After years of struggle, and months of political wrangling, lawmakers have finally reached a controversial compromise to resolve the $4.3 billion unfunded liability in the state employee pension fund.
The crisis of the unfunded liability developed over time, partly because previous lawmakers raided the fund, but more recently because the market, as they say, tanked.
The Maine Public Employees Retirement System, or MePERS, is currently invested in low- to moderate-yield funds. It’s a safe way to go with public money.
But, now, the Legislature is considering a bill that could permit MePERS — through a newly created exception to the state’s Freedom of Access Act — to invest more than $10.5 million in assets in top-tier, private equity firms, upping the ante to set up risky investments.
Really, is that wise?
The argument to create the FOAA exception to shield certain investments — including direct investments in land, timber and mining rights, private company equity and private company debt, indirect investment in limited partnerships and investments in unregistered securities — is because the investment firms don’t want the public poking in their business.
Why not? Isn’t it our money?
The Government Accountability Office, just last year, issued a report warning public funds from investing in high-yield, high-risk ventures, like private equity firms, because of the very high risk of collapse.
Last year, the Pew Center issued a report specifically pointing to the volatility and disintegration of private equity investments as a principal factor in the painful, rolling public pension crises across this country.
So, we ask you to ask yourself: Would you, knowing the substantial risk for collapse, invest your retirement funds in private equity firms without the benefit of access to information regarding those investments?
If LD 1524 passes, that’s exactly what you’ll be doing.
The opinions expressed in this column reflect the views of the ownership and editorial board.
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