Playing Politics with Pensions

An Oregonian article today, Payback slow for pension fund, reports some interesting facts on Oregon pension funds. Though the article title suggests that pension funds are the focus of the article, they aren't. Investing in new Oregon businesses is. The subtitle tells it all: Investing - Few of the millions the Legislature has marked for venture capital get back to Oregon.

But, how's this for an attention grabber from the article?

Most of Oregon's money remains uninvested.

Hello! Why isn't part of Oregon's pensions funds being invested? Because the Oregon legislature has a dual goal for those funds:

We're not making any headway in dealing with emerging industries in Oregon," said Rep. Mitch Greenlick, the Portland Democrat who sponsored the 2003 bill to set up the fund. "I'm sure Credit Suisse is fine, but they haven't set out to meet the objectives that we set up in the first place. In addition to generating returns, we need to make sure our investment dollars are serving a social function."

Along with "generating returns" (which the uninvested funds presently aren't doing), there is a "social function". If the "social function" can't be met in the context of "generating returns", the funds remain uninvested. The apparent problem is that Oregon start-up businesses are not a stable, profit making investment--which is the kind of investment one wants in pension funds.

Granted that the $100 million out of the $60 billion pension fund is not a lot (about 17/100ths of a percent). But this is pension money--not tax money. Pension money should not have a dual purpose. Its purpose should be to fund pensions. Period. To use it for other ends that do not generate normal returns is a breach of trust.

If legislators want to politicize pension funds to help new Oregon businesses, they should direct that it only be their own pension funds.