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  #31  
Old 01-07-2019, 01:14 PM
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Mary Pat Campbell
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CALIFORNIA
CALPERS

https://www.nakedcapitalism.com/2019...-partners.html

Quote:
CalPERS’ Private Equity “Fire, Aim, Ready”: Railroading Board by Screening Candidates Before Scheme Approved; Seeking to be Victimized Again by Silver Lake Partners
Spoiler:
On Wednesday, John Gittelsohn of Bloomberg wrote that CalPERS acknowledged that it has been in ongoing discussions with two former partners from the tech-focused private equity firm Silver Lake. Each is a candidate to run one of CalPERS two new private equity schemes, even though the board hasn’t agreed to commit the needed funds. In no functioning organization do you start recruiting before an initiative has been approved, but this speaks again to poor governance and lack of professionalism at CalPERS.

Dan Primack, the influential private equity columnist now at Axios, took a swipe at this CalPERS news Thursday morning. Primack pointed to the fact, as we have, that Silver Lake already took CalPERS for a big, costly ride and that the histories of the two Silver Lake executives don’t look compelling. As we’ll discuss, the picture is even worse than Primack indicates.

A refresher: the centerpiece of CalPERS’ “highly questionable plans,” as Primack put it, is creating two new large fims, each of which would invest roughly $10 billion of CalPERS monies. One would focus on “core economy,” whatever that means, and hold investments for a very long time, which is a prescription for valuation fraud and which, CalPERS now admits, is expected to generate lower returns than traditional, shorter holding periods. The other would invest in yet another fad, “late stage venture capital,” with focuses on life sciences and clean energy.

CalPERS has admitted these vehicles won’t be accountable to CalPERS; CalPERS won’t even appoint its toothless advisory board. CalPERS has also ‘fessed up that these funds may, which means will, raise money from other investors. At that point, CalPERS will have succeeded in re-creating the traditional private equity fund structure that it originally set out to escape with the initiative, only at much greater risk by making super-large commitments to start-ups with no track record and by making concentrated investments.

CalPERS’ “Fire, Aim, Ready” is a too-obvious effort to muscle the board. CalPERS staff is operating in an astonishingly high-handed and incompetent manner. The only rationale for trying to recruit candidates before staff has finalized the private equity scheme and the board has approved it is to strong-arm the board, by trying to argue that these great picks won’t wait much longer. It also serves to condition board to see the venture as a given by getting them to focus on implementation issues and divert their attention and energy from fundamental “Why are we doing this at all?” questions.

CalPERS’ staff is simply trying to get these schemes across the finish line rather than making sure they get done well. The way to get the most candidates for any sort of hiring process is to be public about the opportunity and invite proposals. This is particularly true if the role is attractive and the best candidates are currently employed. In this instance, there was definitely no public solicitation.

CalPERS almost certainly approached only the personal contacts of its executives and key advisers, particularly the uber-conflicted Silicon Valley lawyer Larry Sonsini, who has an extensive paper trail of business dealings with Silver Lake. The fact that CalPERS has kept its private equity staff frozen out of this process means this effort has to have been superficial since the CalPERS PE staff possesses most of the organization’s connections to the industry.

When CalPERS has repeatedly emphasized the importance of attracting “talent,” why would it so flagrantly undermine that objective via a severely constrained search process? The only plausible answer, as former board member JJ Jelincic intimated in his What’s the Payoff? article, is that staff is pushing this scheme so hard to advance their personal aims, as opposed to those of beneficiaries.

CalPERS yet again wants to enrich its victimizers. CalPERS acts like the battered girlfriend who keeps going back to the tattooed bikers who beat her.1 Remember that CalPERS took a highly embarrassing and visible hit via investing at BlackRock’s instigation in the Stuyvesant Town deal, in which the giant pension fund lost over $500 million. Moreover, that investment was made by senior management, over the objection of the apartment portfolio manager.

Yet despite BlackRock doing squat to make that up to CalPERS, CalPERS was falling all over itself to hand a large chunk of its private equity business to BlackRock, via a “what could they be thinking” fund of funds scheme which was guaranteed to increase costs and lower returns.

As we described in an earlier post, Silver Lake managed to do BlackRock one better, delivering big losses to CalPERS on what should have been a sure-fire deal. BlackRock’s StuyTown deal, like any real estate investment, could always lose money. By contrast, CalPERS took a stake not in a Silver Lake fund or deal but a 9.9% interest in the firm itself. Investing in an established private equity general partner ought to be as close as you can get to a guaranteed win: only vanishingly small odds of loss with handsome potential upside. Recall that, as Eileen Appelbaum and Rosemary Batt pointed out in their landmark book Private Equity at Work, over 60% of the income that private equity firms earn is from fees that the firm collects regardless of how it performs, like management and monitoring fees.

But Silver Lake got CalPERS to remove a critical investor protection, an anti-dilution provision, from the draft contract. No competent investor should have agreed to that. And Silver Lake then massively diluted CalPERS, effectively stealing the money CalPERS had invested. Nice work if you can get it.

