Calpers Officer Urges Money Manager Pension-Bashing Donation Disclosure
April 12 (Bloomberg) -- California Governor Jerry Brown, a Democrat, speaks about his plan to extend a temporary tax increase to avert deeper cuts in the state's budget. Brown, speaking at a conference hosted by the Bay Area Council in San Francisco, appealed to the Bay Area Business community to help him rally Republican support for his proposal. (This is an excerpt. Source: Bloomberg)
Wall Street firms seeking to invest for the $235 billion California Public Employees’ Retirement System should disclose if they’ve supported groups critical of government pensions, one of the fund’s board members said.
Money managers trying to win business from the largest U.S. public pension should report contributions to groups advocating for dismantling public worker pension plans that guarantee benefit levels regardless of investment returns, said a Calpers board member, J.J. Jelincic, former head of one of California’s largest state worker unions.
“We obviously have an interest in defending defined benefits and we have an interest in defending public employees,” Jelincic said in an interview at the fund’s Sacramento headquarters. “If the people we are paying a lot of money to are working against us, we ought to at least be aware of it and have a conversation about it.”
Investment banks and money managers earned a combined $1.1 billion in fiscal 2010 handling Calpers assets, the fund said.
Government pensions have become a political flash point across the U.S. as benefit costs have risen while tax revenue remains below pre-recession levels. Republican lawmakers in California and at least one non-profit group are pushing to replace traditional public-employee pensions in the most populous state with 401(k)-style accounts, where workers bear more investment risk.
Seeking ‘Conversation’
In February, a trustee for New York City’s police retirement system proposed that the fund’s board be able to dismiss future managers who disparage a public pension. Blackstone Group LP (BX)’s chief strategist, Byron Wien, strained relations with New York unions last year when he said benefits are “too generous.” The city’s five pension funds hold combined assets of about $115 billion.
“If they provide a really good service then I don’t think it becomes the decision-maker, but we need to have the conversation,” Jelincic said.
Jelincic made the suggestion for more disclosure to other board members during discussions yesterday. He hasn’t introduced it as a formal proposal to the full board. Brad Pacheco, a Calpers spokesman, said the fund’s staff wasn’t given any direction to take Jelincic’s idea further.
The past president of the California State Employees Association, a union for 140,000 state workers, Jelincic said he’d like to know, for example, if any of Calpers’ fund managers have contributed to the California Foundation for Fiscal Responsibility, a group that advocates for less-generous pension benefits.
Donor Disclosure
Such non-profit 501(c)3 committees are allowed to raise money from foundations, individuals, labor unions and corporations without disclosing donors.
Calpers’ top lawyer, Peter Mixon, said grading money managers based in part on support of a political position must take into consideration constitutional free-speech protections.
“Disclosure is one thing, but grading potential contractors or investment managers based on their First Amendment speech is something we would have to take a very close look at,” Mixon said at the meeting yesterday.
California Governor Jerry Brown this month said he is exploring whether to offer future government workers the choice of a traditional public pension plan or a hybrid including elements of a 401(k)-style account.
He also is pushing legislation prohibiting employees from “spiking” pensions by manipulating overtime, unused vacation and special compensation to inflate future benefits.
Brown also said he is seeking to forbid workers from buying additional service credits, to set a maximum on the pension that a retired state worker can receive and to ban so-called double- dipping, when a retiree collecting a pension takes another government job.
To contact the reporter on this story: Michael Marois in Sacramento at mmarois@bloomberg.net
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
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