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State Investment Council Chairman Tom Byrne said Wednesday that a bill expanding pay-to-play rules would force the state to liquidate some investments.
(File Photo)
TRENTON — A bill awaiting Gov. Chris Christie's signature would likely force the state to pull out of some lucrative investments, the chairman of the New Jersey State Investment Council said Wednesday.
Tom Byrne, who was elected chairman of the board overseeing the state's $77 billion in pension funds at the start of the meeting, said the rule change, which would expand pay-to-play rules, is ill-advised.
State laws already prohibit contracts from being awarded to firms whose investment management professionals have made political contributions to a state political party in the previous two years. The bill (S-2430) would extend the prohibition to political contributions made to federal and national committees and non-state political committees.
"We might have to not only liquidate assets that have helped us outperform our 7.9 percent (expected rate of return), but we might have to get out of some of these things at disadvantageous prices," Byrne said after the meeting. "If you're a forced seller, that's not so great."
Byrne, a former chairman of the Democratic State Committee, said he's made that case to some lawmakers and wouldn't expect the Legislature would attempt to an override if Christie vetoes it.
The investment council moved ahead with plans to invest up to $100 million with KSL Capital Partners, a private equity firm focusing on the travel and leisure industry whose managing director, Mike Shannon, contributed $2.5 million to the Republican Governors Association in 2013 and 2014.
Christie led the RGA last year.
Byrne defended the investment, saying "it doesn't violate our guidelines in any respect." Because existing pay-to-play regulations don't bar investments with firms that have donated to the RGA, the Division of Investment didn't screen for the contributions, staff said.
The International Business Times first reported on the donations Tuesday.
The investment council also addressed an investment deal that was hit with allegations of violating pay-to-play rules last year but was ultimately cleared by an internal audit.
In that instance, the state invested with a venture capital fund with ties to Massachusetts Gov. Charlie Baker after Baker made a $10,000 donation to the New Jersey Republican State Committee.
The Treasury Department audit was launched in May, but its findings weren't released until January. The donation became an issue in that state's governor's race, which Baker won in November.
Seven months after Baker's donation, New Jersey invested $15 million from its pension fund into General Catalyst. The state sold its stake in the firm in September at a profit.
The audit determined Baker was not an investment management professional with the investment group the pension funds were invested in.
Members of the council also suggested they review their investment regulations to add some clarity to terms like "investment management professional."
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Samantha Marcus may be reached at smarcus@njadvancemedia.com . Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.