I had several inquiries yesterday about the latest problem at CalPERS, this time the resignation of a CIO who allegedly wasn’t vetted for conflicts of interest.

1. “Why does bad stuff keep happening at CalPERS?” CalPERS’s governance is like that of the Soviet Union in which rhetoric is populist but power lies with a nomenklatura of pension beneficiaries and board members under their influence who control the board because of a constitutional amendment passed by voters in 1992. The State Senate cited that amendment when removing me from the board of CalSTRS in 2006 after I questioned state pension fund math.*

2. “What will it take to change things?” Another constitutional amendment. That will only happen, if at all, when we or others like us have enough power to convince 62 state legislators and the governor to place such a measure on the ballot.

3. “Will the CIO’s departure change CalPERS’s plans to leverage up?” I don’t know but my guess is that one way or another they will keep swinging for the fences with your money until governance is modified.

4. “Aren’t legislators embarrassed by this?” Not really. They are more embarrassed by unemployment claims processing, homelessness, K-12 underperformance, etc and until governance is modified they can’t do anything about it anyway. Neither can the governor.

*The 1992 measure was placed on the ballot by public employee unions after a bonehead budget maneuver by a GOP governor in 1991 who invaded CalPERS’s assets to help “balance” a budget. Just goes to show you pension problems were created by both parties, who also jointly voted for a retroactive pension increase in 1999 that still ranks as the largest issuance of non-voter-approved debt in state history.

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Lecturer at Stanford University and president of Govern For California

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