Corporate Governance -- Enhancing the Return of Capital Through Increased Accountability
Draft Testimony of James McRitchie
BPAC, Agenda Item 11, May 16, 2006

A. 5. d. Is there an alternative method of verifying membership than last six digits of SSN? Staff report says using the last 6 SSN digits provides the best opportunity to validate membership “without breaching the confidentiality of the member's identity.”

  1. Using the last 6 digits does breach confidentiality, since the first digits are assigned based on the region in which you apply for an SSN. (it was local office, since 1972 based on zip code) A recent Federal Trade Commission survey reported that, between 1998 and 2003, 27.3 million Americans were victims of identity theft. A report by CALPIRG and the Privacy Rights Clearinghouse finds the average consumer spends 175 hours and $808 “out-of-pocket” to remedy identity theft. Total costs to society are $50 billion annually.
  2. The requirement that nomination petitions include SSN is an underground regulation. "Regulation" means every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure. (Government Code section 11342.600) No state agency shall issue, utilize, enforce, or attempt to enforce any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a “regulation” under the APA unless it has been adopted as a regulation and filed with the Secretary of State pursuant to the APA. (Government Code section 11340.5(a)) CalPERS is not exempt. (1999 OAL Determination No. 18, initiated by J. McRitchie)
  3. Your duty as board members isn't to make it easy for candidates. Your Constitutional duty to “participants and their beneficiaries shall take precedence over any other duty.” Collecting an extra 100-200 signatures isn't that big of a deal compared to putting members at risk for identity theft. Perhaps date of birth and zip code would be a better means of verification.

B. 7. Should the Board consider IRV or ranked voting?

  1. Staff report says IRV can result in no winner being selected. Yes, same as run-off. You could have a tie.
  2. Staff report says IRV lets "fringe" voters decide the winner. The same “fringe voters” decide a runoff (assuming those who voted for candidates who make it to the runoff don't change their votes); it just takes longer. “Fringe” is code for Green or other 3rd party. The dominant parties don't want IRV because voters can vote for who they really want, without fear of helping to elect the candidate they least want. In the 11 recent public IRV elections (7 for supervisor in 2004 in SF, 3 citywide races in 2005, and 1 Burlington mayoral race in 2006), the candidate with the most first choices won every race, and every incumbent got re-elected. No “fringe candidates won.”
  3. Staff report says in San Francisco “it took days for the final results.” Yes, as in most elections, unofficial election results were posted on election night. As in any other election, they continued counting absentee and provisional ballots for a couple weeks.
  4. Staff report says San Francisco approval “has not been extended.” However, IRV vote is in San Francisco Charter, Section 13.102. RCV/IRV “shall be use for the general municipal election in November 2002 and all subsequent elections.” With 61% preferring IRV compared to 13% preferring a second ballot, changing the charter isn't likely.
  5. Staff suggests the need for voter education will offset any savings from not holding a run-off.
    a. Ranking preferences is an easy concept, understood by most 3 year olds.
    b. The postcard mentioned in agenda item A4 could serve a dual purpose, including education, or CalPERS could simply include instructions with the ballot.
  6. Staff says "confusion" could lead to lower turnout. Use of Ranked Choice Voting (RCV) in San Francisco's November 2005 election increased voter participation in the decisive round of the Assessor-Recorder race by an estimated 120,000 voters. (Ranked Choice Voting and Voter Turnout in San Francisco's 2005 Election) I have never seen any evidence of lower turnout in IRV elections. Staff provides no evidence for their assertion that IRV will lead to confusion and lower turnout.

B. 9. Should regulation be amended to delete reference to staff “directly involved in conducting a CalPERS election”? Staff report asserts there is no showing of necessity.

  1. The rule conflicts with other legal requirements, violating Government Code section 19990, subdivision (a), and California Code of Regulations, title 1, section 11342.2.
    a. By limiting the prohibition against using his/her official position to those “directly involved in conducting a CalPERS election,” CalPERS clearly implies that staff not directly involved are free to use the prestige or influence of their appointing authority to the advantage of one of the candidates. The rule conflicts with Government Code section 19990, subdivision (a), which prohibits State agency staff from “using the prestige or influence of the state or the appointing authority for the officer's or employee's private gain or advantage or the private gain of another.”
    b. California Code of Regulations, title 1, section 11342.2 establishes that “no regulation adopted is valid or effective unless consistent and not in conflict with the statute.”
  2. Who is “directly involved”? Where is that term defined in the CalPERS regulations? With regard to the comment there is no showing of necessity, consider the following:
    1. A violation of the law should be necessity enough to change the regulations.
    2. Examples from the 1998 elections for the state member seat.
      1. Staff produced a CalPERS newsletter, distributed just before the elections, prominently featuring the incumbent in a 3-page cover article. Were they “directly involved” in the election?
      2. The Chief of Public Affairs tried to get the incumbent's challenger to remove information from his Internet site concerning his efforts and success in obtaining closed door minutes and potential conflicts of interest. Was she “directly involved” in election?
      3. The CEO attacked the incumbent's challenger in the press, implying he was unqualified to comment on the legality of actions supported by the incumbent, which were later overturned in court. Was he “directly involved” in the election?
      4. The Chief Counsel, whose salary was in part determined by the incumbent, allowed the incumbent to violate the rules by changing his statement after the legal deadline so that he could address issues raised by the challenger. Was she “directly involved” in the election?
      5. The Board allowed the Chief Counsel to appoint a protest panel to determine, in part, if she had violated Board rules. Were they “directly involved”?
  3. What legitimate reason does the Board have for allowing CalPERS staff to use their official position to influence the outcome of CalPERS elections?

As I have previously indicated to members of the Committee, I will be filing a petition for reconsideration under Government Code section 11340.7 and will also raise the issue of underground regulations in advance of filing a request for a determination with the Office of Administrative Law. I've already discussed the SSN requirement on nomination petitions. Two other significant underground regulations are the number of signatures required for such petitions and the election schedule. Changing the election schedule caused significant problems for David Miller, who had spent all or nearly all of his campaign funds, when the Board moved back the election dates in 2002.

In summary, the Board should: protect the financial assets of members from identity theft; avoid wasting money on an unnecessary second ballot; and provide for fair elections, free from staff interference and without illegal underground regulations

Contact: jm@perswatch.net

The Committee agreed to form an ad hoc committee to investigate ways to pare costs and streamline the balloting process. Staff is also to report back on alternatives to use of the Social Security Number. (CalPERS seeks election savings, Sacramento Bee, 5/17/06)