One of the two candidates mentioned in the Bloomberg article, David Roux, was a co-founder of Silver Lake and a longtime member of the firm’s senior management. So neither CalPERS nor he can pretend he had nothing to do with screwing CalPERS this loss.

These candidates aren’t such hot picks. CalPERS cooperated with the Bloomberg story, to the extent of having a senior staffer sit for an interview. CalPERS must have thought showcasing these supposedly hot-shot names would improve the not-very-good image of its private equity plans. As Primack’s hot take shows, that was a bad assumption. A fancy brand is no guarantee of fitness to task.

One prospect, as mentioned, is David Roux, a co-founder and recent CEO of Silver Lake who is now a “senior director.” Bizarrely, CalPERS is considering him to head the “core economy” buy and hold-too-long strategy, even though Roux’s entire professional career has been in and around tech. The consideration of Roux makes a mockery of CalPERS’ claim that it wants “deep expertise” in these roles. At best, it’s like taking a formerly great basketball player and trying to turn him into a golf pro. It means that Roux’s reflexes and his Rolodex are largely irrelevant to what CalPERS wants him to do.2

But even that assumes that Roux has kept his contacts active. Despite keeping a formal role with Silver Lake, it’s not clear what if anything Roux is doing for the firm. Roux lives in Virginia, when Silver Lake’s only East Coast office is in New York. It’s not uncommon for private equity firm founders to stay in the saddle well past normal retirement age; KKR’s Henry Kravis is 74; David Bonderman of TPG is 76; Steve Schwarzman of Blackstone is 71. Roux is a comparatively youthful 61. His distance from the firm suggests he doesn’t have the passion for deal-making that other successful firm founders had, raising questions as to his motives and view of his role with the CalPERS vehicle.

The red flags with the other Silver Lake candidate, Adam Grosser, are even more apparent. Roux is at least has unquestioned expertise, even if he is being asked to operate outside that realm. Adam Grosser is now a former partner of Silver Lake because Silver Lake is exiting the strategy with which Grosser was involved, that of “Kraftwerk,” which the website describes as “providing growth capital to technology and tech-enabled businesses driving efficiency across the operations, energy, and resources industries.”

To put it bluntly, Silver Lake would not be jettisoning this approach if it had been a success. And Silver Lake apparently didn’t think enough of Grosser to deploy him elsewhere in the firm. Note that Grosser came to Silver Lake in 2011 from Foundation Capital, where he had also been a partner. Partners in private equity firms seldom leave other than to start their own firms. Grosser’s exit from Foundation suggests either his deals didn’t do well or he had serious disputes with his former partners. The question of why Grosser left Foundation and what his track record was there bears investigating, particularly in light of presumed weak results at Silver Lake.

Are these really CalPERS deals or Larry Sonsini’s deals? As we indicated, it’s hard to fathom how CalPERS can possibly come out ahead by investing in risky new funds in a massive way. CalPERS claim that it needs these vehicles to invest “at scale” are barmy, since even bigger private investors aren’t going this route. Indeed, CalPERS is responsible for any difficulties it is having in private equity investing, first by having reduced its number of private equity managers, which its private equity consultant Meketa deemed to have been a bad idea. As noted above, CalPERS has also had no head of private equity for months, and the very real possibility that CalPERS would cut the size of its private equity staff would hurt morale and lead the best employees to leave. Thus CalPERS whinging about how hard it is to put all that money to work sounds an awful lot like a kid who has shot his parents asking for sympathy for being an orphan.

However, it sure looks like Friends of Larry are being positioned to do well. David Roux is a very long-standing buddy. For instance, when Sonsini was implicated in several options backdating scandals as a board member as well as the Hewlett Packard illegal wiretapping affair, it was Roux in 2006 who sang Sonsini’s praises for a full four paragraphs at the top of a Fortune article. And as we’ve pointed out, the rising tide of CalPERS funds going to Silicon Valley would raise a quite a few boats, some of which are sure to be Sonsini’s. We quoted Bill Lerach, the disbarred but still formidable one-time plaintiff’s attorney in our New York Magazine article on CalPERS. Recall that Lerach has tangled with Sonsini and is now a consultant on the pathbreaking fiduciary duty lawsuit against KKR, Blackstone, and PAAMCO over over-hyped and underperforming hedge fund investments by the Kentucky state pension system. His words bear repeating:

Are you kidding me? That guy’s not a fox in the henhouse. He’s an alpha wolf, whose law firm has been involved in more dubious financial companies and their practices and transactions in Silicon Valley than any other firm. Of course he’ll be great for his financial clients while he works inside CalPERS to direct billions of dollars to them. Will someone please call the cops?

Unfortunately, the only parties that might prevent this train wreck are the press and beneficiaries getting the attention of key politicians, first and foremost the state Controller and Treasurer, who sit on the CalPERS board, new governor Gavin Newsom, who I am told already has some insiders warning hime that he needs to get on top of the mess at CalPERS, and state legislators, particularly members of the Senate and Assembly pension committees. It’s hard to protect CalPERS from its own terrible reflexes, but the costs of not intervening are sure to be very high.

