A little surprise showed up on the agenda of the last meeting of the Maryland State Retirement and Pension System's Board of Trustees: Their vice chairman got screwed. On the final day of the Maryland General Assembly session, Democratic leaders stealthily amended legislation the trustees had submitted to clarify the oath of office. In its final form, the bill (which passed without objection, incidentally) changed the way the board's chairmanship is selected.
Boring, right? One of those bills that's passed off as a "technical correction," perhaps — unless you are Maryland Comptroller Peter Franchot, who has been in line for more than a decade for the top job on the pension board. In a move that was so sneaky that nobody in Mr. Franchot's office even noticed until two days after the legislative session ended, the top post will no longer be elected by the board, it will automatically go to the state treasurer, a position appointed by the General Assembly and currently filled by Nancy K. Kopp.
At least that's what is going to happen if Gov. Larry Hogan chooses not to veto the measure, as Mr. Franchot has already asked him to do. In a letter dated exactly one week after lawmakers adjourned, the comptroller called the actions of legislative leaders "offensive and deeply troubling." The "high degree of recklessness — given the importance of a stable and well-governed pension system to the preservation of our state's AAA bond rating — reflects a startling lack of judgment from lawmakers who should be held to higher expectations," he harrumphed.
That Mr. Franchot might be under attack, or angry about it, should come as no surprise. He has lately become something of a favorite target of top Democrats, Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, who have grown tired of the footsie he plays with the Republican Mr. Hogan on the Board of Public Works and the pot shots he takes at them despite his being a member of their party. Mr. Franchot's grandstanding on issues recently earned him a carve-out from school construction decisions, too. And that one did get a gubernatorial veto — which the Democratic majority promptly overrode. The comptroller has vowed to campaign to unseat Messrs. Miller and Busch in the Maryland Democratic primary on June 26.
Mr. Franchot is right about at least two things. First, there's no question that the pension bill (SB 178) was a sneak attack aimed mostly at denying him a job and any prestige (or bully pulpit) that comes with it. Second, he's correct that the process was all wrong, particularly when there's $51 billion in pension assets involved. The staff of the MSRPS was never consulted on the matter. That's just not a wise choice. But what about his underlying point: Is this, in fact, a bad move on the state's part?
Remarkably, it might actually be a good thing.
By practice, the chairmanship has been passed between the treasurer and comptroller for decades based who has more seniority in their post. Ms. Kopp has held the chair since 2007. But under law, the trustees could elect anyone on their board, including appointees who might have a personal stake in decisions like investment managers or union reps. Having stakeholders on the board is one thing, having them make choices such as whom to appoint to chair the subcommittee that makes decisions on employee salaries is another. The last thing Maryland needs is another Nathan Chapman Jr., the fraudulent money manager whose self-serving investment choices cost the pension system $6 million and landed him in prison on 23 counts of fraud in 2004.
That leaves the treasurer and comptroller, but given that most governing boards in state government have an appointed chair, not an elected one, assigning it to one office makes some sense if only for clarity and predictability. And as it happens, under state law, Maryland's pension investments are already under the treasurer's oversight as the legal "custodian" of assets. Lawmakers may have set out to mess with Mr. Franchot, but they may have in the process adopted a reasonable reform.
Certainly, it's hard to argue that it makes much difference, given that the immediate effect is merely to keep Ms. Kopp in a post she's had for 11 years. Are stakeholders upset, frightened or dumbfounded by lawmakers flexing a little political muscle? Probably not (at least outside the comptroller's office). Does it invite further micro-managing of the pension? Maybe, but that happens anyway. Is the state's bond rating in peril? Definitely not. That the rest of the pension board hasn't similarly called for a veto (at least not yet) speaks volumes. The governor may yet veto the bill anyway as a "solid" for his favorite Democrat in statewide elected office, but it won't be because of any adverse potential impact on the solvency or good management of the pension fund.