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Byrne Bows out of Key Investment Panel as Murphy Puts His Stamp on It

Son of former governor satisfied he helped draw attention to state pension system’s huge unfunded liability and need for action

Tom Byrne
Tom Byrne, chairman of the NJ State Investment Council

Less than a year after being re-elected as the leader of the New Jersey State Investment Council, Tom Byrne is now leaving the panel that plays a key role in how the state’s roughly $77 billion in public-employee pension assets are invested.

With Gov. Phil Murphy taking action to replace former Gov. Chris Christie’s council appointees with his own nominees, Byrne ran what will likely be his last council meeting yesterday.

The Princeton financial professional, who is son of the late Gov. Brendan Byrne, took over leadership of the panel in 2014, guiding it through a period that saw a number of noteworthy changes. He also served on a gubernatorial benefits-study commission impaneled by Christie in 2014 that was tasked with, among other things, coming up with ways to address the pension system’s huge unfunded liability.

“Doing something that’s public-service oriented is gratifying,” Byrne told reporters after yesterday’s meeting. “I feel like I’ve helped make some difference,” he added.

“If nothing else, over the years I’ve helped to call attention to the fact that we have to deal with the pension situation or people are going to be badly hurt,” Byrne said.

Big changes

Although Byrne is a former chair of the state Democratic Party, he was first appointed to serve on the investment council by the Republican Christie in 2010. He took over its leadership in 2014 when its former chairman Robert Grady resigned, and he was elected by the other members to serve as chair himself in 2015. Byrne was last re-elected as chair in October.

Some major changes occurred at the investment council saw during Byrne’s tenure, including a closely watched vote in 2016 that scaled back its hedge-fund investments. Those investments had become a source of criticism among union representatives who faulted the heavy fees that some of the hedge-fund managers charged, even during years when the pension system itself did not enjoy healthy returns. But Byrne generally defended the investments, saying they helped to diversify the fund and protect against wild swings in the stock market. He’s also suggested the fees paid to outside fund managers generally reflect good performance that benefits the pension system in the long run.

Also during Byrne’s tenure, the state decided to overhaul the way contributions are made into the pension system to help address the unfunded liability, which now totals an estimated $90 billion. Those changes included shifting to a quarterly pension-payment schedule and dedicating all revenues from the state lottery to the pension system, which covers the retirements of nearly 800,000 current and retired workers.

In addition to his role on the investment council, Byrne also served on the nonpartisan gubernatorial study commission impaneled by Christie that recommended a series of public-worker benefits changes in 2015. Those recommendations, which included a call to provide public workers with less generous health coverage, were widely criticized by union leaders, and they were never advanced by Democratic legislative leaders. But Byrne has stood by the work performed by the panel, which was led by Tom Healey, a financial analyst and former U.S. Treasury official under President Ronald Reagan.

“There’s still some disagreement on exactly what to do, but there is a clear focus on fixing this, and that’s to the benefit of everybody,” he said yesterday.

Byrne’s departure from the investment council isn’t unexpected as he previously said he would serve through the end of the current fiscal year unless Murphy, a fellow Democrat, moved to replace him sooner.

At odds over pension system

Byrne had publicly disagreed with Murphy’s stance on issues related to the pension system as he campaigned for governor last year, including his criticism of the hedge-fund investments. And Byrne himself had considered running for governor in the 2017 Democratic gubernatorial primary before ultimately deciding not to enter the contest.

Christopher McDonough, director of the Division of Investment, praised Byrne’s time on the investment council yesterday, saying the pension system enjoyed overall annual returns that averaged 8.3 percent, besting the fund’s assumed rate of return. During the current fiscal year, which ends June 30, the pension system’s returns are running just over 7 percent.

“Obviously a great run,” McDonough said. “We thank you for your contributions.”

McDonough also highlighted the work done by other members of the panel who are stepping aside or have already done so as the transition from Christie’s appointees to Murphy’s continues. “All were extremely generous with their time and willingness to share their expertise, and we’re very grateful for their contributions,” McDonough said.

Murphy, who took over for Christie in January, has already put forward the names of eight nominees to serve on the investment council, pending Senate confirmation. They are: Theodore R. Aronson of Philadelphia, Pa.; Danielle Beyer of Roselle Park; Wasseem Boraie of East Brunswick; Leonard J. Carr of West Orange; Vaughn Crowe of Randolph; Samir M. Pandiri of Chatham; Deepak Raj of Princeton; and Susan Soh of Short Hills.

“We’re looking forward to having them seated here next time,” Assistant Treasurer Dini Ajmani said during yesterday’s meeting.

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