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Walker to public pension fund manager: Can you spare $200 million?

By   /   February 1, 2013  /   45 Comments

By Ryan Ekvall | Wisconsin Reporter

MADISON – Nearly two years after demanding public-sector unions pick up their share of taxpayer-funded pensions, Gov. Scott Walker is asking government workers to bet part of their retirements on a plan to subsidize new businesses in Wisconsin.

The venture capital plan calls for moving hundreds of millions of dollars into an embattled quasi-public economic development agency that lost track of a $56 million loan portfolio, among other mismanagement problems.

Documents obtained by Wisconsin Reporter show that Reed Hall, CEO of Walker’s Wisconsin Economic Development Corporation, recommended that the State of Wisconsin Investment Board loan $200 million to WEDC.

Walker serves as chairman of the WEDC board of directors.

Hall said WEDC would use SWIB’s cash to promote business growth through taxpayer-subsidized government investments in Wisconsin companies.

Embattled WEDC has asked the state’s pension fund manager to kick in $200 million for venture capital.

In a letter to SWIB, Hall explained that he was turning to the pension fund because his start-up program would likely find it harder to tap private investors “due to a lack of demonstrable track records.”

“Given that some of these funds may be managed by first-time fund managers, the issue arises of where to turn for the outside investment,” Hall wrote. “We recommend that SWIB consider an allocation … of $200M.”

Hall noted that $200 million “represents less than 0.3 percent of the SWIB’s total assets.” SWIB manages the $76 billion Wisconsin Retirement System public employee pension trust fund, as well as several smaller trusts.

SWIB politely rejected WEDC’s offer.

“The challenge for SWIB is to make sure that any new programs it engages in, such as economic development, does not have any adverse effect on its management of WRS assets,” the agency responded.

Any “investment opportunity” must meet SWIB’s “established due diligence and investment requirements.”

“However, use of WRS trust fund monies to fund economic development initiatives does not meet our fiduciary duty,” the agency added.

“We have to invest based on what’s best for trust fund,” said Vicki Hearing, communications director at SWIB. “We make the best investment choices based on the risk that is allowable for the trust fund. If a fund is not about earning an investment return, then it would not meet our fiduciary duty. Earnings will not be their primary goal.”

The brush-off might have something to do with the fact that WEDC has already developed a reputation for inattention to detail. The Milwaukee Journal Sentinel in October revealed the quasi-public economic development organization lost track of a $56 million loan portfolio , among other accountability concerns.

Another document shows WEDC has also approached private investors for their participation, and acknowledged that politics will determine the program’s future.

“It is also anticipated that the Program will be funded over a term of approximately six years in annual tranches to be determined,” WEDC’s David Volz wrote in a request for information to venture capital fund managers in December. “There is, however, no assurance that future Legislatures will continue authorization past the initial biannual budget period (2013-2014.)”

“Part of what we’re doing is trying to get some inquiries in advance of what the Legislature might do,” said WEDC spokesman Tom Thieding. “What Tim (Cooley, director of capital development at WEDC) has been doing is getting input from early-stage developers to fund managers to angel investors. This could be a pretty significant investment the state makes, and we really want to make sure we’ve done our homework and get it right out of the box.”

Despite its aversion to the WEDC proposal, SWIB has invested pension funds locally. The organization’s “Investing in Wisconsin 2012” report notes:

“Over the past 12 years, SWIB has allocated a total of $305 million to its Wisconsin Private Equity Portfolio. This represents 20 percent of SWIB’s total venture capital commitments. From July 2012 until June 2017, SWIB projects new Wisconsin private equity investments will range from $25 million to $50 million.”

Hearing, the SWIB spokesperson, said $25 to $50 million is just a guideline and that SWIB could invest more in venture capital at any time. The investment board just hasn’t “seen the good investment opportunities,” Hearing said.

In 2012, SWIB committed $25 million to a new venture capital fund, Venture Investors Early Stage V fund.

