Billionaire Texas Democrat seeks to reform CA pensions

John ArnoldJune 26, 2013

By Wayne Lusvardi

California’s pension problems are so massive that any help should be welcomed, even from outside the state.

Enter Texas billionaire Democrat John Arnold, who announced an effort to reform unsustainable public pensions across the United States, starting in California.

According to Reuters, that sparked a response from Lowell Goodman, communications director for the southern California chapter of the Service Employees International Union, “It’s the height of narcissism for a Texas billionaire who doesn’t have to worry about his retirement to come into California to try and meddle with the secure retirement of working class people.”

Of course, the main issue with government pensions is not how beneficial they are to “working class people” — meaning government retirees — but whether the costs are rising so fast that taxpayers can’t possibly pay the tab. As Goodman surely knows, just last year San Bernardino and Stockton declared bankruptcy largely due to an inability to meet massive pension obligations.

It has to be troublesome for Democrats when even their own wealthy campaign contributors want to reform California public pensions to forestall what could burgeon into a nationwide crisis.

John Arnold

Arnold is a hedge fund billionaire centered in Houston.  His $3 billion natural gas trading hedge fund Centaurus Advisors was formed in 2002 after he left Enron as an energy trader. Although Enron famously collapsed into insolvency, Arnold left unscathed because at the time he actually was making money for the firm.

His $1.2 billion philanthropic foundation, the John and Laura Arnold Foundation, seeks to improve criminal justice, education, public accountability and research integrity, as well as reform unsustainable public pension systems. Denis Calabrese, a Republican political strategist and consultant to Texas Gov. Rick Perry, heads the foundation.

Despite the high technical credentials of the foundation’s staff in social welfare, education and law, it doesn’t have an expert in pension systems.  Instead, the foundation has taken to funding grass roots efforts at pension reform.

Arnold must seem odd to the union-dominated California Democratic Party.  He donated $35,800 to Barack Obama’s presidential campaign in 2007 and was an Obama campaign financing bundler in 2008.  He also has funded other Democratic candidates. According to, Arnold’s philosophy is libertarian and his wife is a Democrat.

For its philosophy that all philanthropy and social welfare should be by the private sector, many have criticized the foundation. But the foundation’s philosophy of reform is technocratic, not based on conservative voluntary religious institutions.

Reforming CA

Arnold has put $10 million toward reforming pension systems in 25 jurisdictions in the last two years.  His foundation does not disclose which pension reform efforts were funded.  Reuters reported no funds have reportedly yet been committed to efforts in California.

But the foundation is reported to have been the secret donor of $150,000 to initially fund the California Foundation for Fiscal Responsibility.  The Arnold Foundation is seeking to fund other groups supporting ballot initiatives that would scale back California’s $500 billion hole in financing public pensions.

Democrats criticized First Lady Michelle Obama’s attendance at a fundraiser at the Arnolds’ home in 2011 because John Arnold wants to convert public pensions to 401(k) plans.  But needed pension reform may not be coming from the private philanthropic sector, thinks tanks, state legislatures, governors or the local governments, but from the business sector.

The Obama connection also may indicate that President Obama is concerned that the national public pension crisis could explode during his term in office. If that happened, it could damage his presidency much as the collapse of the Lehman Bros. shocked the Bush administration to the core in September 2008 and plunged the country into economic chaos.

The president sees not only the California bankruptcies, but the pending Detroit bankruptcy. CNN Money recently ran an article titled, “On the brink, Detroit halts debt payments, plans pension cuts.” The text began, “Detroit will immediately stop payments on about $2 billion in debt, the city’s emergency manager announced Friday, an effort to conserve cash. The manager, Kevyn Orr, also said Detroit will need to cut pay and pension and health benefits for city workers.”

Instead of flippant dismissals, such as that by the SEIU’s Goodman, California should be open to any reasonable proposal to solve our pension problems, including ideas from Democrats in the private sector.


Write a comment
  1. Sean Morham SIlver
    Sean Morham SIlver 26 June, 2013, 12:56

    Obama knows well that the protectors of the govt pensions are motivated by greed, just like businessmen. This needs leadership and he could score points for democrats nationally. Blowback in California may be worth it, because the state is a lost cause for republicans.

