LEGISLATIVE REPORT
Governor recommends
changes to pension bill
Following weeks of behind-the-scenes ne-
gotiations and policy discussions with the
State PBA, Governor Murphy conditionally
vetoed Senate Bill 5 to recommend changes
to strengthen the controls and investment
powers of the future PFRS Board of Trustees.
While the veto of the bill to make PFRS inde-
pendently run contained a few recommen-
ROB NIXON dations that the State PBA expressed initial
reservations to, the overall result represents
a dramatic change to the management of the
PFRS as we had originally designed.
While the word “veto” seems negative, in New Jersey the
governor is permitted to recommend amendments after pas-
sage in the state legislature to request changes on a piece of
legislation. A conditional veto therefore allows the executive
branch to amend a bill rather than reject it outright once it
has been passed. This process then loops the changes back
to the state legislature to approve or reject.
In the case of Senate Bill 5, Governor Murphy made sever-
al recommendations to refine the process that allows PFRS
to control its own investments and strengthen the integrity
of Board of Trustee and staff operations. Specifically, rather
than force an immediate transfer of more than $20 billion
from the state treasurer to the new PFRS Board, the veto di-
rects PFRS funds be maintained by the state.
However, the PFRS Board and its investment committee
and staff will have the exclusive powers to direct the PFRS fi-
nancial policy and control the investments held on its behalf
by the state. In short, the state holds the PFRS funds in an
account while the Board of Trustees invests the funds being
held on its behalf.
The change accomplishes our goal to segregate PFRS pen-
sion funds from the rest of the state pension systems and
the State Investment Council by giving the Board of Trust-
ees control over how and where that money is invested. Even
with the change, the PFRS will have the power we have de-
manded to avoid the poor investment decisions, high man-
agement fees and accounting tricks that have plagued the
pension fund for years.
The governor’s changes give the PFRS Board of Trustees
auditing power over the Division of Investments’ handling of
PFRS Board investment decisions, accounts and funds and
gives the board broad powers to take appropriate steps to
protect PFRS. This includes taking the funds from the state
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NEW JERSEY COPS
■ MAY 2018
if the board’s review determines that state actions negatively
impact the long-term viability of the PFRS.
The veto also requires professional, academic and con-
tinuing education experience for the future PFRS executive
director and investment committee members. These chang-
es will ensure that the staff and PFRS board members have
the appropriate experience and training to manage a multi-
billion-dollar pension fund.
The PFRS Board of Trustees will continue to maintain con-
trol over making future changes to PFRS benefits and COLA
through a proc