_____

1 And we don’t see the usual inducement of great sex, which again raises the question of what the inducement is.

2 Roux’s experience as senior partner at a firm could arguably be very helpful but this firm would have vastly fewer employees than Silver Lake and would thus not need as much in the way of “adults in the room” to keep everyone playing nicely together. Roux would also likely be very good in raising new money, something which is of no value to CalPERS.


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  #32  
Old 01-08-2019, 06:05 AM
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KENTUCKY

https://www.whas11.com/article/news/...0-c90712a16e0a

Quote:
From pension reform to hate crime: What to expect from Kentucky's 2019 legislative session
Kentucky's legislative session opens on Tuesday and lawmakers have plenty to discuss this year.

Spoiler:
FRANKFORT, Ky. — The General Assembly is set to get back to work on Tuesday at noon, which means we're at the start of the legislative session in Kentucky.

What's on the agenda for 2019 and what are some of the big talkers not filed just yet?

First and foremost, pension reform will be a big discussion this year.

Kentucky Teachers Protest At State Capitol Against Pension Reform Bill
Public school teachers and their supporters protest against a pension reform bill outside the Senate chambers at the Kentucky State Capitol on April 2nd, 2018 in Frankfort, KY.
Bill Pugliano
A bill to fund the system hasn't been filed yet, despite Governor Matt Bevin's special session in December that concluded without resolution.




Senate Bill 151 was passed back in April of 2018, but with plenty of opposition on how it was passed. In December, the state Supreme Court ruled the bill unconstitutional, sending lawmakers back to the drawing board.

RELATED: Kentucky special session ends in adjournment, pension bill not passed

RELATED: What's next for Kentucky's pension reform?

This will be one of the first things and biggest issues discussed at the legislative session on Tuesday.

Something to keep in mind is that there are a lot of new faces in the House and Senate - 32 new representatives in the House and two new senators.

There are also more women on both sides of the aisle in 2019.

Republicans still hold the majority in both the House (61 to 39) and the Senate (28 to 9, with one vacant seat).

Kentucky House representatives 2019
Illustration of the number of Republicans and Democrats in the Kentucky House for 2019
WHAS11
Kentucky senators 2019 graphic
Illustration of the number of the Republicans and Democrats in the Kentucky Senate for the 2019 legislative session
WHAS11
So what does that mean for some of these bills?

Bills like BR 179 may stand a greater chance if female lawmakers stand behind it. The bill would allow employees from the legislative branch to report sexual harassment through an exclusive anonymous tip line.

BR 823 is anticipated to receive a strong reaction from the public, but lawmakers may hold off making any major decisions on it. This bill would essentially require someone who is performing an abortion to determine the presence of a heartbeat. If it is detected, according to the bill, an abortion cannot be performed. Our experts are calling this bill a "wild card" - no guarantee that it will go to a vote, but it's worth watching.

Others bills of note include stricter punishments for animal abusers, the inclusion of criminal (and fetal) homicide as a hate crime, and the prominent display of the national motto - "In God We Trust" - in primary and secondary schools.


You can view all of the pre-filed bills for the 2019 legislative session here.

The session runs until Friday and will then recess until February 5th.
Political editor Chris Williams will be in Frankfort covering all the action.


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Old 01-08-2019, 06:06 AM
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NEW YORK
DOUBLE DIPPING


https://www.democratandchronicle.com...on/2500433002/

Quote:
New York Legislature: Get re-elected, retire and then collect a salary and pension

Spoiler:
ALBANY – Add three more members of the state Legislature to the list of those were re-elected, retired and started a new term collecting both a salary and a pension.

The three New York City-area Assembly members this month joined the ranks with two state senators who lost re-election in November and put in for their pensions, as well as former Assembly Majority Leader Joseph Morelle, who was elected to Congress.

Morelle, D-Irondequoit, Monroe County, will now collect a roughly $80,000 annual state pension each year along with his $174,000-a-year congressional salary.

The practice of state lawmakers being able to collect a salary and a pension for the same job when they reach retirement age has long been derided in Albany.

But doing so is legal, and 15 state Assembly members and six senators double dipped last year, state records show.

Collecting a salary and a pension in the same job became more lucrative this year.

Salaries for state lawmakers rose from $79,500 to $110,000 this month and goes to $130,000 in 2021.

More: Check the list: New York workers who collected a salary and pension last year

DATABASE:Pension Double Dippers in New York

More: New York governor, lawmakers in line to become highest paid in country

The new double dippers

Democratic Assembly members Peter Abbate Jr. of Brooklyn and Deborah Glick of Manhattan put in for their pensions as they are seated for another term in the Legislature, according to the state Comptroller's Office.


Based on their years of service, age and previous salaries, their pensions could each be about $57,000, according to a calculator on the state Comptroller Office's website.

So too did Assemblyman Fred Thiele, a member of the Independence Party from Long Island who sits with Democrats. His pension may be about $70,000 a year.

They could not immediately be reached for comment.

Two state senators who lost re-election last November — GOP Sen. Carl Marcellino of Long Island and Democrat Tony Avella of Queens — also put in for the pensions, but they are no longer in public office.

In Morelle's case, his office said he filed to receive his pension because he was eligible after decades of state service as he moves into federal office.