    Reply this comment
  2. Dyspeptic
    Dyspeptic 26 June, 2013, 14:46

    “Arnold must seem odd to the union-dominated California Democratic Party. He donated $35,800 to Barack Obama’s presidential campaign in 2007 and was an Obama campaign financing bundler in 2008. He also has funded other Democratic candidates. According to, Arnold’s philosophy is libertarian”

    The WaPo retreads at Politico are clueless as usual. No genuine libertarian would support a Progressive Fascist tyrant like Obummer. I doubt anyone at Politico has any idea what libertarian philosophy is. Probably none of them could name a single libertarian philosopher of the last 50 years. What a bunch of empty headed Libtards.

    Reply this comment
  3. Hondo
    Hondo 26 June, 2013, 14:58

    If this man John Arnold wants to bang his head against the wall here, its his right. If he can solve the pension mess en Kali, without trashing the taxpayers, he ought to be elected President.
    He really ought to go to Illinois. The are in far worse shape.

    Reply this comment
  4. The Ted System
    The Ted System 26 June, 2013, 20:41

    Solve the so called pension problem?

    Col bargaining my little buddies….wake up.

    Now back to your cubicles!

    Reply this comment
  5. sean Morham=Applied Silver
    sean Morham=Applied Silver 27 June, 2013, 09:40

    BS still smells no matter how it is disguised.

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 28 June, 2013, 07:41

    There is no right to collective bargaining in the pubic sector-outlaw it.,

    Reply this comment
  7. Tough Love
    Tough Love 28 June, 2013, 17:45

    Wayne, Nice summary. You said …”California should be open to any reasonable proposal to solve our pension problems”.

    Considering the financial mess most cities and states are in due to the excessive pension promises made to Public Sector workers (MULTIPLES greater in value at retirement than what comparable Private Sector workers get), is it not unreasonable to propose that Public Sector workers get to keep pension accruals for PAST Service, but going forward, FUTURE Service pension accruals will be EQUAL TO but NOT GREATER (with the pension contribution being expressed as a level percentage of pay) that of reasonably comparable Private Sector workers?

    On a conceptual basis, it’s REAL hard to argue that that proposal is not “fair”, but there isn’t a “snowballs chance in hell” that such a proposal (fair as it may be) would be acceptable to the Public Sector Unions .

    It’s called … GREED.

    Material change MUST be forced upon the Unions …. or we will be Greece in short order.

    Reply this comment
  8. Rex the Wonder Dog!
    Rex the Wonder Dog! 29 June, 2013, 09:04

    I saw a detailed employee costs spread sheet for the Bay Area Rapid Transit (BART) last night, and there are employees in their police department who are receiving$50K-$70K in pension contributions alone, that is 2 times the average private sector SALARY.

    Reply this comment
  9. Tough Love
    Tough Love 29 June, 2013, 12:35

    Rex, That doesn’t surprise me at all, because to fully fund the typical 3%@50 COLA-adjusted California Police officer’s VERY generous pension over their working career, requires a level annual pension contribution of 50%-60% of pay …. and MORE if an unfunded liability develops.

    Why Private Sector Taxpayers put up with this amazes me, when they typically get no more than a 3-5% of pay contribution “match” into a 401K Plan.

    Reply this comment
  10. Ansley Park
    Ansley Park 13 October, 2013, 16:59

    Dyspeptic is very clever with his words and name-calling. Unfortunately if you do study the history of libertarianism, you find that it is not black and white but many shades of grey. With a big grin on my face, I do have to correct his use of the word “fascist” in his name-calling of the President, specifically “progressive fascist Obummer.” You see, I did say he was clever with words. Fascism is a far right movement as communism is a far left movement. Often President Obama’s haters get a little confused as to what to call him. He is actually neither. He really isn’t even a true socialist, which is towards the communist spectrum. The haters of everything liberal or progressive actually want a one-party totalitarian government. Being a liberal, I insist upon a strong two-party system. It is what has made this democracy (republic) the most successful exercise in government ever to see the light of day. It is far from perfect but what keeps it successful is (has been) the ability for moderates of both parties to keep the radicals at bay. When the radicals hijack a party (any party), it eventually can destroy the party, which is the brilliant thing about our country, insuring sanity to prevail.

    Reply this comment

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