Constitutionality of Cuomo’s Common Fund reforms challenged

New York’s State Comptroller, Thomas DiNapoli, has hinted the constitutionality of legislation to create a board of trustees for the State’s Common Retirement Fund may be challenged.

New York Attorney General Andrew Cuomo co-sponsored the bipartisan legislation, titled Taxpayers’ Reform For Upholding Security and Transparency’ or “TRUST”, which will institutionalise his Public Pension Fund Reform Code of Conduct in light of the “pay-to-play” scandals under former Comptroller Hevesi.

The Comptroller will be replaced as sole arbiter of investments at the US$116.5 billion Common Retirement Fund by a 13-member trustee board.

Under Cuomo’s legislation, the Comptroller will chair the new board, however a further six trustees will be handpicked by a panel including the Attorney-General himself, along with the Governor and Senate figures.

The legislation has already been dubbed MISTRUST – or Men In Suits Trying To Resist Uncovering State Tactics – by a New Yorker commenting on the “timesunion” political blog, reflecting scepticism about the Attorney-General’s motives in the lead-up to his run at the State’s Governorship.

In his reaction to the legislation, Comptroller DiNapoli said the legislation codified reforms he had already implemented – such as banning the use of placement agents and lobbyists in decisions on Common Fund investments –  and had voluntarily limited campaign contributions from Common Fund service providers to “less than half the legal limit”.

The TRUST legislation proposes a two-year ban on doing business with a public pension fund for two years after the firm makes a campaign contribution to any board member.

DiNapoli further implied that passage of TRUST could be less than smooth.

“Whatever changes the legislature and governor may decide to make, they have to be done right.,” his statement last week read.

“We can’t afford the chaos and confusion of protracted legal battles and constitutional challenges. There are any number of issues that have to be resolved, including the make up of a board, how board members would be selected, what is the fiscal impact and cost of the new system, and perhaps most significantly, the constitutionality of this kind of change.”

Whatever heartache the pay-to-play scandal caused New York pensioners and taxpayers, they have earned nearly US$60 million in settlements with Cuomo’s office from funds managers keen to cut their ties with the affair.