SWIB’s portfolio in Wisconsin as of June 2012 shows $126 million that SWIB has committed to venture capital funds that have not been drawn upon yet.

According to the 2012 report, SWIB has more than $16 billion of assets in companies based in Wisconsin or companies based elsewhere that employ more than 20 people in Wisconsin. Most of those assets are held in public equities.

Contact the reporter at rekvall@wisconsinreporter.com

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M.D. Kittle

  • http://twitter.com/tjamba77 T.

    Keep Your paws off MY retirement WALKER!!!

  • ghhshirley

    Walker has some nerve. Glad his request was denied.

  • http://www.facebook.com/becky.scott.9849 Becky Scott

    Thank you SWIB for turning down the request!! Please continue to keep our pension fund safe.

  • http://www.facebook.com/chuck.walker.3150 Chuck Walker

    Once again a Wisconsin Governor attempts to get his mitts on the greatest financial jewel in all of Badgerdom – the Wisconsin Retirement System trust fund. Proof positive that you can’t keep $76 billion in the bank without attracting politicians faster than a heap of cow dung attracts flies.
    Wouldn’t it have been just super if someone in authority at the federal level would have done for Social Security what SWIB is doing for Wisconsin?

    I happen to be a supporter of Gov. Walker, but as an American, and a Wisconsinite, I have to say, “Once burned twice shy. Forget about the Wisconsin Retirement System trust fund, it’s already spoken for!”

  • http://www.facebook.com/theresap2 Theresa Peterson

    well gee, after putting the screws to every public sector worker in the State they have the gonads to ask us for a loan? Imagine that……

  • roy

    Still not feeling for the public employees.

  • http://www.facebook.com/paul.trotter.35 Paul Trotter

    No!

  • FoxValleySpirit

    Dammit! THAT MONEY BELONGS TO THE PEOPLE WHO EARNED IT! The SOB is just in it to stick it to state workers. F’ him!

  • http://www.facebook.com/people/Ron-Knutson/711159387 Ron Knutson

    Not one f–king red cent for King Walker. Go ask the Koch Bros.

  • Luanne Peterson

    That is some Chutzpah! Tommy Thompson raided WRS. He had to pay a penalty, and the stollen amount with interest. Doyle got his hand slapped. WRS is NOT venture capital. Scooter, you don’t get to gamble with retirement money. WRS is the envy of the nation, because it so well run. Go pound sand Scooter!

  • http://www.facebook.com/profile.php?id=100000970215779 Paddlingirl Chris

    keep ur weasel claws off our retirement you evil POS

  • plankbob

    WEDC is a slush fund for Walker contributors.

  • http://www.facebook.com/people/Marilyn-McDole/100001057476514 Marilyn McDole

    Next year Walker will find a way to put the SWIB under his authority. Just watch. Then we will be turned into an Illinois regarding our pension fund. Absolutely mean and venal.

  • http://www.facebook.com/garry.lee.589 Garry Lee

    Judging from the articles and the comments, this is clearly a liberal-based, anti Walker web site. I’d bet that there’s more to this story- and this is just one side of it.

  • http://www.facebook.com/bobbie.johnson828 Bobbie Johnson

    Guess again!

  • http://www.facebook.com/bobbie.johnson828 Bobbie Johnson

    I usually don’t resort to vulgar language – but this is an exception!! Screw you Walker and screw every resident of Wisconsin that supports you. Keep your greedy paws off my pension. Sincerely, “A Union Thug” that worked hard for my retirement.

  • Craig Richards

    I was a CFO (retired now) of a manufacturing company that borrowed a huge amount from SWIB under the Doyle admin. Where were the “keep your paws off my retirement” shouts then?

  • FantasiaWHT

    Amazing amount of vitriol. How much attention do all of you pay to where the rest of the $76B fund is invested? If I was on the SWIB I wouldn’t agree to this proposal either because the WEDC hasn’t proved itself capable yet, but I would make that decision without regards to whether Walker or any other governor proposed it.

