It appears that a good governance initiative has needlessly and erroneously evolved into a turf protection issue. In her capacity as trustee of the state retirement system, State Treasurer Denise Nappier has the legal obligation to assure that the system is administered in the best interest of the plan participants which logically includes effectively and efficiently managing the funds that are held in trust for the participants.
Doing so produces the collateral benefit of lowering the taxpayer support required to properly fund the system because each dollar of additional investment return represents one less tax dollar in required contributions.
The legislature recognized her need to attract and retain the investment talent needed to fulfill her obligation and further recognized how she was being encumbered in that regard by the pay plan in place. This is simply a matter of applying common sense to produce dollars and cents. If she is able to expand the knowledge and experience base of the investment staff through additional compensation, the rewards should be a considerable multiple of the additional expense.
For example, if the combination of lower external fees and higher return generated by the more highly skilled investment staff only increased return by 1/10 of 1 percent, it would add $30 million per year in incremental return. The additional compensation required would be a fraction of that and it would be reasonable to expect a greater than 10 basis point improvement in the rate of return. I would think most taxpayers of the State of Connecticut would embrace that trade and would encourage the governor to do the same.
Gary Findlay is a retired Executive Director of the Missouri State Employees Retirement System.