Lawmakers have said that taking their pensions is important to ensure their spouses are entitled to the payments if they died.

"These benefits are fully earned and collecting them ensures the Congressman’s beneficiary may receive the pension in the event of a tragedy, providing peace of mind for his family," Morelle's spokeswoman Dana Vernetti said.


Joe Morelle is headed to Washington D.C. Virginia Butler, Democrat and Chronicle

More collecting a salary and pension
Lawmakers are only one group of state workers who can collect a salary and a pension at the same time, often in the same job.

For example, more than 300 state workers earned $100,000 in combined pension and salary in 2017, records last year showed.

But the state has cracked down on the number of double dippers, dropping 37 percent to about 1,700 workers since 2011.

State law, though, allows legislators to collect a salary and a pension if they reach retirement age. They officially retire with the pension system, then resume in their next term after being re-elected.

Assemblyman David Gantt, D-Rochester, collected $166,739 in 2017 in salary, stipend and pension in 2017, for example.

Assemblyman Gary Pretlow, D-Mount Vernon, received $140,564, and Assemblyman Clifford Crouch, R-Bainbridge, Chenango County, got $133,348, records show.


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  #34  
Old 01-08-2019, 06:07 AM
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MASSACHUSETTS

https://www.telegram.com/news/201901...pension-system
Quote:
Thousands of UMass employees may owe money to pension system

Spoiler:
About 3,000 University of Massachusetts employees may owe money to the state’s pension system because of years of incorrect payroll deductions.

It’s unclear how much money might be owed, according to UMass, although the amount owed by most individuals is expected to be less than $1,000. Incorrect deductions date back to at least 2002, said UMass spokesman Jeff Cournoyer.

“UMass and the Massachusetts State Retirement Board are working to address a historic retirement deduction discrepancy whereby certain types of specialty pay – including shift differential, holiday pay and on-call pay – were not counted as pensionable earnings by UMass, resulting in retirement contribution deductions being under calculated for some UMass employees,” Mr. Cournoyer said in an emailed statement. “The MSRB is in the process of determining how best to reconcile the discrepancy.”

UMass has sent letters to employees affected by the discrepancy and notified the 29 unions representing workers. All UMass campuses are impacted, including the University of Massachusetts Medical School in Worcester.

UMass employs about 24,000 workers. The issue emerged when a UMass employee at one of the campuses asked if specialty pay counted in retirement calculations.

Among those impacted are 148 members of SHARE Local 4000, which represents about 450 medical school employees in Central Massachusetts.

SHARE members include administrative assistants, technicians, mental health counselors and animal medical technicians. Those employees are shocked and had no idea anything was being done incorrectly, SHARE officials said.

“Our position is really that the university should pay for it,” said Jana Hollingsworth, a SHARE organizer. “It wasn’t our members’ fault, and we really feel like (UMass) should bear the burden.”

The state retirement system serves state workers. About 88,000 employees are active members, paying into the system. About 63,000 beneficiaries, including retirees, receive benefits.


The net market value of assets in the system totaled about $27.6 billion at the end of June 2018, the end of the state’s fiscal year. The system’s unfunded liability totaled about $14 billion, according to its annual financial report.

The payroll deduction issue revolves around what constitutes “regular compensation,” according to an explanation posted online by UMass.

Employees pay part of their earnings into the state’s pension fund. The amount they pay is based on their regular compensation. Base pay counts toward regular compensation, but other types of pay, such as overtime, do not.

UMass previously did not consider specialty pay to be regular compensation, so it did not deduct the money from paychecks, the university reported online. It will now do so, and the deductions will start showing up in workers’ paychecks Jan. 25.

The Massachusetts State Retirement Board has calculated that more than 75 percent of impacted workers would owe less than $1,000. But some could owe much more.

Those who work nontraditional hours are more likely to be affected. Reliable payroll records for UMass extend back only to 2002, the university said.

Employees could be asked to pay what’s owed in a lump sum or over five years.

UMass also told the state retirement board in November that it has hired the accounting firm KPMG to audit its payroll reporting practices.


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Old 01-08-2019, 06:08 AM
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CALIFORNIA
CALPERS

https://www.sacbee.com/news/politics...223944580.html

Quote:
At least 3 new faces will join the CalPERS board in 2019. What’s ahead for your pension?

Spoiler:
The board that oversees the nation’s largest public pension fund will get at least three new faces in 2019, marking unusual turnover at the California Public Employees’ Retirement System.

Two of the newcomers were decided in recent elections. Gov. Jerry Brown this week created a third vacancy when he removed CalPERS board member Richard Costigan from the pension fund.

Costigan, a lawyer and former legislative director for Republican Gov. Arnold Schwarzenegger, had served on the CalPERS Board of Administration as a Brown appointee since 2011.

He held a seat reserved for a member of the State Personnel Board. Brown replaced him on the State Personnel Board, which means he also cannot serve at CalPERS.

Costigan was one of the more outspoken CalPERS board members, sometimes rebutting criticism of the pension fund in editorials and at public forums.

“I want to thank the incredible board members and staff of @CaliforniaSPB and @CalPERS for the memories, friendship and camaraderie – it was a honor, privilege and inspiring opportunity to work along side all of you in service to our great state of #California – Thank you!” he wrote on Twitter Thursday night.