  • http://www.facebook.com/woforange William Oforange

    Craig did that investment go through the vetting process that the SWIB spokesperson described? I’ll bet it did. No one would give money to WEDC after what they’ve done as evidenced by the fact that no private equity can be raised. Oh, and did you enjoy your government subsidy? I’ll bet you hate it when others depend on government funds but were happy to take the money from taxpayers. And even if you paid it back it’s still a subsidy since you apparently couldn’t raise it elsewhere.

  • Ed167

    So… the project is too risky for private investors, so Walker wants to use public money to promote his corporation.

    I can understand — Walker thinks he is King of Wisconsin, so he feels he should be able to do whatever he wants with impunity.

  • Ed167

    Why? We don’t get raises — EVER. Our pay is about 40% of what we would make in an equivalent private sector job.

    We had unions because our pay was so stinking low that we needed them. Of course, nobody cares that our salaries are so low — all they hear is that our benefits are high.

    I gotta tell you: a good pension does not make up for $20,000 less per year.

    Your response would probably be that we should quit if the pay is so bad. That is happening. At my university we have tried to replace professors who left for better paying states. Once a candidate finds out how much we’re offering, though, they say no. It appears that we cannot find people to replace those moving on. Police departments have reported the same thing.

    Imagine how awkward it is when there aren’t enough police or teachers or EMTs to fill needed positions. What will Walker do then?

  • Ed167

    The SWIB turned it down for the right reasons. They need to be impartial about it — whether they like Walker or not.

    The rest of us don’t have to be impartial… and we despise him. Utterly.

    The vitriol is not really directed at this smarmy request. It is directed at the man himself. The fact that he has a corporation that “loses” millions of dollars, however — something the feds probably should look into — does serve to reinforce how much he really is in this for himself, not for the people of Wisconsin.

  • Ed167

    The comments are because Walker doesn’t have that many supporters who care about what he does, but he has a lot of enemies.

    The facts are good enough. Is there more to it? I’m sure Walker feels it is a good investment, but I trust SWIB’s judgement. If they thought it was a good investment and put our money in it that would make my stomach turn, but I would still trust their judgement.

    Whether the people posting — or the site itself — are liberal and anti-Walker does not affect the decision by SWIB.

  • Ed167

    If SWIB thought that was a good investment, I trust them. They think this is a *bad* investment, and I trust that judgement, too.

    If they thought Walker’s corporation was a good investment it would have turned my stomach, but I would have trusted their decision.

  • http://www.facebook.com/pam.simpson.7 Pam Burch Simpson

    We all know he will pull some dirty trick out of his ‘sleeve’ (cleaned that one up). He always does. We have to find a way to stop this!

  • http://www.facebook.com/pam.simpson.7 Pam Burch Simpson

    Good suggestion! That would be king of Fitzwalkerstan!

  • Mark Bye

    Of all the unmitigated gall. First you screw public employees out of their right to collectively bargain, then you want to “borrow” from them? For an outfit that has lost millions down an unknown rathole already? Kiss my ass, Walker!

  • http://www.facebook.com/people/Daniel-Glines/1223017296 Daniel Glines

    Amazing hypocrite.

  • http://www.facebook.com/joanne.laufenberg Joanne Laufenberg

    If private sector Wisconsin business doesn’t pick up soon, public sector pensions will be the least of their concerns. Who does the public sector pension recipients think gave them that $56 billion?

  • Franseenit

    When will you explain where the $56 Million went – WE WANT TO KNOW NOW!!! Wow, you have more gall than anyone I know. Shameless, aren’t you.

  • http://www.facebook.com/Don.Tidd.II Donald M. Tidd

    Do NOT let him loot the pension fund and give it to his buddies to squander like the last 56 Million he gave out.

