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Correction: Public Pensions Boards story

Published on NewsOK Modified: February 24, 2014 at 5:50 pm •  Published: February 24, 2014
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SACRAMENTO, Calif. (AP) — Correction: Public Pensions Boards story

SACRAMENTO, Calif. (AP) — In a story Feb. 16 about the board of the California Public Employees Retirement System, The Associated Press reported erroneously the number of the 12 current board members collecting pensions from the agency they oversee. Ten board members collect such pensions, not 9.

A corrected version of the story is below:

Worker-run pension boards raise call for reform

As retiree costs soar, reformers question independence of worker-dominated pension boards

By FENIT NIRAPPIL

Associated Press

SACRAMENTO, Calif. (AP) — A rift between Gov. Jerry Brown and the board overseeing the nation's largest public pension fund over rising liabilities tied to longer retiree life expectancies highlights a concern about how decisions are made at an agency with tremendous influence over state finances.

The board of the California Public Employees' Retirement System will meet Tuesday to begin considering how to address the costs associated with retirees living longer. CalPERS responded to the governor by saying it must consider the ability of employees and governments to pay higher rates, and the fund's staff has recommended against the governor's request to tackle the problem immediately.

Pension-reform and taxpayer advocates in California say this response isn't surprising considering the composition of the CalPERS board, which is dominated by public employees who will benefit from the pension system or those who are appointed by Democratic officeholders who receive significant campaign contributions from government labor unions.

They say such an arrangement, common across the U.S., can encourage rosy investment projections and low contribution rates.

"You have people who are not disinterested," said Joe Nation, a Stanford University public policy professor and former Democratic state lawmaker who studies pension systems. "Unfortunately, the incentives are really misaligned."

Of the 12 members on CalPERS' board, 10 are due to collect public pensions from the agency they oversee. The board, which has one vacancy, has no independent taxpayer representative or an independent investment expert. The "public representative" appointed by the Democratic leadership in the Legislature is president of a grocery and food industry workers union.

CalPERS' board has the power to unilaterally set contributions rates for the state, cities and other government entities.

Brown wants the board to use that power to start boosting contribution rates this year. The staff recommendation is to wait two years before increasing contributions from public employees and the government entities that pay into the pension system, then phase in those increases over a five-year period.

Advocates for reforming the public pension systems say increasing contribution rates often means less take-home money for government workers, a move employee-dominated boards might be loath to make.

"A labor-heavy retirement board might be choosing numbers that are in their favor," said Carole D'Elia, executive director of the Little Hoover Commission, a state watchdog agency.

State government, which is among the pension fund's contributors, would see its annual costs to the system rise from $3.8 billion to $5 billion at the end of the five-year period. Brown has called CalPERS' delay unacceptable.

"No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run," Brown wrote in a letter to the board.

In a written statement, CalPERS said it must consider the ability of government agencies and employees to pay more for pensions before hiking rates. The board's president and vice president declined to comment.

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