A Response to Yves Smith on CalPERS

Yves SmithYes, The Twelve Days of CalPERS by Yves Smith at naked capitalism is very witty, but it plays into the hands of those who would like to see public pensions dismantled.

I like some of the work Yves Smith has  have been reporting on CalPERS, which obviously needs not only watching but needs to be constantly reminded of its duties, fiduciary and otherwise. Yes, failing to disclose private equity fees is problematic (I’m also glad JJ Jelincic is on the board Pension Pulse: CalPERS’ Partial Disclosure of PE Fees?)… but not long ago former board members were collecting enormous fees from CalPERS and it wasn’t just Villalobos.

Hiring Robert Klausner was ill-advised and Yves Smith’s expos­e has some good points. See CalPERS Board, Scandal-Ridden Fiduciary Counsel, Plan to Break California Law in Effort to Silence Board Member for Asking Too Many Questions, Seeking Records.

However, there is no comparison between Anne Stausbol and Fred Buenrostro. I have publicly criticized how executive bonuses are calculated at CalPERS (download 2009 testimony CalPERSBonusesMcRitchie2009) but she appears to have high ethical standards, whereas Buenrostro was a crook, led down that path by an attitude that permeated the board.

Go back and review the determination I got from the Office of Administrative Law, you’ll see that in 1999 the Board argued their Constitutional authority put them above the laws of California. Arrogance has come down several notches and for the most part they are doing a good job in a much more difficult financial environment.

I hope Yves Smith will continue to monitor CalPERS and to speak out. I would just encourage her to engage in a little more constructive dialogue and a little less grandstanding to avoid playing into the hands of Chuck Reed and similar crazies. (Measure Of Deception: California Initiative Would Gut Retirement Benefits for Millions and Can San Jose Move Past Pension Measure’s Toxic Fallout.) To see how far we’ve come from the 1990s, which Smith terms the ‘glory days’ of CalPERS, read the following editorial from the Sacramento Bee from 1999.

CalPERS muzzles critics: Ballot rules protect board, keep others in the dark

“Self-serving” is what one critic called the vote last week to sharply limit what candidates for the California Public Employees Retirement System board can include in their ballot statements. Certainly, “self-serving” is one word that characterizes that vote. “Anti-democratic,” “chilling” and “wrong” are among the others.

In a decision sweeping in its arrogance and disregard for First Amendment speech rights, the CalPERS board voted 9-4 to restrict ballot statements to “a recitation of the candidate’s personal background and qualifications” — and nothing more. Incredibly, board members even voted to delete a proposal by their staff that would have allowed ballot statements to include “candidates’ opinion or positions on issues of general concern to the system’s membership.”

Membership in this case means more than 1 million state and local government workers and retirees — the people whose $155 billion pension fund the powerful PERS board directs. How do PERS members benefit from ballot statements stripped of any information about what candidates for the pension board think about issues affecting their pensions?

Equally significant is what many see as the real motive behind the censorship vote: a provision in the newly approved election rules that bans any comment in ballot statements “about other candidates for office or another candidate’s qualifications, character or activities.”

A little history is instructive here: Last year, PERS board candidate Jim McRitchie mounted an aggressive but unsuccessful challenge to CalPERS board President William Crist. Among other things, McRitchie wrote in his ballot statement that Crist “had accepted gifts from those doing business with CalPERS.” No one challenged the truth of McRitchie’s ballot statement, but it infuriated Crist. In what an official protest panel later ruled as “arguably a technical violation of board rules,” incumbent Crist was allowed to amend his own ballot statement after the deadline to respond to McRitchie.

Campaigns for the pension board are not public in the ordinary sense. Voters include retirees and state and local government workers spread across California. Most of the information about the campaign and candidates comes from union newsletters. So the ballot statements are one of the few avenues candidates not endorsed by the major unions have to reach public employee voters. The vote by CalPERs incumbents muzzles challengers in ways that risk creation of a permanent board: unaccountable, untouchable and isolated from the people who elect it.

Members of the board who voted against the censorship measure were Treasurer Phil Angelides, Controller Kathleen Connell, the director of the Personnel Administration Marty Morgenstern (an appointee of Gov. Gray Davis) and Michael Flaherman.

Those who voted to deny candidate ballot information to pensioners and state and local government workers were William Crist, Charles Valdes, William Rosenberg, Robert Carlson, Joseph Thomas. Thomas Clark, Mike Quevedo Jr. (an appointee of the speaker and Senate Rules Committee), Ronald Alvarado and Rob Feckner.

PERS is required to seek public comment on the rule changes. The public should protest loudly and clearly.

(Published May 25, 1999Sacramento Bee)

The CalPERS board has come a long way. However, recent developments, including efforts to silence Jelincic are troublesome. While we should all welcome constructive criticism of CalPERS, we also need to guard against unconstructive mudslinging.

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