Daily Report: Money & Politics
August 12, 2011 | Will Evans

A young Texas couple with a multibillion-dollar hedge fund fortune is bankrolling a series of reports by one of California’s most influential pension overhaul groups.

The until-now secret $150,000 grant from the Laura and John Arnold Foundation to the California Foundation for Fiscal Responsibility is sure to fuel speculation about who might fund a brewing battle over California’s public pension system. Advocates of limiting pensions have been searching for a deep-pocketed donor to fund a multimillion-dollar ballot measure.

But while the Arnolds already are drawing criticism for entering the fray, it’s unclear whether they are the answer pension activists have been waiting for and public-employee unions have been worried about.

John Arnold, a former Enron trader who became a billionaire as a hedge fund manager, formed the foundation with his wife as a way to promote change in education, pensions and the criminal justice system. Although they give money to President Barack Obama and other Democrats, the Houston couple hired a conservative political strategist as president of the foundation.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, hopes the Arnolds give to future projects and perhaps even a high-stakes ballot initiative.

“There’s not that many billionaires around,” she said. “I’m hopeful this would inspire others like them.”

Fritz’s group has made waves by suing for the public release of pension information and publishing details on the state’s top recipients of retirement benefits. Her newest report analyzes the savings to state and local governments of different pension overhaul proposals.

Steven Maviglio, Democratic consultant and spokesman for the union-backed Californians for Retirement Security, criticized the report’s funding.

“California voters have never taken kindly to out-of-state special interests or billionaires trying to influence our state’s public policy,” he said. “Concerns about California’s pension system are best addressed by Californians, not Texans. We continue to believe that the best approach to address abuses in the pension system are through our elected representatives and the Legislature, and we are working hard to do just that.”

The California grant is one of the first in a ramping up of foundation funding for pension overhaul work across the country, said Josh McGee, the Arnold Foundation’s vice president for public accountability initiatives. The foundation hopes the California study, released today, will “spur some sort of reform that works for the government, the taxpayers and workers, too.”

“There hasn’t been a whole lot of work done to really illuminate the stress caused by public-employee benefits on state and local governments,” he said.

McGee said the foundation is looking to fund other educational activities but is prohibited from funding overt political work like ballot initiatives.

“I think what we can do in California right now is to really illuminate the issue and provide people with information that will allow them to make informed decisions at the ballot box,” he said.

Dan Pellissier, president of California Pension Reform, plans to put a measure capping public pensions on next year’s ballot, but he won’t comment on his funding prospects yet. “We’re going to wait until the time is right,” he said.

John Arnold once was renowned for his lucrative natural gas trading at Enron. He never was implicated in wrongdoing at the now-infamous company, but Democratic U.S. Sen. Dianne Feinstein of California once criticized him for allegedly refusing to answer, during a deposition, whether he had manipulated West Coast energy markets. A committee representing former Enron employees sued Arnold and other top traders for receiving huge bonuses, including $8 million for Arnold, right before Enron collapsed. Arnold and the committee settled on confidential terms, according to court records.

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