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PolitiFact Oregon is going to be bold and call the race for the state’s next treasurer. We know the election isn’t until November, but barring calamity, we’re pretty sure the winner will be the Democratic incumbent, Ted Wheeler. (There’s no Republican candidate in the race, and, sorry third-party candidates, but you probably won’t beat him.)
The presumed win hasn’t stopped Wheeler from launching a campaign and it doesn’t stop us from checking the claimed accomplishments on his campaign website. Among them is this bullet point: "Saved $37 million in management costs for the oversight of public investments."
Voters tend to like it when elected officials save taxpayer money, so we set out to find out how these savings had occurred. For example, did the office, under Wheeler’s leadership, do anything different to save these millions?
We scrolled through Treasury press releases and found this from November 2011: "Oregon Treasury saved millions in management costs, comparative analysis shows." Here’s the smaller headline on that release: "Oregon’s costs were $39.3 million less than expected, based on benchmark of large funds."
Wait, so Oregon didn’t "save" any money? We just didn’t spend as much as others?
According to the press release, the study was conducted by CEM Benchmarking Inc. of Toronto. It rated Oregon’s costs associated with managing the Oregon Public Employees Retirement Fund against 18 other large pension funds.
We found the report as presented to the Oregon Investment Council, the board oversees investments. And it’s accurate to say that as benchmarked, Oregon "saved" $39 million because we paid less for more expensive, but more profitable, private investments for the period ending December 2010. The fund paid more than $445 million in management costs, which is less than 0.9 percent of assets.
(In case you’re wondering about the $2 million discrepancy, Wheeler’s website should state $39 million, not $37 million). In any case, that’s excellent news. But is it fair to call it money saved?
The treasurer’s office thinks it’s fair since that is money the office could have spent but didn’t.
"It is an accurate way to reflect a kind of savings," says Mike Mueller, the Treasury’s deputy chief investment officer and interim CIO. "... they take a snapshot and say based on this universe, we would expect your costs to be X but your costs were Y."
Oregon has been regarded as a pioneer in private equity -- the more expensive to manage but more profitable investments -- since the 1980s, Mueller explained. Because Oregon has an older, more mature program, our management fees have declined over time. That’s why Oregon is lower relative to the peer group, he said.
Bruce Hopkins, a vice president with CEM, says the $39 million "is very real," he said. "Oregon has been successful at getting lower fees. I would also give them some credit for seeing this as an appropriate asset class … they were getting into private equity deals that others hadn’t thought of yet."
We checked previous years, to see how long the office has been "saving" money for taxpayers by paying lower-than-peer-group fees. It’s been as low as $11 million in 2001 and as high as $57 million in 2005. We should note that Randall Edwards was treasurer for much of the decade, from 2001 to 2009. Ben Westlund took office in January 2009 and served until he died of cancer in early 2010.
Wheeler can’t take much personal credit for $39 million, although his office has negotiated savings. His spokesman sends along a 2011 press release that shows the office was able to negotiate even lower fees for a new investment. That likely will be reflected in future benchmarking reports. But that’s not what we’re talking about here.
Wheeler said he stands by the campaign statement. "The results are for the time during which I was Treasurer and accountable for our activities and results." He pointed out that The Oregonian has also held him accountable for past office policies.
We don’t agree. Had the treasurer’s office negotiated terms under Wheeler to net $39 million in actual savings from one year to the next, we would rate this statement much differently.
Wheeler’s savings statement contains an element of truth. A third-party report showed that Oregon paid $39 million less in fees than its peers. But just because a peer group spent more than Oregon doesn’t mean Oregon was ever at risk of spending that much. Moreover, a key reason for our lower-than-peer-average fees is that our private investments are older, a crop of decisions that have nothing to do with Wheeler.
These are critical facts that would give a different impression of the savings statement. We find the statement Mostly False.
Emails from Ted Wheeler, April 12, 2012
Interview with and email from James Sinks, public information officer, Oregon State Treasury, April 5-6, 11-12, 2012
Interview with Mike Mueller, deputy chief investment officer and interim chief investment officer, Oregon State Treasury, April 11, 2012
Interview with Bruce Hopkins, vice president CEM Benchmarking, April 11, 2012
Office of State Treasurer, "After negotiating lower fees and higher transparency, Investment Council commits $525 million to KKR fund," Jan. 26, 2011
Office of State Treasurer, "Oregon Treasury saved millions in management costs, comparative analysis shows," Nov. 4, 2011
Office of State Treasurer, "Oregon investment officers outperformed peers and saved millions in management costs, study shows," Nov. 23, 2010
Oregon Investment Council, Meeting Minutes, Nov. 2, 2011
Oregon Investment Council, Meeting Minutes, Oct. 27, 2010
Democratic Party of Oregon, "Oregon Treasury Saved Millions in Management Costs, Comparative Analysis Shows," Nov. 4, 2011
Oregon Investment Council, Minutes, Dec. 16, 2004
Oregon Investment Council, Minutes, Sept. 28, 2005
Oregon Investment Council, Minutes, Sept. 27, 2006
Oregon Investment Council, Minutes, Oct. 27, 2009
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