CALIFORNIA ELECTIONS : PROPOSITION 162 : Boards Seek Authority Over Pension Funds
“This is one of the most obscure issues the California voter has ever been asked to decide.”
That was how Fred Main, vice president and general counsel for the California Chamber of Commerce, described Proposition 162 on the Nov. 3 ballot, a measure that would give governing boards of public employees retirement systems more authority and independence.
Obscure though the initiative may be, supporters say it is needed to protect the $70-billion Public Employees Retirement System (PERS) fund and other public employee pension funds from political “raids.”
They cite the deal that allowed Gov. Pete Wilson and the Legislature to use $1.9 billion in supplemental pension funds to balance the 1991-92 state budget and also to Wilson’s attempt last year to place more gubernatorial appointees on the PERS governing board.
However, opponents argue that the measure does little to prevent raids but instead makes pension fund governing boards more autonomous and less accountable to the Legislature and other elected bodies.
Proposition 162 would change the state Constitution to:
* Give the governing board of a public employee pension fund “sole and exclusive authority” over investment decisions and management of the system.
* Require governing boards to place more emphasis on providing benefits to the system’s participants and less on the costs to taxpayers. The state, using taxpayer funds, makes an annual contribution to PERS.
* Allow the PERS board to hire its own actuaries--experts who calculate the contributions needed to keep the fund sound--instead of using those named by the governor, as state law requires.
* Maintain the present composition of PERS and other public pension fund governing boards.
The measure is supported by the California State Employees Assn., the state School Employees Assn. and other public employee unions. It is opposed by the California Taxpayers Assn., the state Chamber of Commerce and the League of California Cities.
Backers of the initiative raised $1.6 million by Sept. 30, Common Cause reported, while there is no organized financial effort in opposition.
Although there are more than 100 public employee pension systems in the state, most attention is focused on PERS because of last year’s budget maneuvering.
Jeff Raimundo, communications director for Californians for Pension Protection, said giving governing boards sole authority to manage the funds would “keep it away from the Legislature, keep their hands out of the cookie jar.”
Raimundo acknowledged that future governors, Legislatures and PERS governing boards still could reach agreements similar to last year’s $1.9-billion deal but said the Legislature “won’t be able to grab these funds unilaterally. They’ll have to negotiate with the governing board whether this use of the money is in the best interests of the trust fund.”
Ron Roach of the California Taxpayers Assn. said the change would “create a lack of accountability and give public employee pension boards--which often are dominated by public employee unions--control over the amount of taxpayer contributions, which are in fact taxpayer dollars.”
Wilma Krebs, a retired economics professor and a supporter of the initiative, said restoring the PERS board’s right to name its actuaries was important because “if the governor makes the appointment, we feel that spells political control.”
The actuaries study the pension system’s assets and liabilities each year and determine what the state contribution to the fund should be.
Wilson was given the authority, subject to approval by the Legislature, to name the PERS actuaries in legislation passed last year. Wilson’s nominees were approved by the Senate but rejected by the Assembly, and the pension system has continued to use its own actuaries.
“Over time, there could be a big cost to taxpayers” if PERS names the actuaries, Roach said. “The fund is so large that a change in the estimate (of state contributions) by one-half of 1% could mean hundreds of millions of dollars.”