The Governing Board of the California Public Employees Retirement System. (Calpers)
Article by: FENIT NIRAPPIL , Associated Press
Updated: February 16, 2014 – 10:50 AM
SACRAMENTO, Calif. — A rift between Gov. Jerry Brown and the board overseeing the nation’s largest public pension fund over rising liabilities tied to longer retiree life expectancies highlights a concern about how decisions are made at an agency with tremendous influence over state finances.
The board of the California Public Employees’ Retirement System will meet Tuesday to begin considering how to address the costs associated with retirees living longer, but it already has indicated that it will ignore the governor’s request to tackle the problem immediately.
Pension-reform and taxpayer advocates in California say this outcome isn’t surprising considering the composition of the CalPERS board, which is dominated by public employees who will benefit from the pension system or those who are appointed by Democratic officeholders who receive significant campaign contributions from government labor unions.
They say such an arrangement, common across the U.S., can encourage rosy investment projections and low contribution rates.
“You have people who are not disinterested,” said Joe Nation, a Stanford University public policy professor and former Democratic state lawmaker who studies pension systems. “Unfortunately, the incentives are really misaligned.”
Of the 12 members on CalPERS’ board, nine are due to collect public pensions from the agency they oversee. The board, which has one vacancy, has no independent taxpayer representative or an independent investment expert. The “public representative” appointed by the Democratic leadership in the Legislature is president of a grocery and food industry workers union.
CalPERS’ board has the power to unilaterally set contributions rates for the state, cities and other government entities.
Brown wants the board to use that power to start boosting contribution rates this year. Instead, the board has indicated it will follow a staff recommendation to wait two years before increasing contributions from public employees and the government entities that pay into the pension system, then phase in those increases over a five-year period.
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