Senator Ryan Fazio Calls for Reforms to State Investment Office to Protect Taxpayers and State Workers

FOR IMMEDIATE RELEASE
March 26, 2024

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Senator Ryan Fazio Calls for Reforms to State Investment Office to Protect Taxpayers and State Workers

HARTFORD, CT – Today, Senator Ryan Fazio (R-Greenwich) reiterated his year-long calls for reforms to the Office of the State Treasurer in light of public testimony from the treasurer’s office and Yale scholars on the state’s long-term pension fund underperformance.

Research at Yale School of Management from Prof. Jeffery Sonnenfeld and Mr. Steven Tian has shed light on Connecticut’s historically underperforming pension funds, costing taxpayers and state employees billions in lost money. Their most recent report, discussed at the hearing, finds that Connecticut ranks 8th-worst in returns among 43 states with data on its roughly $55 billion of pension assets.

“Professor Sonnenfeld and Mr. Tian have provided a public service to Connecticut state employees and taxpayers that the legislature should have already been doing itself. We need better oversight of our taxpayer dollars and investments and better long-term governance to save billions in state investments,” Sen. Fazio said.

According to the Yale study, Connecticut is one of only two states where the elected state Treasurer is the sole fiduciary for the state’s tens of billions of investment dollars—meaning the sole official ultimately responsible for performance. In most states, there is shared responsibility. The only other state, North Carolina, with a similar structure to Connecticut, has the 3rd-worst returns in the nation over the last decade.

“Last year and this year, I co-wrote legislation with Sen. Kelly that would improve governance and long-term performance by creating a board of directors with fiduciary responsibility for the state’s pension funds, shared across several qualified and confirmed people, with the treasurer as chairman and CEO of the office,” Sen. Fazio continued.

“We also need to adopt more governance reforms to improve performance for state workers and taxpayers, including periodic independent performance evaluations, reporting to the legislature, with regular hearings. We also need some prescriptive requirements for the state to divest from asset managers who significantly lag benchmarks or fail to meet certain levels of confidence. It’s unacceptable that our state still invests with money managers for decades with abysmal returns.”
Finally, Senator Fazio thanked the new state Treasurer, Erick Russell, for his public service.

“I appreciate the internal reforms Treasurer Russell has made to his office in his first year on the job. Those are helping to improve our performance. Now, the legislature has to step up to help the office succeed for the next ten treasurers, not just the current one. Shared fiduciary responsibility, transparency, and other checks and balances will ensure a better system to support Treasurer Russell and the many who come after him.”

Sen. Fazio concluded, “It is not fair to vest responsibility for over $50 billion of pension and taxpayer dollars in any individual, no matter who it is. If Connecticut had a different system for the last decade than it does now and profited on its investments at the same rate as a normal portfolio (70% stocks and 30% bonds), the average family could have paid $800 to $900 less per year in taxes! The time for reform is now! With the right changes, the legislature can support our treasurer, state workers, and taxpayers for years to come.”

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