Nice Work if You Can Get it

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There is more happy news about the ever widening California public employee pension nightmare.

Some of the news relates to the California State Teachers’ Retirement System (CalSTRS), one of the biggest public employee pension funds in the world, The Los Angeles Times reported on January 29 that CalSTRS is $43 billion short of covering its liabilities. As of last year, CalSTRS could cover only 77% of its total pension fund, and in fact could be broke within 35 years.

The other huge California pension program (the California Public Employees Retirement System, or CalPERS), the behemoth agency that handles the pension funds of the California state employees, is also underfunded. It has only 86% of the assets required to cover its liabilities. But unlike CalPERS, CalSTRS cannot just require more contributions from its members or employers (school districts). It has to get a bill through the legislature to increase contributions. Given the immense fiscal woes that California faces, that is not likely.

But speaking of CalPERS, an article in The Wall Street Journal (Jan. 15) reports that there is something of a tradition at CalPERS of top officials leaving it for greener pastures. The story reports that one noble fellow, William Crist, departed from CalPERS after being president and chairman of its board and took a job at a U.K. firm, Governance for Owners. Crist later convinced CalPERS (in 2006) to invest $300 million in a Governance for Owners fund and pocketed a $913,000 commission for doing so. The value of the CalPERS investment fell to only $192 million – a loss of over a third.

In 2008, the enterprising Mr. Crist also persuaded CalSTRS to invest $350 million in that selfsame excellently performing fund, and he will pocket a fee even bigger than his earlier commission. The article mentions other former CalPERS officials who left it to work in private investment firms that were then able to sell securities to CalPERS for tidy commissions. Yes, there is no corruption to see here. Keep moving, keep moving. . .

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