Mona Pasquil Rogers, Brown’s appointments secretary and a Democrat, will replace Costigan at the State Personnel Board.

Pasquil Rogers does not necessarily get Costigan’s seat on CalPERS. The State Personnel Board, which oversees statewide human resources polices, has to vote on which of its members it want to place on CalPERS.

CalPERS is considered underfunded because its assets are worth about 70 percent of what it owes to government employees and retirees.


The board over the past three years took a series of votes that led to it charging local governments more money to fund pensions. Those decisions made CalPERS more stable, but have heightened financial pressures on cities, counties and utility districts.

One of the board’s closest votes last year took place in January when it appointed Mathur to be its president, succeeding longtime CalPERS board President Rob Feckner.

Union-supported CalPERS members and the two statewide elected officials voted for Mathur, while Gov. Brown’s appointees and two members who won election with support from retiree groups voted against her. That gave Mathur a 7-6 advantage.

The board this month is expected to pick a new president.

Tim Behrens, president of California State Retirees, views the turnover “as a positive change.”

“The board members that have turned over didn’t always act like it was their job to protect the shareholders money at CalPERS,” he said.

Neil McCormick, chief executive of the California Special Districts Association, released a statement on Friday thanking Costigan for his time on the CalPERS board. The group represents hundreds of utilities, water districts and special services districts that contract with CalPERS for retirement plans.

“Throughout his tenure on the CalPERS board, we enjoyed an excellent working relationship and we wish him all the best in his future endeavors. CSDA also looks forward to continuing the positive relationship we have established with the CalPERS board,” McCormick said.

The other new CalPERS board members are Treasurer-elect Fiona Ma and Corona police officer Jason Perez.


CalPERS has $337 billion in assets and is overseen by a 13-member board of administration. Six of the members are chosen by government employees and retirees. Two are statewide elected officers. One is appointed by the Legislature and four are appointed by the governor.

Ma will take one of the two seats on the CalPERS board that are reserved for statewide elected officials, succeeding Treasurer John Chiang. Chiang has served on the CalPERS board since 2007, when he was first elected state controller.

Perez won an upset victory in a CalPERS election in October, defeating longtime board member Priya Mathur. Mathur, a BART financial analyst, had served on the CalPERS board since 2003.

A fourth seat on the CalPERS board could open in 2019. Bill Slaton, a former director at the Sacramento Municipal Utility District, holds a governor appointee position representing local government employers.

Slaton’s last term on the SMUD board of directors ended in December. He’ll remain on the CalPERS board unless Gov.-elect Gavin Newsom appoints someone else to the local government seat.


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Old 01-08-2019, 06:09 AM
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ORANGE COUNTY, CALIFORNIA

https://yournews.com/2019/01/07/8115...fire-pensions/

Quote:
Cities Across OC Struggle with Law Enforcement and Fire Pensions

Spoiler:
Many Orange County cities are struggling to maintain budgets that keep, or minimally cut services and employees, while trying to keep up with growing law enforcement and fire pension spending.

Police officer and firefighter pension payments often take the biggest share of retirement benefits, especially in cities that have their own police departments, fire departments or both.

“See the problem is the great majority of public cost is in public safety and that’s very resistant to cuts. It’s politically powerful and the public wants public safety as well, so the public doesn’t like to see cuts there either,” said Fullerton City Councilman Bruce Whitaker.

But unions have to negotiate higher pay and benefits in order to stay competitive with other agencies to keep employees, while also trying to address the pension issue, said Garden Grove Police Officers Association President Brian Dalton.

“Moving forward, we’re obviously concerned about the pension issue. I think we all understand the gravity of the situation and I think we would be remiss in our ability to address the issue. It’s definitely something that we all have to look at,” Dalton said.

He said other police agencies, like Anaheim and Santa Ana have been able to pull some veteran officers away from Garden Grove.

“If you have other agencies that are more competitive than us, then you end up losing officers, real experienced officers, to other agencies that are paying more. We have to strike that balance to being competitive,” Dalton said. “It is a challenge, it really is … We’re working through it. We’re, at least from the association’s side, we’re open to looking at all angles.”

While Fullerton was able to adopt a balanced budget this fiscal year, some cities, like Santa Ana and Garden Grove, asked voters to increase the sales tax in order to keep police staffing levels the same, while meeting pension obligations.

Costa Mesa Councilman Jim Righeimer, who’s been critical of the increasing police and firefighter pensions, said he expects nearly every city to increase their sales tax within five years.

“I expect most every city in the next five years will raise a one cent sales tax in their cities. I think it’s wrong, I think it’s completely wrong to the public, but the public sector unions have figured out how to scare the public into ‘we can either get rid of your firefighters and police, or you pass a one-cent sales tax’ … you scare the public enough and you’ll get what you want,” Righeimer said.

He said the Legislature should come up with a statewide pension cap to reign in the rising costs.

Fullerton City Manager Ken Domer said it’s tough to pay pensions when the costs are rising at a faster rate than city revenues.

