Tuesday, April 23, 2013

Weingarten Tries to Dissuade Investors from Reform

OK, back to my blasting the unions as usual… Last week, the AFT published a report, Ranking Asset Managers, in an attempt to bully investment managers who support school reform. It’s sort of comical. I know a lot of the managers on it and they view it as a badge of honor. Here’s the WSJ editorial on it:

Public pension funds are frantically chasing higher yields to reduce their roughly $3 trillion in unfunded liabilities. But don't tell that to Randi Weingarten, the teachers union el supremo, who is trying to strong-arm pension trustees not to invest in hedge funds or private-equity funds that support education reform.

That's the remarkable story that emerged this week as the American Federation of Teachers president tried to sandbag hedge fund investor Dan Loeb at a conference sponsored by the Council of Institutional Investors. CII had invited Mr. Loeb, who runs Third Point LLC, to talk about investment opportunities and corporate governance. Ms. Weingarten is an officer and board member of CII.

But Ms. Weingarten's real concern is that Mr. Loeb puts his own money behind school reform and charter schools. In particular, Mr. Loeb is on the board of the New York chapter of StudentsFirst. That's the education outfit founded by former Washington, D.C., schools chief Michelle Rhee that is pushing for more charters and teacher accountability, among other desperately needed reforms.

…The report goes on to list StudentsFirst, the Show Me Institute and the Manhattan Institute as special bêtes noires that promote school and pension reform. And it helpfully lists no fewer than 34 funds whose "directors, managers, advisors and executives" have dared to support reform organizations. The funds on the blackball list include such well-known names as Appaloosa Management, Elliott Management, Khronos, KKR KKR -2.18% and Tudor Investment.
Mr. Loeb is cited for being "a director of StudentsFirst New York" who "has funded the organization's New York political activities." David Tepper of Appaloosa is described as "a known funder of StudentsFirst," with "known funder" underlined, as if he were on the FBI's Most Wanted list. You gotta love the implication that it is sinister to support the idea that poor kids should be able to attend schools that are better than the failure factories that Ms. Weingarten wants to condemn them to.

…And this is the real source of Ms. Weingarten's union fury. She knows unions are losing the moral and political debate over reform, as more Americans conclude that her policies are consigning millions of children to a life of diminished opportunity.
So now she stoops to bullying pension trustees to bully hedge funds to cut off funding for poor kids in Harlem. Every time we wonder if we're too cynical about unions, they remind us that we're not nearly cynical enough.

Here’s RiShawn Biddle’s take:

The reality is that donors to StudentsFirst account for 13 of the 33 names on the list; Manhattan Institute donors accounts for another 17. It seems like Randi has been keeping a handwritten list of longstanding enemies on her desk since her days heading up the AFT’s Big Apple Affiliate, then handed off to one of the AFTs public relations staffers when she thought it was time to get revenge. Lovely. You have to thank the Wall Street Journal for making this entire list publicly available. At the very least, reformers looking for more cash now have a list of potential donors to hit up. Among other things.

The AFT’s effort to advise (or, more appropriately, give marching orders to) pension board members — especially those who report directly to the union’s state affiliates — would be useful if it at least attempted to serve as a warning to pension systems about the consequences of using inflated rates of returns on their investments of as much as eight percent when actual rates of return of the Standard & Poor’s 500 index was only around four percent during the last decade (and often, even lower for many pensions). It would have also been somewhat useful if it attempted to steer pensions away from risky hedge fund investments whose risks can prove to be too great for either taxpayers or teachers to bear. The report could have at least mentioned the new formula developed by Moody’s Investors Service for uncovering the true level of teachers pension (and other defined-benefit pension) underfunding — which Dropout Nation has used to reveal that pensions such as those of Chicago are in worse shape than admitted. [The board of Chicago's teachers' pension, by the way, is dominated by the AFT; the pension's board president, Jay Rehak and number two Lois Ashford are members of the C.O.R.E coalition led by Chicago AFT boss Karen Lewis.] The union could have even suggested that states move toward a defined-contribution system with states and districts paying a guaranteed rate of contribution so that younger teachers, who now make up the majority of teachers in its rank-and-file, are no longer taking the proverbial hit because they may not stay in the profession long enough to reap the full retirement benefits for which they have worked.

Given that the AFT, along with the NEA, have been complicit in perpetuating pension deficits, both through the roles played by their leaders in running pensions as well as in negotiating deals with states and districts that led to teachers not paying enough toward their own retirements (and have allowed states and districts to offer overly generous benefits they couldn’t ever fully fund), one can’t expect the union to do anything that actually does well by the teachers they claim to represent and by children for which the union proclaims its care. But at least Weingarten could been a little more clever in developing her enemies list. But she has given reformers more reason to continue pushing for the overhaul of traditional teacher compensation systems that no longer work for anyone other than Weingarten and her fellow union leaders.

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