UCOP & Regents Out of the Loop on Public Pensions: Here is a way to get into the loop

As has been noted on previous blog posts, UC is in danger of letting the pension issue get away from it. The governor has – according to news reports – agreed to a $106,000 cap on public pensions. Legislative Republicans have filed an initiative putting a cap of 60% of final pay on pensions. Both caps clearly apply to new hires and clearly do not apply to those already retired. There is uncertainty about what would be applicable to current employees. The initiative – which is poorly drafted – explicitly covers UC. We don’t know about the possible $106,000 cap deal on that score, although there is no reason to assume the governor has excluded UC from a more general deal on all public pensions.

A major problem is that we have no indication that anyone at UCOP or the Regents is communicating directly with the governor. Even apart from the personnel issues of revamping the UC pension plan, both UCOP and the Regents ought to be concerned with protecting the constitutional autonomy of UC. There is more at stake than just pensions. But UCOP and the Regents appear to be out of the loop.

The excerpt below from today’s Calpensions.com blog indicates that both the governor and the GOP have concerns about the current makeup of the boards that control the state’s two biggest pension funds: CalPERS and CalSTRS. Basically, the concerns revolve around conflict of interest – union-backed candidates on the boards – and oversight (various recent scandals relating to investment decisions of fund money). As far as is known, no such concerns have been raised by either the governor or the Republicans about the control of the UC pension system. The board that oversees the UC pension system is the Regents, whose members are appointed by the governor and approved the legislature.

Since neither the governor nor the legislative Republicans seem concerned about the Regents as trustees of the UC pension, that view would give UC an opening for arguing that UC’s pension should be left in the hands of the Regents and not thrown in with some broad reform of all public pensions. The Regents last December already approved various pension changes and a funding plan for the UC retirement system. Of course, for that argument to be made, UCOP and the Regents would have to insert themselves (now!) into the negotiations between the governor and the GOP legislators.

Below are excerpt from the calpensions article:

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New pension reform issue: board makeup (excerpt):

Ed Mendel, calpensions, 3/28/11

Should the makeup of the governing boards of the two big state pension funds, CalPERS and CalSTRS, be changed? The issue edged into the spotlight last week, pushed from the shadows by rising government pension costs and a CalPERS corruption scandal. It’s not the major overhaul advocated by some, where the traditional stakeholder board of management and labor representatives is replaced by a board majority chosen for their expertise in finance and investments. That kind of change happened in San Diego, one of the first public pension meltdowns, and in San Jose, where Mayor Chuck Reed successfully pushed pension reform ballot measures last fall.

But a Senate Republican list of pension reforms given Gov. Brown in budget talks, reported by the Sacramento Bee late last week, contains this brief notation, where “admin” apparently indicates a proposal or agreement by the Brown administration:

“Oversight

- Governing board conflict of interest and greater transparency (Admin: Add 2 public members to each retirement board. For CalPERS, switch SPB representative to DOF).” The abbreviations for the California Public Employees Retirement System switch refer to the five-member State Personnel Board, which handles civil service issues, and the administration’s Department of Finance.

One of the eight points in the pension reform plan Brown issued during his campaign calls for “independent oversight” of the pension funds and monitoring by the Department of Finance.

Another point calls for heightened board “standards and accountability” and specialized training for board members. The main qualification for the unpaid CalPERS board is who they represent, not what they know about pensions and investments…

Full article at http://calpensions.com/2011/03/28/new-pension-reform-issue-board-makeup/