NJ ends salary cap for job running its $93 billion pension fund

Once again, the state is searching for a new pension director. They could could earn far more with private companies
Credit: (AP Photo/Mark Lennihan)
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With little fanfare, Gov. Phil Murphy and lawmakers have abolished a long-standing cap on how much the state can pay a key employee — the director of investments for the public-worker pension fund.

A bill that was fast-tracked by lawmakers last month and then signed into law by Murphy about a week later, lifted a limit on the annual salary for the director of the state’s Division of Investment.

The move to abolish the cap — which had been in place for more than two decades — comes as Murphy and fellow Democrats who control both houses of the Legislature have fully funded the pension system for the first time in a quarter century. That infusion of tax dollars improved the fiscal outlook for a fund historically among the nation’s worst-funded state retirement plans.

And removing that legal salary cap also comes as the New Jersey State Investment Council is searching for someone to run the nearly $93-billion fund that covers the retirements of roughly 800,000 government workers and retirees.

Third departure in a decade

Corey Amon left early last month, the third time in less than a decade the person charged with directing investments quit state government for a private-sector job.

Treasury officials and lawmakers pointed to the importance of filling the director’s position and the need to attract top talent when asked about the adoption of the new salary policy by NJ Spotlight News.

“The simple reality is that with Wall Street close by, we need to offer a competitive salary to attract and retain a director of Division of Investment with the talent and acumen to manage one of the largest public pension funds in the United States,” said Senate President Steve Sweeney (D-Gloucester), one of the lawmakers who backed the legislation that lifted the salary cap.

“We worked collaboratively with the Legislature to address the issue of the cap in a timely manner,” said Treasury spokeswoman Jennifer Sciortino.

At $200,000, that old salary cap for the state’s top pension-investment official meant that individual could make well above what most government employees earn in New Jersey. That includes the state treasurer and the governor whose $175,000 annual salaries are set by law.

Modest by industry standards

But the investment director’s salary has, in more recent years, been considered modest by financial industry standards. It also fell well short of what other high-dollar government-paid officials with arguably less responsibility now are paid, such as the president of the New Jersey Sports & Exposition Authority, who earns $280,000 annually, according to public records.

The Division of Investment, working under the supervision of the New Jersey State Investment Council, is one of the nation’s largest pension-fund managers.

Responsibilities include handling investments for seven worker pension funds, as well as the state’s cash-management fund, which is an account where any surplus funds are deposited, according to Treasury.

Amon stepped down from the director’s position on June 4 to become the chief investment officer for the Virginia-based National Rural Electric Cooperative Association.

He left New Jersey on a high note. At nearly 25%, preliminary returns for the pension fund through the first 11 months of the 2021 fiscal year were flirting with record highs, according to figures reviewed at an investment council meeting last week.

Trying to attract talent in shadow of Wall Street

Amon was the division’s director since March 2019. He was initially named acting director after serving as deputy director for several months following the departure of the former director, Christopher McDonough, who also left state government for the private sector the year before. And McDonough had landed the director’s position after his predecessor, Timothy Walsh, left state government in 2013.

The division’s deputy director Shoaib Khan was elevated to acting director following Amon’s departure last month, according to Treasury officials.

Khan previously served as senior portfolio manager at the Florida State Board of Administration before coming to New Jersey earlier this year. He drew praise from state Treasurer Elizabeth Maher Muoio during the recent investment council meeting as the vacancy created by Amon’s departure was briefly discussed.

“He’s a consummate professional and has really been a pleasure to work with,” Muoio said of Khan.

Citing the high stakes of protecting retiree pensions, investment council leaders have long questioned whether the salaries for New Jersey’s top investment professionals should be increased to help attract and retain top talent.

Still, the salary cap for the director of the Division of Investment had remained in place since it was established in a 1998 state law, according to legislative records.

Treasurer will make final selection

Instead of setting a new limit, the new law now leaves it up to the treasurer to “determine the salary for the Director of the Division of Investment.”

The investment council is taking the lead in the search to find a permanent replacement for Amon and will eventually present a list of candidates to the treasurer for her to make a final selection, Sciortino said.

“The pressing need to launch a thorough search to attract a highly qualified Director, upon the departure of Corey Amon, in an extremely competitive field made the issue of lifting the cap more urgent,” she said.

The legislation proposing the new salary policy was drafted just days before it won final approval in both full houses of the Legislature on June 24, according to legislative records. Murphy announced his signing of the legislation in a news release issued on June 30.

The fast-tracking of the legislation coincided with last month’s speedy introduction and adoption of a record-high $46.4 billion spending bill for the new fiscal year that began on July 1. That budget-approval timeline was widely criticized by Republicans, progressive activists and others, who faulted majority Democrats for putting openness and transparency on the back burner.

To be sure, the $200,000 that Amon earned while working for the division was not the highest salary in state government — or even the Department of Treasury.

That honor falls to Russell Niemie, who was hired last year with an annual salary of $350,000 to serve as chief investment officer for the New Jersey Police and Firemen’s Retirement System, or PFRS.

The PFRS gained more control over of its own assets under a law enacted in 2018, after which its board hired Niemie and other professionals to beef up operations.

“The Board believes deeply that investing in talent will benefit PFRS members in the short- and long-term,” PFRS board spokesman Dan Bank said in a statement.

“In consultation with a nationally renowned executive staffing firm, the Board made a competitive offer to our Chief Investment Officer and we are very grateful that he accepted and is leading our investment strategy,” Bank said.

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