Californian pensions row escalates

As exclusively revealed in Global Pensions last month, Assemblyman Keith Richman wrote a letter to California Public Employees’ Retire-ment System (CalPERS) CEO Fred Buenrostro calling for a ‘performance audit’ on the US$200bn fund.

In that letter, delivered mid-December, Richman claimed there was “evidence in the public record that some material departures from industry regulations and best practices had occurred that warranted full investigative and corrective action.”

Dan Pellissier, chief of staff for Assemblyman Richman also accused CalPERS of ‘basically cooking the books’. “We have documents that show CalPERS used data more than two years old when providing analyses of benefit increases for local government, and that is a direct violation of Government Accounting Standards Board (GASB) standards,” he said.

But CalPERS denied the accusation, and said all its actuarial staff’s work was fully audited and complied with all GASB rules and regulations.CalPERS said that Rich-man’s letter made no mention of the fact that two independent audits are performed on CalPERS annually.

“The independent actuarial audit consistently finds that the CalPERS actuarial work is completed in a professional, accurate and complete manner,” said a CalPERS spokesman.

Richman’s office also singled out the $132bn California State Teachers’ Retirement System(CalSTRS) for criticism.

“They are in serious trouble, both CalSTRS and CalPERS, and they are trying to act like they’re not,” said Pellissier.

CalSTRS currently has unfunded liabilities of over $24bn, while at a recent board meeting it emerged that figure could rise to $212bn by 2034. But a CalSTRS spokesperson told Global Pensions the situation was by no means bleak: “It is not a crisis. In fact, even if the board were to do nothing about the unfunded obligation now, our members would continue to receive benefits for the next 60 years,” they said.

The CalSTRS board had voted in December to oppose Assembly Constitutional Amendment (ACA) 23 – brought forward by Assembly-man Keith Richman – which would effectively have banned DB plans for all state and local employees hired after 1 July, 2007.

The CalSTRS spokesperson claimed ACA23 would threaten the financial stability of the fund: “Closing the DB programme and providing a new plan is not going to do anything to solve the problem the board is currently addressing. In fact it will make it worse by limiting our options in how to address it.”

Under the proposal, the current plan would be closed to contributions from new members, thereby affecting the long-term funding of benefits, the spokesperson said.

But Pellissier refuted those claims as “balderdash”.

“The fund is $24bn in the hole, and ACA23 would only stop them from making promises that we can’t afford to keep.”

He also accused CalSTRS of not giving ACA23 sufficient consideration before voting to oppose it.

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