Perry Wants To Put Teacher Pensions At Risk With New Scheme

Texas Governor Rick Perry wants the Texas Teacher Retirement System to invest as much as $600 million in so-called emerging start-up businesses that his Texas Emerging Technology Fund has also invested in.
This is in spite of the fact that most of these companies have uncertain futures and no worthwhile revenue to speak of.

Perry, of course, thinks such a move would help boost these companies and propel them into the future.

The big question is whether or not the retirement future of thousands of Texas teachers should be put at risk to promote economic development.

It certainly doesn’t seem like a common-sense approach to either economic development or protecting teacher retirement.

Although it is an entirely different ball of wax than the Orange County, California government fund collapse in 1994, which caused a run on TexPool and could have caused severe financial problems for Texas and the government bodies that invest in TexPoo, this nonetheless reminds me of that.

The bottom line is that Texas cannot hinge its futures on the unproven. As altruistic of a concept as it is to invest state retirement funds in emerging companies the state has already invested in, unproven investments are not wise when it comes to the future of our Texas teachers.

The recent scandal surrounding the loss the Employee’s Retirement System of Texas sustained following the lawsuit against James Leininger’s KCI and the subsequent dip in that company’s stock price should illustrate just how carefully the state must invest dollars when thousands of Texans will be depending upon those dollars in the future.

Educators agree with this assessment:

Greg Poole, a teacher fund trustee and a school superintendent in Mont Belvieu, east of Houston, said focusing on investments to Texas startups seems “completely arbitrary,” considering that the fund invests globally with the goal of producing the best returns.

“At the very least, this sends up some yellow flags,” Poole said. “Are we getting pitched this first and foremost because it will increase returns, or is it because it’s limited” to Texas companies?

Keep in mind that the Teacher Retirement Fund already has a shortfall of $13 billion and that retirees haven’t seen benefit increases since 2001.

Especially in an environment when the $100 billion fund has a shortfall, should we even be talking about investments like this?

Another unspoken here is that this opens up the Emerging Technology Fund up to even more political pressure and less accountability. Consider that entrepeneaurs who would like to become “paper millionaires” overnight will see the Emerging Technology Fund as an immediate cash cow. After all, if you get the ETF money, you’ll also get serious investment from the Teacher Retirement System.

It doesn’t exactly create poster children for governmental accountability.

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