“It’s extremely difficult when your pensions costs are escalating at a pace that is much higher than your other expenditures and far higher than your revenues and if we have a recession in two years, we’re going to see our revenues decrease and our pension expenditures increase. And that’s where just about every city is going to struggle with,” Domer said.

The California Public Employees Retirement System (CalPERS) is asking cities to pay more toward unfunded pensions and pay them off sooner. CalPERS is a statewide agency that manages the pension funds of public employees and gives pension payment projections to cities.

The average retirement age is 62 years old, according to a CalPERS December 2017 staff report.

The California League of Cities released a report last January which outlines the pension hardships cities face and estimates pension costs will increase roughly 50 percent by 2024.

Balancing Cuts During Budget Process
According to CalPERS projections for Fullerton, the city will have to pay roughly $20.5 million total in pensions for the 2018-2019 fiscal year. The majority of that, $14.3 million, is for safety employees’ pensions.

Whitaker said Fullerton has had to put infrastructure projects, like road repair, on hold while the city figures out how to deal with the rising pension costs. At nearly every Fullerton City Council meeting, the city’s poor road conditions are brought up by residents during public comment.

“Actually what you’ve seen there has been threefold. One is postponing necessary infrastructure improvements, like in Fullerton, the streets have gotten worse because we need to take up the growing pension costs,” Whitaker said. “We’ve had to curtail a lot of the bottom-level employees when it comes to landscape maintenance, arborists … public works … it seems like that’s the choice area where cities start cutting back and we’ve seen some of that.”

“And the third consequence of this has been increased taxes and fees. Most cities have been working on driving up structural taxes and fees and we’ve seen this election,” Whitaker said, referring to sales tax measures and fee increases throughout cities.

Many cities will have to either raise taxes or cut services, said nonprofit pension watchdog California Policy Center President Will Swaim.

“The overview is we’re seeing — it’s not a left/right thing so much at the local level — is public officials have to balance their budgets year in and year out and faced with two possibilities, none of them appetizing,” Swaim said.

The California Policy Center’s members include some local Republican names like former San Diego City Councilman Carl DeMaio, who largely organized and funded the effort to repeal the 12-cent state gas tax this past election. The board also includes former Tustin City Councilman Jim Palmer and newly elected Santa Ana City Councilwoman Ceci Iglesias.

Righeimer said other city employees face cuts because they don’t have the political strength and organization of the safety unions.

“The reality of it is, in the end, except for police and fire, you continue to hit at everything else because they don’t have the political power that police and fire have,” Righeimer said. “I just call them your regular, everyday employees — they’re getting the short end of the stick.”

Santa Ana and Garden Grove Sales Tax Increases
The Santa Ana City Council, facing a financial crisis maintaining current personnel and city service levels, put a sales tax increase to voters in November. They voted to increase the city sales tax — from 7.75 percent to 9.25 percent — by a margin of 15 percentage points, which gave the city the highest sales tax in the county.

The city is facing a $10 million shortfall this fiscal year and it is expected to hit roughly $40 million by the 2021 fiscal year. The tax increase is expected to generate about $63 million annually.

Given the $40 million-plus funding gap in future years, it appears most of the $63-million tax increase would go toward maintaining existing services and the pension cost increases for the existing workforce and retirees, with the remainder supporting expansions.

According to CalPERS projections, Santa Ana has to pay $27.7 million in pension contributions for its safety employees for the 2018-2019 fiscal year. Of that, $19.3 million is going to pay unfunded liabilities — retirees’ benefits. The other $8.4 million is going to pay for “normal costs,” which is money paid to CalPERS to invest to pay for future pensions of employees currently working for the city. Employees also help shoulder some of the normal costs.

Current safety employees pay $3.5 million of the $11.9 million normal cost, leaving the rest — $8.4 million — for Santa Ana to pay.

“Santa Ana Police Officers have worked with the city to address pension costs. Officers are now paying 12% of their salaries towards PERS (Public Employees’ Retirement System). In addition, officers now have to work seven additional years before retiring and receiving said benefit. The economy is doing great and in fact PERS reported an 11.2% rate of return in 2017. The 11.2% rate of return will have a positive impact on what cities pay in the upcoming years,” said Santa Ana Police Officers Association President Gerry Serrano in an email.

The city also has a separate $24.5 million pension payment for all of its other employees, including $18.3 million in unfunded liabilities and nearly $6.2 million in normal costs — employees contribute nearly $4.9 million in normal costs. In total, Santa Ana has to pay over $52 million to pensions in the current fiscal year.

Serrano said Santa Ana has a high amount of vacancies in the police force and the positions have already been budgeted for.

“As far as retention and recruitment, the Santa Ana Police Department is the only Orange County agency with astronomical funded vacancies. The city of Santa Ana has 51 funded police officer vacancies, which makes providing public safety very challenging,” Serrano said.

According to the projections, Santa Ana’s contributions to unfunded liabilities for safety employees will increase from nearly $23.5 million in the 2019-2020 fiscal year to $35.1 million in the 2024-2025 fiscal year. During that same time frame, its pensions for the other city employees will rise from nearly $21.4 million to over $30.5 million.

