A hundred days into his job, Pennsylvania state treasurer Rob McCord says he feels like the proverbial "dog that caught the car." Big problems:
1) Pennsylvania's Guaranteed Savings Program, for citizens who pre-pay their college tuition, is running a $300 million deficit. Savers paid in $1.3 billion, but under state management (and the stock market decline) it's only worth $1 billion. People will need that money as their kids start college in years to come.
To boost returns, McCord wants to invest more of the money in high-yield junk bonds -- and in federally-backed Term Asset-backed Loan Fund (TALF) securities, which include federal guarantees against large losses, modest face-value returns, and the prospect of "double-digit" returns as markets recover. (Pennsylvania's $500 million Section 529 college savings program, run by Vanguard Group, is also down, but that's savers' problem -- there's no state guarantee for 529.)
2) Treasury's check-payment and software system is "antiquated." McCord says he's had to ask for $30 million to prevent a collapse.
3) The State Employees' Retirement System (SERS) and Public School Employees' Retirement System (PSERS) still don't know whether the billions they pumped into "alternative assets" (the kind of stuff McCord managed in his previous profession) have lost more, or less, than stock investments. But SERS managers "erred" in leveraging past stock investments; at both funds, assets are down, and liabilities are surging as more teachers and workers retire at higher pay grades. Again, McCord wants to invest more in TALF. Still, "2009 is not going to be a good year at the pension funds."
This isn't why McCord ran for office -- he still has a long list of loan and education programs designed to benefit "Pennsylvanians who work hard but play by the rules" -- but crisis management is the priority for governments these days.
1) Pennsylvania's Guaranteed Savings Program, for citizens who pre-pay their college tuition, is running a $300 million deficit. Savers paid in $1.3 billion, but under state management (and the stock market decline) it's only worth $1 billion. People will need that money as their kids start college in years to come.
To boost returns, McCord wants to invest more of the money in high-yield junk bonds -- and in federally-backed Term Asset-backed Loan Fund (TALF) securities, which include federal guarantees against large losses, modest face-value returns, and the prospect of "double-digit" returns as markets recover. (Pennsylvania's $500 million Section 529 college savings program, run by Vanguard Group, is also down, but that's savers' problem -- there's no state guarantee for 529.)
2) Treasury's check-payment and software system is "antiquated." McCord says he's had to ask for $30 million to prevent a collapse.
3) The State Employees' Retirement System (SERS) and Public School Employees' Retirement System (PSERS) still don't know whether the billions they pumped into "alternative assets" (the kind of stuff McCord managed in his previous profession) have lost more, or less, than stock investments. But SERS managers "erred" in leveraging past stock investments; at both funds, assets are down, and liabilities are surging as more teachers and workers retire at higher pay grades. Again, McCord wants to invest more in TALF. Still, "2009 is not going to be a good year at the pension funds."
This isn't why McCord ran for office -- he still has a long list of loan and education programs designed to benefit "Pennsylvanians who work hard but play by the rules" -- but crisis management is the priority for governments these days.
You know, there's always the option of changing the way State and Public Colleges and Universities do business. Like how about LOWERING TUITION and making the schools more accessible to those who do well in high school but need financial help. This idea that the freaking economic balloon is always going to rise is just stupid. So often we act like the only solution to these things is to panic about our inflated quality of life being affected.... if we melted down 1/10th of the SUV's on the road and sold the metal as scrap, we'd have enough money to put hunderds of kids through school. I'm not talking crazy, i'm saying the prices have out risen the reality.— TooTone- Joe, another case for either legalizing video poker or introducing Rob McCord to Seth Lehr, Ira Lupert, and Howard Ross at LLR.— Scoop
- Crisis management is expensive in that it keeps McCord from focusing on more current opportunities. TALF-sized returns demand TALF-sized risks. Limit returns to the universities to actual returns achieved on the Guaranteed Savings Fund monies received and invested in the past. That would give some meaning to the title "Guaranteed". Force the Universities to hold the line on tuition increases. Get creative, man. Tough times call for tough measures. Share the pain. McCord needs to refocus on those initiatives for which he sought office without worrying about taking on more risk now to overcompensate for past market downturns. He may never climb out of that hole.— Scoop
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