Wednesday, October 22nd, 2014
Half-True
Republican Party of Florida
"Newspapers say Florida made bad investments, lost hundreds of millions of dollars, billions in pension funds lost. Who was in charge of Florida's investments? Alex Sink."

Republican Party of Florida on Monday, September 27th, 2010 in a campaign ad

Republican Party of Florida says Alex Sink was in charge of pension losses

An ad from the Republican Party of Florida targets Alex Sink.

Update:  This item has been corrected to distinguish between the Florida Retirement System Trust Fund and the Local Government Investment Pool. Both were controlled by the State Board of Administration, but they are separate funds.                                                        
You should believe our attack ad, because we found a lot of newspaper stories that support our case!

Okay, so campaign attack ads don't really say that. But it seems to be the unstated premise of several ads featuring newspaper headlines and quotes from stories rushing across the screen.

Take the latest attack ad from the Republican Party of Florida, which is campaigning against Democrat Alex Sink for governor. Her opponent is Republican Rick Scott, a former health care executive.

Newspapers say Florida made bad investments, lost hundreds of millions of dollars, billions in pension funds lost. Who was in charge of Florida's investments? Alex Sink."
   
Meanwhile, the screen flashes quotes and dates from the St. Petersburg Times: "the state of Florida made bad investments that lost hundreds of millions" and "Florida pension fund plummets."
   
The ad then cuts to video of Sink: "I'm the fiscal watchdog for the citizens of our state, I have to look over how our citizens money is invested."
   
The narrator goes on: "The press says our government skirted legal advice, gambled on risky investments. Auditors blamed Sink for a 'weak controls and a lack of oversight.' And now she wants a promotion?"
   
The screen flashes more quotes from the Times: "Florida's State Board of Administration skirted legal advice, gambled on risky investments," and "weak internal controls and a lack of external oversight by trustees."
   
Three of the four quotes are from a Times story published Sept. 19, 2010: Florida's State Board of Administration skirted legal advice, gambled on risky investments. The other quote is from a story published Nov. 17, 2008, Florida pension fund plummets.
   
The Republican Party of Florida has released other ads against Sink and the state pension fund; we rated a previous ad Barely True. We wanted to see if this latest attack was more accurate. We're going to examine its claim in two parts.
   
"Newspapers say Florida made bad investments, lost hundreds of millions of dollars, billions in pension funds lost."
   
The Florida Retirement System Trust Fund is a massive investment account, today worth about $117 billion and holding the retirement assets of about 1 million current and retired state employees. It is one of the largest retirement funds in the nation. When Wall Street melted down in 2008, the value of Florida's retirement fund fell, too. In Sept. 2007, the fund was at its peak at about $138.4 billion and by June 30, 2010, the value had declined to $109.34 billion, a $29 billion drop in value. Still, according to the last actuarial report completed in 2009, the fund is 88.5 percent funded -- meaning if every employee retired today, they would get 88.5 percent of their retirement benefits. A funding level of 80 percent is considered healthy.
   
The State Board of Administration oversees the Florida Retirement System Trust Fund, as well as 33 additional public funds, including the Local Government Investment Pool. Hundreds of governments and organizations use this short-term fund like a money market fund and count on it for investments that are safe and easily converted to cash.
       
The St. Petersburg Times story from Sept. 19, 2010, detailed the local fund's risky investments over the past few years. The investigation found that state officials aggressively sought exceptions to rules intended to stop the local fund from buying high-risk securities.
       
From the story:
       
"Going back at least seven years, state money managers had been trying to find a way around rules that restricted them from buying certain risky securities. Time and again they asked, time and again lawyers told them no.
       
"But so eager were Florida's money managers for higher yields, they bought them anyway. In two months at the brink of the housing market meltdown in 2007, the state invested at least $9.5 billion in securities it was not authorized to buy, a review of confidential memos shows."
The ad mixes state pension fund and the Local Government Investment Pool together.

Where the SBA "skirted legal advice, gambled on risky investments," according to the St. Petersburg Times was not with the pension fund, but  with the Local Government Investment Pool, which had chafed under rules that prevented it from buying higher risk (and possibly higher return) investments.

The losses in the pension fund are assets that have declined in value. Some previous ads have confused this issue, implying that the money lost was cash that disappeared out of bank accounts. But this ad makes pretty clear that it's talking about declines in value in investments made from pension funds, which are commonly referred to as losses. We find the claim that Florida "lost hundreds of millions of dollars, billions in pension funds lost" to be mostly accurate.

"Who was in charge of Florida's investments? Alex Sink."
   
The ad then targets Sink in her role as chief financial officer, an elected position in Florida that oversees several functions, including overseeing the state's auditing and accounting functions. But the specific claims of lost pension money and bad investments is related to Sink's role as one of three members of the Board of Trustees on the State Board of Administration, or SBA, the board charged with overseeing both the Florida Retirement System Trust Fund and the Local Government Investment Pool.
   
The other members of the board are Gov. Charlie Crist and Attorney General Bill McCollum. (Crist recently left the Republican Party to run as an independent for U.S. Senate against Republican Marco Rubio and Democrat Kendrick Meek. McCollum lost to Scott in the Republican Party primary for governor.)
   
According to statute, the three-member board "may retain investment advisers or managers, or both, external to in-house staff, to assist the board in carrying out the power specified," and the board "shall create an audit committee to assist the board in fulfilling its oversight responsibilities." So the board doesn't directly invest and administer the money but delegates the responsibility to an executive director. Ash Williams is the current executive director, and the job of investing the state's assets is divided between in-house investment managers and external investment managers. So as a member of the board, Sink is "in charge," but she's in charge along with the two other trustees. And she's not responsible for day-to-day investment decisions.
   
Still, in April 2008, the board commissioned an audit that found many questionable purchases of securities, purchases that were riskier than what state rules should have allowed. The auditors said they were not hired to do a criminal investigation, and it was ''outside the scope" to determine if the problems were the result of fraud or illegal acts. But the audit found weak internal controls and a lack of external oversight by the trustees -- Crist, Sink and McCollum.
   
It's a fair question to ask whether Sink, as a member of the board, asked enough questions and demanded enough answers. It is not accurate to imply, as the ad, does that she alone was in charge. The Times investigation repeatedly mentions that Sink, Crist and McCollum were the three charged with oversight of the funds and does not single out Sink for blame.
   
Our ruling
   
In the context of making investments, the ad rightly claims that Florida "lost hundreds of millions of dollars, billions in pension funds lost," as the St. Petersburg Times stories reported. But the ad is misleading with its implication that Alex Sink was in charge of the funds as chief financial officer. She was one of three members of an oversight panel during a historic decline in investment values, and there are other people who bear responsibility for what happened to Florida's pensions funds, including internal and external financial managers. Still, Sink was one of three members who were in charge of defending the state's interest. The newspaper stories that the ad mentions don't single out Sink as being "in charge." So we rate this statement Half True.