I don't think that concern suggests that we should just stay away from it. There need to be some safeguards in place so there's not undue political interference from the federal government in the marketplace. BNH
|
Go FirstGo PreviousGo
NextGo LastGo
to Index
|
|