“Pension contributions are already squeezing our cities and counties … so that has to be funded through pension contributions bonds, which is really kicking the can down the road, or they have to cut services or raise taxes. Period. That’s just really simple algebra — you push down the balloon in one spot and it goes up in another place,” said Ed Ring, CA Policy Center co-founder and financial analyst.

In Garden Grove, the city is trying to reduce a projected $8 million deficit for the 2018-19 fiscal year by instituting an early retirement program, a 5 percent budget cut to every department but public safety and other adjustments. Even after the cuts, the city is left with a $3.6 million shortfall, according to a budget presentation.

Like Santa Ana, the Garden Grove City Council put a sales tax question to voters in November. Voters overwhelmingly approved the sales tax measure by a nearly 30 percent margin, raising the sales tax by one percent, meaning Garden Grove will now have an 8.75 percent sales tax. Placentia voters also did the same this November.

“These are regressive taxes hitting people that are least able to pay. And they are shouldering some of the costs related to pensions and benefits — that really is the impact,” Whitaker said.

For the 18-19 fiscal year, Garden Grove has to pay a total of $25.6 million in pensions, with the majority — $16.2 million — going to safety employee pensions. The city owes $9.4 million to its other employees.

Dalton said the Garden Grove police union is currently negotiating its new contract with the city and both sides will address the pension issue.

“There are remedies to that, there are [pensionable] benefits, there are non [pensionable] benefits that address both sides of the fence. We want to stay competitive in the workplace, because we don’t want to lose experienced officers to other agencies,” Dalton said.

“Up until recently, we’ve maybe lost a couple officers to Anaheim, maybe one or two to Santa Ana, but we’re starting to lose more and more — going over to Anaheim. We’re talking 10, 12-year officers — we’re trying to avoid that.”

Dalton said in previous contract negotiations the union agreed to increase its contribution to pensions from 9 to 12 percent starting in 2015, three years earlier than the Public Employees Reform Act called for.

“It wasn’t an automatic increase, it was something that had to be negotiated between the union and the city … and that’s what we ended up negotiating to do in our contract,” he said.

At a July 24 meeting, when the City Council decided to put the sales tax question to voters, Mayor Steve Jones said the increase to pension payments from CalPERS hit the city hard.

“CalPERS lowered the discount rate (investment return rate) … they also shortened the amortization period (payment schedule) for the repayment unfunded liabilities,” Jones said. “It was unanticipated and directly out of our control … it exponentially increases next year and the years after in a very scary way. I don’t know how that’s going to be sustainable. I don’t know how cities across the state are going to survive that cost increase just from CalPERS alone.”

According to the CalPERS report, Garden Grove’s payments for its safety employees’ unfunded liabilities are expected to go from $12.1 million in the 19-20 fiscal year to nearly $17.8 million in 2024-2025 fiscal year. Payments for the other city employees’ unfunded liabilities are expected to grow from $7.4 million to nearly $10.4 million during the same time frame.

Although Garden Grove police department has one of the lowest officers per capita in Orange County, Dalton said, the city is in the top five safest cities.

“While we’re struggling in one area with our manpower … we’re also doing a great job on the other side with the manpower we have to keep the residents safe. My concern, as the association president, is maintaining that safe city status,” Dalton said. “Be patient with us, we’re working through it, we want to keep our experienced officers here and provide the best service for the residents of Garden Grove.”

Facing the Increased Pension Payments Ahead
Some cities, like Newport Beach, aren’t facing the financial hardships of Garden Grove or Santa Ana and are able to pay more than the minimum pension contribution in order to help save money on the backend.

Newport Beach City Councilman Will O’Neil, who also heads the city finance committee, said the city will pay anywhere from $3.7 million to $8.5 million on top of their required annual pension payments in order to bring down the unfunded liability amount.

“Let’s say you have a 30 year mortgage and you decide you’re going to pay it off in 15 years making discretionary payments. You will not have to pay any additional interest you would have had in the last 15 years. The same is true for unfunded pension liability,” O’Neil said. “We’re cutting our interest payment on the backend and in our case that’s about $45 million.”

O’Neil said the money used to pay down pensions faster could be used on other things in the city, but it’s fiscally responsible to shrink the unfunded liability as much as possible.

“It’s still a hard choice for public officials to take $8 million and use it for pension liability when there are plenty of short term things that would be fun … but this is the responsible thing for the long haul.”

Ring said the increase in unfunded pension liabilities is largely due to retired employees living longer than projected and CalPERS investments not making adequate returns.

“For example, when you look at in a pension fund — who’s participating in the fund? And you estimate for this participant population. How long are they going to live and how much money will they collect in the future?” Ring said. “Well, how much do you have to invest right now so over time that amount of money earns interest (returns) and that money’s sufficient to pay the pensions?”

Righeimer said the State Legislature could fix the increasing pension problem by adjusting the benefit amount going forward, but still keeping the accrued pension employees earned.

“The only way to fix anything is to change the plan with the employee. All you would talk about is changing the plan going forward. So you wouldn’t take away from anything they’ve already earned,” Righeimer said. “So far, we’ve never had a legislature willing to do that. The unions won’t allow that. That’s called the ‘California Rule,’ basically.”

