US - The California Public Employees' Retirement System has filed legal action for judicial review of the state's furlough programme.
In a statement issued yesterday along with the filing to the Superior Court in San Francisco, CalPERS Board President Rob Feckner stated that the savings made from CalPERS' furloughs do not accrue to the general fund of the state of California.
He said: "State law does not permit general fund budget problems to jeopardise the financial soundness of CalPERS or the benefits that we are obligated to pay retirees."
The furlough also limits the pension fund's ability to provide services to members, and to meet its contractual responsibilities to local employers.
The pension fund also said in a statement that the furlough places CalPERS at risk of not providing timely disability and retirement checks, as well as health care benefit services.
It said the furlough is detrimental to the ability to reconcile investment trades, post collateral accordingly and monitor the activities of external investment managers for risk and compliance.
The state is struggling under a US$24bn budget gap that lawmakers had spent months trying to fill. Governor Arnold Schwarzenegger eventually instituted a state of emergency on July 1 that included the mandatory furlough days.
But in late July, legislators signed a new budget deal that included $16.1bn in expenditure reductions, $2.3bn in savings from structural reforms and other initiatives that filled the hole.
Government workers and other agencies are still feeling the effects of the budget crunch. On it's website, CalPERS said it will be closed three Fridays in August, but is still trying to "determine direction for future closures."
Commenting on the impact of the furlough on CalSTRS, chief executive officer Jack Ehnes said that the pension fund has taken the initial step of sending California State Controller John Chiang a letter on August 18, seeking relief from the three day a month furlough as it is negatively affective various aspects of the fund's operations.
He said: "First and foremost, our members, the educators of California, are receiving a lower level of service due to the three-day furlough. Secondly, the reduced work schedule places adverse pressure on CalSTRS ability to run an investment operation because, while our investment staff work the Friday's that other CalSTRS workers are required to take off, they must make those days up. That creates the possibility of 45 days of leave being accumulated."
He said that the furlough affects the fund's ability to retain valuable employees and that some of its most experienced staff members are faced with retirement rather than a 14% pay cut.
He added: "Finally, there is an adverse affect on staff morale and on employees' financial well-being."
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