Alabama scored a 78.8 in the Pension Fund Management category of the Center for Public Integrity study, ranking it seventh in the country.
The primary driver of the state’s relatively high ranking in this category is that the Retirement Systems of Alabama uses staff analysts to make investment decisions, with oversight from the boards of control for the Teachers’ Retirement System and the State Employees’ Retirement System. The state does not contract with outside firms to manage the investments and does not procure investments through placement agents, a practice that has come under fire recently in several other states.
The study did not take into account the return on investments achieved by the RSA or recent criticisms about the systems’ unfunded liabilities.
The state did get a less-than-perfect score on the issue of whether politics played into investment decisions. As Retirement Systems of Alabama Chief Investment Officer Marc Green put it, “No matter what you do, there’s always some politics.”
Green stressed that the vast majority of the RSA’s investments are in equity stocks chosen by a team based on unbiased analysis. But some of the RSA’s individual investments, such as in real estate, are rooted in political reasoning, or at least economic reasoning, in addition to a straight analysis of the likely return.
David Bronner, the RSA’s chief executive director, has said some investment decisions were intended to promote tourism in the state, including development of the Robert Trent Jones Golf Trail, or to recruit industry to the state, including the offering of $10 million in free advertising on TV stations owned by the RSA as part of the incentive package to persuade Hyundai to build a plant in Alabama. Bronner and the boards of control, which ultimately must approve or reject his plans, have come under fire in recent years because some of those local investments have had less-than-average returns. Bronner has defended the choices as good long-term investments and has said that the RSA plays a role as an economic driver in the state. What’s good for Alabama’s economy will benefit the retirement systems in the long run, he’s said.
The state’s score also was boosted by requirements that decision-makers in the RSA file financial disclosure forms and abide by the same ethics law that applies to all state employees, and by the public availability of records documenting the financial condition and transactions of the RSA.