In the recently completed 2011 legislative session, Senate Bill 17 (Keller, D-Albuquerque and Neville, R-Aztec), a bill designed to complete State Investment Council reforms by removing the governor as chairperson, passed with wide bipartisan support. It now sits on the governor’s desk waiting to be signed.
Senate Bill 17 was carefully crafted in the interim by the bipartisan Investment Oversight Committee, long before the recent gubernatorial election. It is composed of original sections from the 2010 bill, including sections to ensure minority party legislative appointments. It now also includes an amendment that allows the governor to serve for two more years in the chairperson role before being removed from the board.
Signing SB 17 provides our new governor with an appropriate chance to oversee a transition and recovery of lost funds and then turn over the reins at the SIC.
In 2010, the Legislature passed landmark reforms (Senate Bill 18) of the SIC in response to conflicts of interest, legal investigations and governance challenges at the SIC. These reforms reflected multiple governance recommendations from the 2010 interim independent bipartisan Enis Knupp Report.
The reforms achieved by SB 18 included making the state investment officer serve the SIC rather than being personally appointed by the governor, requiring 10 years of investment expertise for all appointed board members, and diffusing the influence of any single individual by moving four appointments out of the executive branch.
All of these changes have been important in reforming the SIC. However, the top recommendation of the Enis Knupp Report was to remove the governor as chairperson of the SIC. While this was included in the original 2010 SB 18, the provision removing the governor was stripped out in the final hours of the session to enable the other reforms to move forward.
Regardless of who is serving as governor, a change in who serves as SIC chairperson is critical to eliminate conflicts of interest, potential for pay-to-play and favoritism, and to maintain the appropriate the level of fiduciary responsibility and expertise. New Mexico is the only state in the country where the governor is personally in charge of similar permanent fund oversight.
We expect our governor to lead the state and appoint and hire staff to implement the vision they were elected to deliver. We do not, however, expect him or her to have the expertise or direct responsibility for approving the buying and selling of billions in stocks, bonds and alternative investments with our children’s endowments.
This is precisely why the SIC was set up as quasi-independent government institution in the first place. Governance best practices suggest that the SIC should internally elect a chairman who is not an elected official – someone chosen based on merit, sound judgment, integrity and expertise that the fiduciary nature of the position warrants.
The bottom line is that it is best to base our state’s financial investments on the principles of finance, not politics.
New Mexico needs our new governor to finish the job of reform at the SIC and then put the long-term governance of the SIC above executive office authority. It takes real leadership to reduce one’s own direct power and influence.
Voters sent Susana Martinez to the governor’s office to put what is right over what is personally beneficial. It is now up to her to seize the opportunity to protect our state’s financial future and put our SIC on sure footing for generations to come.
That is precisely the kind of bold change and deviation from the status quo that our state will be proud to celebrate with her signature of SB 17.