Christie strikes down expansion of N.J. pay-to-play rules

— Gov. Chris Christie on Monday issued a conditional veto stripping down a bill that would have expanded the state's pay-to-play rules and required the state to disclose fees paid to outside investment managers.

Christie struck down lawmakers' efforts to block deals with investment firms whose management professionals have made political contributions to Garden State candidates' national political committees. He also made changes to disclosure requirements that he said would have a "chilling effect" on the state's ability to attract investment managers.

Private investment managers are already "subjected to stringent disclosure requirements regarding their political activity, including federal and state restrictions that prohibit or limit the types of donations they can make to state and federal campaigns and candidates," the governor's office said in a statement.

"He gutted it," said state Sen. Shirley Turner (D-Mercer), who sponsored the bill. "The conditional veto is really nothing more than a fig leaf to cover up for the fact that he doesn't want to provide total transparency and accountability."

State Assemblyman Troy Singleton (D-Burlington), who backed the legislation, said he was "a bit disheartened" by the governor's rejection of a bill he said would have assured that firms are hired because they're the "best and brightest" and not because of their political contributions. The bill would have "taken away any hint of less than transparent behavior," Singleton said.

State laws already prohibit contracts from being awarded to firms whose investment management professions have made political contributions to a state political party in the two previous years. The bill (S-2430) would have extended the prohibition to political contributions made to federal and national committees and non-state political parties.

"I don't care if it's a Democrat or a Republican at the state level or the federal level," Turner said. "It should not be done."

Tom Byrne, chairman of the State Investment Council that oversees the state's $80 billion pension fund, had denounced the bill, warning it could force the state to pull out of some lucrative investments.

The legislation would only bar those deals going forward and would not jeopardize existing investments, Turner countered Monday.

Byrne's remarks came in March, after the investment council moved ahead with plans to invest up to $100 million with KSL Partners, a private equity firm whose managing director contributed $2.5 million to the Republican Governors Association in 2013 and 2014. Christie chaired the RGA last year.

The bill also would have required the investment council to report quarterly the rate and amount of fees paid to to the private companies managing the state's alternative investments, such as hedge funds, real estate and private equity. The report would have also included the investment returns for funds under outside management.

New Jersey's public workers and retirees deserve "nothing less than total transparency," Turner said.

In a statement, Christie's office said that requirement would have a "chilling effect... on New Jersey's ability to select the best fund managers," and recommended instead an annual report on the charges. Publicizing "confidential fee arrangements may discourage managers from doing business with the state, he warned.

"I agree that it is important to disclose the fees that the state pays for the services of its fund managers so that we can identify where our success in private investments is greatest and maximize our returns," Christie said. "However, individually identifying each fund manager and the fees they have negotiated with New Jersey will put the state in a disadvantageous position relative to other institutional investors who require no such disclosure. As such, many of the premiere fund managers may elect not to continue a relationship with the state if their confidential fee arrangements will be made public. Any resultant loss of diversity in the fund manager pool will lead to suboptimal returns."

For the revised bill to become law, both the state Senate and Assembly would have to approve it and Christie would still have to sign it.


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