Saturday, September 20, 2008

"Constituents remain concerned about political pressure to invest in deals such as toll road projects favored by state leaders."

Pension fund hires Perry aide as deputy director

Board splits 5-4 on choice as some trustees voice fears of political influence.


By Robert Elder
Austin American Statesman
Copyright 2008

A divided Teacher Retirement System board hired a longtime aide to Gov. Rick Perry as the $107 billion pension fund's new deputy executive director, a position that had been vacant for three years.

The board voted 5-4 to hire Brian Guthrie, a budget and policy aide to Perry. Guthrie, who was one of three finalists for the job, also worked for Perry and the late Bob Bullock when they were in the lieutenant governor's office.

The possible hiring of Guthrie alarmed some educator groups, which expressed concern about the degree of control Perry has over the pension fund, one of the nation's largest. The governor directly appoints three trustees and selects the other six trustees from a list of the top vote-getters in retirement system elections.

After his selection, Guthrie told the board he is "proud of my service to the governor and the lieutenant governor" then added, "My life changed today."

"I've been given the opportunity to serve the members of the Teacher Retirement System and the board, and I am firmly committed to doing so," he said. "I do not have a personal agenda."

After the meeting, Guthrie said the governor had not asked him to apply for the retirement system job and has not spoken with him about the system or any strategies it should employ.

The system serves 1.3 million active and retired public school workers and some state higher education employees. It pays out about $6 billion in benefits a year.

Before the vote, Ann Fickel, legislative director of the 50,000-member Texas Classroom Teachers Association, urged the board "to defer these controversial kinds of decisions until after the legislative session and work on strengthening the relationship you have with your members."

Trustee Charlotte Clifton, a high school teacher in Snyder, voted against Guthrie's hiring, as did the other active educator on the board, Houston-area school superintendent Mark Henry.

Clifton, a former president of the Classroom Teachers Association, said, "I don't think this is the best time to hire this position when a number of other changes are going on." She said she has spoken with a number of educators who are worried about possible political influence on the fund.

Fickel and representatives of other educator groups said the constituents of the retirement system remain concerned about the system's push into more private equity and alternative investments, bonus pay for investment staff, and possible political pressure to invest in deals such as toll roads and other infrastructure projects favored by state leaders.

Ted Melina Raab, a representative of the Texas American Federation of Teachers union, said told the board that Guthrie's hiring would add another layer of controversy to the retirement system and "could detract from the goal of securing maximum state contributions for the pension and retiree health care funds."

The retirement system has already drawn the attention of the Senate State Affairs Committee. Committee members last month questioned system officials about the board's decision to replace its longtime fiduciary counsel and about the system's push into private equity and other alternative investments.

Separately, system trustees said the fund would start to sell its holdings in nine foreign companies that do business in Sudan or Iran. The board didn't provide an estimate of how much it will cost to sell its holdings or what expected returns it might forego.

Last year, Perry directed the state pension funds to unload their holdings in companies with ties to Iran, and the Legislature passed a law requiring state pension funds to sell their holdings of companies that do business with Sudan, whose government has been accused of genocide.; 445-3671

© 2008 Austin

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