TRENTON – Codifying an already ongoing practice, the Senate Budget Committee passed a bill allowing the Division of Investment to invest a portion of state pension funds into New Jersey businesses in the form of venture capital.
The bill, S3064, passed 8-2, with two Republican senators opposing the measure.
State Sen. Joe Pennacchio, (R-26), of Montvale, said recent pension reforms allowed stakeholder control, allowing the lawmakers to “keep our hands off of the pension funds.” The pension investments lost money the last two years, he said, after a decade of solid returns.
Chairman and bill sponsor Paul Sarlo, (D-36), of Wood-Ridge, said the practice is already ongoing, so the Legislature is only clarifying the procedure. “There is some language that is quite ambiguous,” Sarlo said. “What we’re doing here today is we’re codifying it. We are giving them the ability to diversify their investments.”
Ongoing or not, not everyone was on board. “I think we have to be very careful with pension funds…We just saw (a $500 million loss) at the federal level,” state Sen. Mike Doherty, (R-23), of Washington Township, said. “So I don’t think we should be risking the pension funds – for the folks who are going to rely on that – in venture capital.”
Both Pennacchio and Doherty voted against the measure.
According to the bill description, the division director “must exercise the director’s fiduciary duties, which include the requirement that any investment be made for the exclusive purpose of providing financial benefits to the beneficiaries of the funds, that the expected returns are commensurate with the risks associated with the investment, and that the investments do not jeopardize the tax-exempt status of the retirement funds under federal law. The bill thus makes explicit the currently implied statutory authority for such investments.”