CalPERS Re-elects Top Leaders

John Seiler: According to the latest issue of PERSpective (government pun), the magazine that just was mailed out to retirees of the the California Public Employees’ Retirement System:

Members of the CalPERS Board of Administration unanimously re-elected Rob Feckner to a sixth term as the System’s President, and George Diehr as its Vice President for a third year.

Feckner, who represents school members on the Board, was first elected to the CalPERS Board in 1999. He lives and works in Napa, where he has been employed with the Napa Valley Unified School District for 33 years.

But on June 17, SignOn San Diego reported:

The board of the California Public Employees’ Retirement System voted Wednesday to demand a higher contribution from the state’s cash-strapped general fund to pay for public employee pensions.

The action has been criticized because California faces a $19 billion deficit, but others say delaying the rate increase would cost the state more money in the future.

The proposal calls for a $600 million increase in the next fiscal year, but legislative analysts say it will probably be about $480 million. They say about $184 million of that will come from the state’s general fund.

CalPERS does not need legislative approval to enact a rate increase.

Last November, Forbes reported:

The California Public Employees’ Retirement System, Calpers, is sick and tired of “uninformed” critics taking swipes at it recently. The fund, which manages $200 billion in assets for California government employees, has seemingly had little time to grapple with the ongoing financial crisis amid the need to fend off a stream of allegations that its ranks are corrupt and its operations mismanaged.

Among the criticisms thrown at Calpers: Board-member junkets, under-the-table placement fees from outside agents to fund officials, payments by money managers to top investment staff, conflicts of interest involving investment consultants, collapsed real estate deals and multi-year rip-offs of the fund by banks handling its foreign exchange trade.

It has all left Calpers looking pretty stupid, given how it has long held itself up as the self-proclaimed gold standard for public pension management and the holier-than-thou scold of poor corporate governance practices. This, after all, is the fund that opposed the re-nomination of Berkshire Hathaway ( BRK – news – people ) boss Warren Buffett to the board at Coca Cola ( KO – news – people ).

A reasoned response by Calpers to the public’s disgust over its various shenanigans would be to undertake a comprehensive review of its policies and procedures. Such action would be even more timely, given the way the financial market meltdown has called into question some of the basic premises upon which Calpers and other supposedly “sophisticated” investors managed their money. Among them: the notion that alternative investments, like hedge funds, private equity and real estate opportunity funds, into which Calpers dove head-first, are worth their exorbitant fees, murky disclosure and corrupting pay-to-play influence.

Instead of undertaking a heartfelt house-cleaning, Calpers true nature–as a political animal–has come to the forefront. It has responded to its critics by setting up a Web site at www.calpersresponds.com. Calpers says the site “is intended to educate–and separate fact from fiction–about issues and our response related to pensions, investments and national health care reform.”

The Web site does not discuss the scandalous truths that have emerged; rather, it rallies the defense and refers to supportive statements from its chief investment officer and paid external advisers. It also boasts about the fund’s investment performance.

And in April, a Stanford University study showed that, along with CalSTRS and the University of California Retirement System, the three giant pension systems have been so badly managed that, together, they are $500 billion short of their obligations to retirees.

The leaders of any private pension fund performing so poorly would have been exiled long ago to a Del Webb golf retirement community. Investors just wouldn’t put up with such poor performance.

The difference, of course, is that it doesn’t matter how poorly CalPERS performs, the taxpayers are on the hook to make up any shortfall.

And taxpayers have limitless funds.

Don’t they?