With Market Turmoil, Uncertain Fate for C-44

By Beacon Staff

Vicki Cocchiarella, a Democratic state senator for Missoula, had no problems shepherding Senate Bill 489 through the 2007 Legislature, receiving the support of 135 out of 150 lawmakers. But that was then and this is now.

The bill, which will appear on ballots around the state Nov. 4 as Constitutional Amendment No. 44, asks the public to decide whether to allow up to 25 percent of certain state trust fund assets to be invested in the stock market. The basic argument for C-44 is that allowing for equity investment in private corporate capital stock will generate greater returns on those state funds that are currently limited only to bond investments.

In the voter information pamphlet mailed out around Montana by the secretary of state’s office, Cocchiarella wrote the argument in support of C-44, along with Sen. Dave Lewis, R-Helena, and Rep. Dave McAlpin, D-Missoula. But Cocchiarella acknowledges this is not exactly an auspicious time to ask taxpayers to place more public funds in the stock market – compared to almost two years ago when the bill was passed.

“I’m very concerned,” she said. “It’s probably the worse timing of all for this one to be on the ballot.”

The Montana State Fund lost $26 million in September when the stock market tanked. Last week Carroll South, the executive director of the state Board of Investments, told a legislative finance committee that nine state and local government pension funds showed a paper loss of $386 million for the year ending June 30, with the biggest hits going to the Public Employees’ Retirement System, which had a paper loss of $195 million, while the Teachers Retirement System lost $150 million. Those two funds had a value of $6.82 billion as of June 30.

Paper loss means the stock has lost value, but no transaction has led to that loss. Public employees’ pensions in Montana are constitutionally guaranteed and workers are still receiving their pension checks.

The teachers’ and public employees’ pensions are funds that currently allow up to 25-percent investment in stock markets. C-44 would extend that to other state public funds, a prospect Montana voters are likely to be wary of given the economic uncertainty threatening financial markets around the world.

State Sen. Jerry O’Neil, R-Columbia Falls, helped write the argument against C-44 in the voter information pamphlet. The recent economic downturn has only solidified his feelings on the amendment.

“I think it’s more important that we don’t vote for it now than what I thought before this,” O’Neil said. “This just confirms what we wrote in our opposition.”

And he feels confident that voters will agree this is not the time to roll the dice with public funds.

“With today’s stock market, the public’s going to be smart enough not to put any more of their funds into it,” O’Neil added.

Supporters of C-44 have not mounted a campaign to promote the constitutional amendment, but Cocchiarella still believes it would be good thing for Montana. She pointed out C-44 doesn’t mandate a 25-percent investment of public funds in the stock market, it merely allows for up to 25 percent, at the discretion of the Board of Investments, which has a legal obligation to invest funds wisely.

“It can be zero (percent),” she said, “and it should be zero at a time like this.”

And when markets pick up again, she added, the state will have one more “tool” to capitalize on the rebound.

But Cocchiarella said she knows on Nov. 4 there is a good chance C-44 could be one more casualty of the current financial crisis.

“I’m pretty depressed about it and mostly depressed about people I know who are being hurt by this,” she added.