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?

4 comments

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  1. StevefromSacto
    StevefromSacto 23 June, 2010, 09:12

    Here’s a news flash, John. CalPERS was not the only one whose performance suffered during the economic downturn. Maybe we should “fire” everyone whose 401(k) tanked. Same thing happened after the last big downturn at the beginning of the decade and CalPERS came back big time.

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  2. Tyler
    Tyler 23 June, 2010, 10:38

    How come when GM needed a bailout, the CEO was forced to resign because of the fact that he was the one at the wheel when the company went off a cliff, but when CALPers needs another bailout to make up for their incompetance & corruption, the people in charge are re-elected? I guess that just goes to show you the real difference between a job in the private sector and a “job” in the public sector.

    And yes, everyone did lose money during the crash, but everyone else is being forced to deal with it on their own, they arnt getting a participation trophy at the taxpayers expense.

    Reply this comment
  3. StevefromSacto
    StevefromSacto 23 June, 2010, 12:06

    Not everyone is being forced to deal with it on their own. All those corporate tax breaks are still in place and the oil companies are still getting preferential treatment here in Caulifornia.

    Reply this comment
  4. Tyler
    Tyler 24 June, 2010, 09:38

    Why is it always corporate tax breaks & favorable treatment of oil companies with you, no matter what the subject is?

    Our country/world is dependant on oil, so if governments abusivly regulate those companies to the point they cannot operate within that governmental jurisdiction, the price of all energy & transportation goes up drastically, which means companies pay more in operating costs, which means they hire less people, which means the government is now collecting no tax revenue from the oil companies, much less tax revenue from all other companies, and less income tax because there are less people being employed by those companies. That is part of the reason why the Oil companies get preferential treatment. The other part probably has to do with the amount of campaign donations they make to all of the representatives.

    The corporate tax breaks are in place because if taxes make doing business is a specific state or country too expensive, the companies will simply move to a less abusive state or country. When those companies move, they take the jobs they provide with them. California is one of the worst states in the country to do business in because of the over taxation and over regulation, so companies are packing up and moving east. That is why these corporate tax breaks are in place.

    It seems that you do not understand that companies are what make our society run. It is all of these companies that create wealth by providing goods and services that generate income. It is with that income that the companies create more jobs that increase output and creates even more income. It is from all of that income that the government generates it tax revenue. It is with that tax revenue that the governments fund the employment of public employees & their pensions. Without all of those evil businesses, there would be no money to pay the public employees, so maybe you shouldnt be so anti-business. Those businesses are the ones powering the public employee Gravy Train.

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