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Grading the Integrity Report

March 21, 2012

When states buy goods and services, invest their employees’ pensions, hire and fire civil servants, appoint people to regulatory positions, and enforce laws, a system of policies and practices with high integrity is key to serving the interests of people.

It’s a strong and worthy premise, and the State Integrity Investigation’s goal to “inspire policy changes to promote good government practices” is worthy of endorsement.

The investigation is coherent, and as a whole substantial with its analysis of some 16,000 data points. But in the public pension category, the investigation itself didn’t make the grade.

For its methodology.  The Center for Public Integrity, which headed the project in partnership with Global Integrity and Public Radio International, undertook an ambitious agenda. To do so, as an article in Business Week pointed out, it “hired reporters to support its findings with ‘more than 100,000 words’ of anecdotal journalism.”

And that’s a problem. The individual reporters used different standards for what constituted fact-based information.

For example, if you read the report for New Jersey, the state with the highest score, a finance officer and a representative from the State Department of Treasury were interviewed regarding its pension fund management. Go to Maryland, and among the sources are newspaper stories and editorials dating back to 2010.

For its assumptions.  “We measured not the amount of disease, but the amount of medicine each state has to deal with the problem,” said Nathaniel Heller, executive director of Global Integrity. So if a state has been healthy – i.e., no corruption – then no medicine would be necessary, and the state gets a bad score. As Stateline put it:

States where large scandals haven’t been uncovered…often have weaker or non-existent laws and enforcement capabilities. That’s the case, according to the investigation, in North Dakota, Wyoming and South Dakota.

But notice the premise: not no scandals, just folks who have yet to be caught.

For “in law” versus “in practice.”  The report card has two parts: determining if there are laws or regulations on the books and what is called “in practice” which evaluates whether things are working. The former is easily measurable and lends itself to a grade. It’s the latter that becomes subjective.

Back to the Garden State. Its pension fund management got an A. Yet in 2010, New Jersey signed a consent decree with the Securities and Exchange Commission for failing to properly disclose the underfunding of its two biggest pension plans. Isn’t this something that would be considered “in practice”?

New Jersey is mandated by law to make an annual required contribution, but the past five governors have failed to make these payments in full, and New Jersey is recognized as an object example of states that have chronically failed to pay required pension contributions.

To be fair, the report contains no data point on actual funding of a retirement plan; however, a newspaper account in Nevada was quick to point out that the Silver State got an F and attributed the reason to the pension plan being underfunded. Even if the study did not go there, others are.

For not recognizing states’ rights.  There’s an underlying premise here that states can be compared apple-to-apple. But again consider Nevada: Most of the elements receiving low scores are in the state constitution—put there by vote of the citizenry. Are they naïve?

Some might suggest yes; others might say that laws reflect a state’s culture. In some states, corruption is winked at and accepted as part of the process; in others, honesty is simply assumed.

Which brings us to the Tenth Amendment of the U.S. Constitution. This all-too-often neglected provision protects states’ prerogative to design and implement public policies that address each state’s unique demographics, political culture, fiscal constructs and state-local relationships.

This is not to argue that states cannot be improved, that ethics laws, financial disclosure laws, and the like need—and should—be continuously strengthened. But by design, every state is going to be different.

Other responses:

Missouri

Bloomberg

Wall Street Journal

From → In the News

One Comment
  1. John Giambalvo permalink

    I work for the NYC MTA. I belong to NYCERS retirement fund. Before the Wall st crash the fund had 110 billion. after the crash it still had 100 billion. It now has 135 billion.In the 28 years I have worked for the MTA, our pention fund has bailed out the City of NY twice. It has been self sustaining. Gov. Come-more and Mayor Iceberg want so badly to get their dirty hands on that money. Thanks to the Mayors own controller, Mr. Lui has been under investigation for steeling the citys money. The bastards above have lost all of their integrity. I say to them hands off our money. As to Social Security, I say we need a lock box of all the moneys that are paid for that purpose. It was Pres. Johnson who ended the Sol Sec fund to pay for the war. If the fund would have had a lock box on it, we all could have retired at 30. So if they continue to raise the retirement age with out a lock box, and continue to spend the surplus, when will it end? When we are 70 80 90 or when we are dead. They should all keep their dirty hands off our money.
    John Giambalvo
    AFLCIO TWU Local 100 Chair

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