Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)
When legislatures and governors make big mistakes, it’s often because they are focused on the wrong thing. The state’s budget shortfall of $15 billion is at the center of attention these days. But that problem would pale in size to the hidden troubles of unfunded pension liabilities in the state.
That brings me to CalPERS. I can barely balance my checkbook, so look for financial expertise elsewhere. But each day seems to bring unsettling news about the pension fund. A month ago, there were a string of resignations of top executives. This week, we’re hearing more about a $1 billion land investment gone bad. The Wall Street Journal recently has turned up examples of conflicts of interest among actuaries in other states (though not California). In the face of all this news, CalPERS hums along, its officials saying that there’s nothing for taxpayers to worry about.
But we should worry. And so should the governor and state legislature. If CalPERS fails to perform, this state faces a fiscal disaster that would make us forget the current budget predicament. But the legislature is not being persistent enough in holding hearings and asking questions. When the pension fund gets attention, it’s usually during political debates over legislation requiring divestment from this country or that. One reason for the lack of scrutiny, unfortunately, is that CalPERS is an important source of power for the state’s labor movement, which dominates the politics of the state’s Democratic party.