  • Joecaber

    you do know it comes from their paychecks right? Just like you have an agreement with your employer to pay you a certain wage, provide a certain amount of vacation/sick/holiday pay, provide insurance and a pension/401K benefit, so do the members of this union. The pension is collected on their behalf based upon their employment agreement and is partially funded directly from their paychecks while partially funded by the state. This is the same way private business operates with employees paying a contribution to their health insurance plan cost and a contribution to the 401K/pension plan with the company also paying a portion of the expense. The trust fund is the result of this agreement. It’s not extra money and bonuses the state is giving to teachers, it’s salary and benefits that have already been earned.

  • roy

    Lots of people in the private sector are unemployed, so cry me a river. Public employees are paid for by taxpayers. If you happen to be a teacher and you claim that you make 40% of what you would in the private sector, only a fool would not change jobs and more than DOUBLE your pay. That 40% figure is total BS and you know it.

  • roy

    Correction: Walker and the legislature took away the privilege of collective bargaining by public unions which they had enjoyed for decades, to the detriment of taxpayers.

  • roy

    “. and we despise him. Utterly. The vitriol is not really directed at this smarmy request. It is directed at the man himself.” It is very personal for you and you are filled with hatred, by your own admittance.

  • roy

    It was a loan, get over it.

  • roy

    You do know their paychecks come from the taxpayers, right? All of it. Everything a public employee purchases is paid for by taxpayer money, if that is their only source of income.

  • roy

    You may have worked hard for your retirement, but it was ALL paid for by taxpayers.

  • roy

    Yeah because Illinois’ pension problems are all because of Republican meanness and total lack of union power. You can’t see it but I am rolling my eyes.

  • Joecaber

    gosh, never thought of it that way. We should fire them all and then you can quit your job and home school all the neighborhood kids for free.

  • airforceteacher

    So, the work they did provided no value for the taxpayers? You exchange money for goods and services – its not yours anymore. If you pay your dentist for your kids braces, do you feel, entitled to borrow his Lexus? After all, YOU paid for it Roy.

  • Ed167

    There was a study done, about two years ago. I am a professor not a high school teacher. The comparison showed that, based on educational degree and rank, private sector employees earned on average 25% to 60% more than public sector employees in Wisconsin.

    I prefer my type of job, but it is worth noting that university faculty in neighboring states earn about 20% more than us, too.

    I will be moving soon, because this state pays us too little. I make less with a Ph.D than a graduating senior with a degree in history. As I wrote in my prior post, there is a serious exodus from Wisconsin of the sort of professionals who do research and bring in high tech industry.

    The effect of Walker’s war on unions and public sector jobs will be to gut the state’s future. It is sad, but it won’t be my problem to fix his mistakes.

  • roy

    Never said their work has no value. Merely pointing out to Bobbie, the self described union thug, that Public Employee retirement benefits are paid for entirely by taxpayers. Even the portion that is paid by them is paid using money from the taxpayers.
    The point being, many of these taxpayers are getting increasingly tired of supporting lifestyles of Public Employees that are lavish in comparison to their own non-lavish lifestyles. Then listening to these same Civil servants bitch that it is never enough, and of course never or rarely hearing a “thank you”. That is rather galling and that is why Walker won the recall election, to maybe shut them up for 5 minutes.

    A lot of us were and are sick of hearing them bitch when they have it quite good.
    Don’t quite get your Lexus analogy. Not looking to borrow my Dentist’s, yours or Bobbie’s Lexus, though you may all have them. Just not willing to feel sorry for someone who’s doing quite well financially at taxpayer expense.

  • roy

    I’m not a teacher. or a parent.

  • airforceteacher

    Once you pay someone for their services, the money isn’t yours anymore. So, the money in the pension fun isn’t taxpayer money anymore, it’s theirs. You have no claim anymore to how it’s spent. Just like the money your dentist paid for his Lexus. Not yours.