When New York state attorney general Andrew Cuomo and a group of state senators unveiled their proposal to replace the sole trustee of the $109.9 billion New York state pension fund with a new 13-member board, we were skeptical, writing, "This isn't really a reform at all, but an effort to distribute the campaign contributions from money managers, donations that are currently directed to the state comptroller, around among a larger group of politicians." We noted that a bigger board doesn't work particularly well for the New York City pension fund. At a Manhattan Institute breakfast this morning (Federal Trade Commission-mandated disclosure: I had a plastic cup of orange juice and a mini-croissant), the think tank's New York State government specialist, E.J. McMahon, was similarly skeptical, saying that when it comes to corruption, a bigger board "will make absolutely no difference." He predicted, "within ten years of creating a board of trustees you will have another pay-to-play scandal." He said the only thing that would help clean up pension-fund politics would be a defined contribution system in which investment decisions are made by hundreds of thousands of investors rather than a few politicians. This morning's case in point: California, which has a 13-member board of Calpers, along with its own pay-to-play investigation.
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