by Chris Reed | July 13, 2014 8:00 am
The giant California Public Employees’ Retirement System, as one might suspect from its massive and self-important Sacramento headquarters, thinks it is the bomb — a flawless organization that should inspire awe in onlookers.
Yes, of course, the phenomenon of government agency leaders and their managing boards getting into mutually beneficial, mutually reinforcing praise parties is common, especially where there’s a homogenous quality to board membership.
I covered the all-Republican Orange County Board of Supervisors from 1999 to 2001 for the OC Register, and members mostly couldn’t get enough of CEO Jan Mittermeier’s narrative of how the county had rebounded with amazing surefootedness from its 1994 bankruptcy. Mittermeier was so intoxicated with her spiel that I even got her in a taped interview to say the largest municipal bankruptcy in U.S. history was arguably a positive thing.
Now, as a San Diego journo, I’m confronted with more of the same from what until recently was an all-GOP county board, which ignores its chaotic pension system and operates million-dollar-per-member slush funds while simultaneously depicting itself as a divine inspiration to the rest of the planet. This is an actual passage from an actual story (by actual Chris Cadelago) about an actual California government official named Walt Ekard upon his retirement:
“I have been privileged for the past 13 ½ years to lead the finest local government in America, and I say that without fear of legitimate contradiction,” Ekard said.
“Without fear of legitimate contradiction”? Wow. There are some dark chords in that note — and some crazy ones.
But at least in each case, the counties had fig leafs. Mittermeier was plainly way better than her predecessors, even if Orange County’s economic boom was mostly what made its recovery from the 1994 bankruptcy relatively painless. San Diego County’s bond ratings are strong — although it also benefits from the contrast with the city of San Diego’s intensely bad press from the early 2000s.
But what is one to make of this we’re-awesome mindset from the California Public Employees’ Retirement System? Its board meetings, dealings with the media and general demeanor all reflect the notion that it is a “forward-thinking” organization that should be held in high esteem — an agency with a history that is pristine. When I made fun of this attitude, the push-back was quick.
Which was pretty incredible, given CalPERS’ central role in both the state government’s and many local governments’ pension debacles. In a 2011 story about Gov. Jerry Brown’s pension reform manifesto, Ed Mendel — the king of the California pension beat — explained why Brown thought CalPERS was, ahem, unsophisticated:
The “unaffordable” pension increases [Brown cited] were not identified. But the reference may have been to two bills backed by the powerful CalPERS board, which sets annual rates that must be paid by government employers in the giant retirement system.
When a booming stock market gave pension funds a surplus, a CalPERS sponsored bill, SB 400 in 1999, sharply boosted Highway Patrol pensions and authorized the same pension formula for local police, which many obtained through bargaining.
For state workers, SB 400 rolled back a pension cut given new hires earlier in the decade. Low pensions earned under the old plan could be boosted through a “buy back” with increased contributions. Retirees received a 1 to 6 percent pension increase.
A second bill, AB 616 in 2001, authorized three escalating pension formulas for local governments in CalPERS and 20 county systems operating under a 1937 act. The top formula, “3 at 60,” provides 120 percent of pay after 40 years of service at age 60. (See table at bottom)
The CalPERS board, rejecting the advice of its chief actuary, encouraged local governments to boost pensions authorized under AB 616 by offering in 2001 to inflate the value of their pension fund investments to help cover the increased cost.
Yet in 2009, I couldn’t get a substantive reaction from CalPERS on the 10-year anniversary of the SB 400 mega-fiasco. Why? The pension fund would not admit that it was fiscal arson to tell the Legislature in 1999 that increasing pension-benefit formulas by 50 percent would have little or no long-term cost to taxpayers.
Now a story that broke Friday adds more fuel to the CalPERS bonfire of vanities.
The first two payments were made in paper bags. The last installment came in a shoebox. The handoffs all came at a Sacramento hotel near the Capitol.
In a stunning admission covering years of corruption, the former chief executive of CalPERS said Friday he accepted $200,000 in cash, along with a series of other bribes, from a Lake Tahoe businessman who was attempting to influence billions of dollars in pension fund investment decisions.
Fred Buenrostro, who ran the nation’s largest public pension fund from 2002 to 2008, pleaded guilty in U.S. District Court to a charge of conspiracy to commit bribery and fraud. He has agreed to cooperate with federal prosecutors as they pursue charges against his longtime friend, Nevada businessman Alfred Villalobos, a former CalPERS board member. …
Most of those allegations had been aired publicly already. What was new Friday was the blockbuster admission that Buenrostro took $200,000 in cash from Villalobos. In his written plea agreement, Buenrostro said Villalobos paid him in three installments in 2007, “all of which was delivered directly to me in the Hyatt hotel in downtown Sacramento across from the Capitol.”
That’s from the Sac Bee.
There is no way, or at least no sane way, that this grotesque corruption can be compartmentalized away. CalPERS’ whistleblowers didn’t turn Buenrostro in. Instead, he was caught as part of a far-reaching federal probe into “pay-to-play” pension scams. This is a sad and troubling comment on how CalPERS functions.
The next time you see CalPERS start to pat itself on the back, feel free to laugh. Or maybe to start convulsing in pain.
Source URL: https://calwatchdog.com/2014/07/13/65755/
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