A few weeks ago, the Empire Center and the Manhattan Institute highlighted the Legislature’s apparent rush to pass a significant shift in the law governing investments by New York’s $120 billion state and local pension fund.

Although the bill was a top priority of state Comptroller Alan Hevesi, it also raised unanswered questions about potential added financial risks for the ultimate underwriters of the pension fund — New York’s taxpayers.

What happened next could be a case study in the murky ways of the State Capitol.

The Senate, which unanimously passed Hevesi’s measure back in May without debate or a public hearing, moved on June 20 to recall the bill from the Assembly before it could be voted upon in the lower house. Almost simultaneously, the Assembly sponsor of Hevesi’s measure, Peter Abbate, introduced two alternative bills (A.8934 and A.8970).

Both bills contained language increasing the comptroller’s “basket” of more discretionary investments from 15 to 25 percent of the total pension fund; but A.8934 also contained provisions allowing the State Insurance Fund (SIF) to invest up to 10 percent of its reserve funds in equities “irrespective of the rating or other qualitative standards set forth in … the Insurance Law,” in the words of the sponsor’s memo. The state-run (and governor-controlled) SIF follows much more stringent and conservative investment standards than the pension fund. Any loosening of those standards would set off alarms in the business community, for which SIF is New York’s leading provider of workers’ compensation policies.

On the final day of session, the Senate and Assembly both passed A.8970, the bill expanding the “basket” without reference to SIF. This bill also imposes some new disclosure requirements on the comptroller, including a five-year projections of employer (i.e., tax-funded) pension contribution rates and an annual report on in-state investments by the funds.

The issue is surely arcane to many but potentially can have a significant bearing on New York’s already heavy tax burden. Stock market losses by the pension fund and retirement benefit sweeteners enacted by the Governor and Legislature in 2000 have combined to raise the taxpayers’ share of sdtate and local pension costs by billions of dollars over the past four years.

In typical Albany style, decisions involving tens of billions of dollars in public money — with huge implications for the state’s long-run fiscal stability — were made by the Legislature with virtually no public debate or explanation.

So much for “reform” in the Capitol.