Issues

Send us your issues. Meanwhile, here's what we've been working on.

Healthcare. CalPERS is taking the wrong approach on healthcare, thinking that by narrowing our choices, we can negotiate lower prices. However, take a look on the Kaiser site on the Internet. You'll find that CalPERS pays about twice what you would pay as a private purchaser...so much for "volume discount" and the ability of CalPERS to negotiate lower rates. We need more competition, not less. When more plans compete, costs will be lower, especially if each can offer slightly different benefits. Instead of reducing our options and trying to “regulate” those that remain, CalPERS should let more providers offer more options. Yes, it will be more difficult to compare plans, but you will be able to choose the services most important to you and your family. Costs will be lower when plans compete.

We support the Rural Subsidy Program, which is an important element in the effort to recruit and retain qualified employees in rural areas where there are no CalPERS approved HMOs, and the cost health care is higher. However, the current CalPERS strategy of limiting HMOs to only those which offer a mandated homogenous program, severely limits the availability of healthcare in rural areas. Opening CalPERS to more providers and more options will reduce costs further.

Ultimately, state members of CalPERS need a healthcare trust fund, allowing investment returns to cover 80-85% of costs, just as investment returns pay most of the cost of our pensions. Changes to accounting standards will soon require the State to quantify unfunded healthcare liabilities for retirees of $40-70 billion, putting pressure on CalPERS to raise rates. CalPERS recently created a pre-funded trust fund for its local employees, like we have for our pension, protecting our health benefits and using investment returns to reduce costs. CalPERS should consider borrowing to leverage earnings. It can borrow $25 billion at 5% using 30-year tax-free revenue bonds and can earns 9% per year in investment returns, the $1 billion difference can help pay our healthcare costs. I would also seek to use the Bureau of State Audits to conduct a financial audit and the State Controller to do an EDP audit of claims. Let's trim unnecessary costs before burdening members again with additional copays.

Continue to defend CalPERS against attacks, which threaten our defined benefit plan. In 1983, 86% of American workers were covered by a traditional defined benefit plan. By 2004, only 37% had such plans. Attacks will continue with former Assemblyman Keith Richman working on a ballot initiative to cut pensions by 30 percent to 65 percent for new public employees. Reducing CalPERS pension benefits doesn't make economic sense. (see address to International Conference on Corporate Governance, 2005, especially "CalPERS Under Attack")

Work to move administration of benefit programs such as dental, vision, and savings plus from behind closed doors at DPA and the Chancellor's Office to CalPERS. CalPERS administers deferred compensation plans for local government and school employees. CalPERS should administer our benefits as well. More than 10 years ago DPA demonstrated it couldn't be trusted when, at DPA's request, Delta Dental overcharged premiums for our dental plan by $40 million. CAPS, CASE and PECG sued DPA. The court found: "In effect, the state took money it owed its employees as compensation and transferred it to Delta Dental as premium copayment. Then Delta was obliged to transfer that money back to the state because it exceeded the actual costs of the dental plan. Thus, the state was able to get both the time value and control of the money it would otherwise have had to pay to its employees.” Let's work with the next governor to move administration of our benefits to CalPERS.

Protect members against identity theft. Members who sign nomination petitions must expose themselves to identity theft by disclosing their Social Security Numbers. I have petitioned CalPERS to stop this practice and other underground regulations. We already had one decision that CalPERS actions were illegal (1999 OAL Determination No. 18). Now we have 2007 OAL Determination No. 1 that says our election rules are underground regulations. Additionally, our petition seeks to prohibit staff from using their official position to effect election results, to institute instant run-off voting where we rank candidates and save up to $1 million cost for a second ballot. (See petition. The petition is also available for download as a Word Document. See testimony.) CalPERS came back with a proposed rule that continued use of six Social Security number digits or more...putting members at continued risk. We defeated that. However, they still want to address a Determination that they use "underground regulations" by promulgating a rule that sanctions their ability to set the number of signatures required in election petitions by having the Board set that number through underground regulations. See McRitchie's March 18, 2008 comments.

Increase investment returns by taking advantage of the “CalPERS Effect.” While the average stock of “Focus List” companies announced by CalPERS trailed the Standard & Poor's 500 Index by 97.7% in the 5-year period before announcements, the same stocks outperformed the index by 8.1% in the next five years. Yet, CalPERS does nothing to overweight its largely indexed domestic fund prior to announcement. Let's take greater advantage of the work CalPERS is already doing to increase returns.

Enhanced indexing strategies should include screens to weight investments in favor of companies with good environmental, governance, workplace practices (including not taking jobs from public employees), accounting and tax practices. (see extensive writing at corpgov.net)

Let's bring first-class customer service to CalPERS. “Californians Aware” audit gave CalPERS an F, while my staff at DTSC got an A.

Initiative Process. When the Board fails to act, we have little in the way of options...especially given the fact that election rules strongly favor incumbents. Members need other ways to hold the Board accountable. Let's work to institute an initiative process.

Deliver the Goods: The year before SB 400 was introduced, McRitchie took out newspaper ads in Capitol Weekly publicizing the fact that our own Board robbed CalPERS members. CalPERS spent $500,000 suing the Wilson Administration to get raided money back. The Board then used poor actuarial assumptions and essentially returned it by reducing employer contributions by $3/4 billion…equivalent to an 8% pay raise for all state employees. The Board had reduced the state's contribution in 8 out of 11 years. Yes, one of their duties is to minimize employer contributions. However, we strongly reminded them, the Constitution requires their duty to plan participants and beneficiaries "take precedence over any other duty."

Defeat attempts to convert our defined benefit plan to a defined contribution plan. We had several letters to the editor published throughout the state, articles online and in association publications, that exposed last year's attack as a scheme to funnel $5 billion/year extra to corporate money managers while reducing our retirement earnings $10 billion/year.

Won release of closed-door minutes to hold directors accountable for their votes. We investigated a $100 million closed session limited partner deal with Hicks Muse. Former Board member Al Villalobos reportedly was paid $750,000 to act as a "placement agent." Terms allowed Hicks Muse to profit "by as much as $40 million a year from fees even if the deal lost money” for CalPERS. The Board argued for years that closed session votes and minutes remain confidential forever. Former Senator Schiff and Jim McRitchie obtained release of the minutes, which showed the $100 million investment was essentially a Ponzi scheme made against the advice of staff and an outside CalPERS consultant. Jim's testimony before Schiff's committee helped shape legislation preventing pay to play.

Remember this Sacramento Bee editorial, CalPERS muzzles critic: Ballot rules protect board, keep others in the dark? The Board had voted to prohibit candidate statements from including any opinions or positions on the issues. Instead, working with many of you, we won the right to longer candidate statements, rebuttals and a runoff if no candidate wins a majority vote.