In February, the Sacramento Bee reported CalPERS no longer expects to run deficits into the middle of the century — previous financial forecasts expected the agency to spend more money than it makes through 2040.

CalPERS’ anticipated investment return rate could also be off.

CalMatters, a nonprofit newsroom, published in-depth reporting in February about the statewide pension system and found CalPERS’ average 20-year investment return is 6.4 percent. The assumed rate is currently 7 percent until 2020.

“When you change your expected rate of return, all of a sudden that amount of liability, that amount of money you need goes way up,” Ring said.

Over the years, CalPERS return rate has varied — sometimes it is significantly high and sometimes it’s very low. For example, in 2014 there was an 18.4 percent return rate, but it dropped to 2.4 in 2015 and dipped to 0.6 percent in 2016. In 2017, the return rate was 11.2 percent. CalPERS lowered its expected return rate from 7.5 to 7.25 last year and is expected to lower it to 7 percent the next fiscal year.

The Sacramento Bee reported CalPERS enjoyed an 8.6 investment return rate for the 2017-2018 fiscal year, raising its total funding percentage by three percent for a total of 71 percent funded.

Economic downturns, like the Great Recession, often take a financial toll on cities. The downturns also hit CalPERS investments hard. In 2008 CalPERS had a negative 5.1 investment return and a negative 24 percent return in 2009, before going up to a 13.3 percent return in 2010.

“CalPERS projects about a seven percent return per year on investments and we are overdue for a recession and we are already seeing some weaknesses in the stock market. So if we get an economic downturn, that’s going to reduce the investment returns … taxpayers are always the backstop — so if investments underperform, the taxpayers get to throw in the difference,” Whitaker said.

Domer said the market trend affecting the pension system shows how difficult paying pensions can be.

“It’s been reflecting how easy it is to take a hit and how hard it is to climb back up,” Domer said. “I think everybody should be worried and we should be looking at ways to control our costs, reduce our pension load — we have to get through it.”

Ring said CalPERS projected return rate of 7 percent is a high amount.

“7 percent — a long-term rate of return — that’s tough. That’s hard to hit,” he said.

CalPERS investment return projections have been off and if the projections were accurate, cities and counties across the state wouldn’t be in the situation they’re in now.

“If that’s so true, how come they’re so far behind now?” he said.


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Old 01-08-2019, 06:10 AM
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NEW YORK

https://www.complianceweek.com/blogs...y#.XDSDHlxKg2w

Quote:
N.Y. State Pension Fund scrutinizes executive pay

Spoiler:
New York State Comptroller Thomas DiNapoli today announced that the New York State Common Retirement Fund has reached agreements with Microsoft, CVS, Macy’s, The TJX Companies, and Salesforce.com to reexamine their CEO and executive pay “and adopt policies that take into account the compensation of the rest of their workforces.” In response to the agreements, the Fund withdrew its shareholder resolutions with the companies.

“We've seen a growing disparity in corporate income in the United States for years, with CEO pay rising dramatically while wages for most other company employees have remained flat,” DiNapoli said in a statement. “We are encouraging companies to adopt policies that take their entire workforce into consideration rather than setting CEO pay solely by benchmarking it against other CEOs. Overall employee compensation and executive pay has been and will continue to be a key factor for how we engage with companies going forward.”

The New York State Common Retirement Fund is the third largest public pension fund in the United States, with an estimated $207.4 billion in assets under management as of June 30, 2018.

According to research by the Economic Policy Institute, as cited by DiNapoli, CEOs of America’s largest firms earned $271 for every dollar their employees earned in 2016. In 1995, the CEO-to-worker pay ratio was 123-to-1; in 1978, it was 30-to-1; and in 1965, it was 20-to-1.

Many companies’ compensation committees use peer group benchmarks to set their target CEO compensation. These compensation targets are then subject to performance adjustments.

“Although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay well above the median. In addition, peer groups can be ‘cherry-picked’ to include larger or more successful companies where CEO compensation is higher,” DiNapoli said.

New York officials have long advocated for disclosure of a CEO pay ratio, as mandated by the Dodd-Frank Act and implemented by the SEC in 2015. Companies may disclose supplemental information about their workforce to provide context and explain their company’s pay ratio data.

DiNapoli says the New York fund’s portfolio companies should align CEO pay practices with their pay practices for other employees and provide supplemental information that helps investors. It has previously come to agreements on this issue with a variety of corporations, has a similar proposal at Archer-Daniels-Midland Co., and will file with several other companies in the coming year.

Related articles
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SEC’s controversial pay ratio rule still alive and problematic
Ways companies can ease the pain of pay ratio calculations
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ARKANSAS

https://www.kark.com/news/local-news...ons/1690684473

Quote:
2019 Session: Bill Would Strip State Pensions from Felons

Spoiler:
LITTLE ROCK, Ark. - A new Arkansas senator is working to fulfill his campaign promise to tackle ethics reform in state government.

Under the bill sponsored by St. Sen.-elect Mark Johnson, R-Ferndale, state employees, including elected officials, would lose their retirement if convicted of a felony for abusing their office.

"If you're a crook that stole from the taxpayers as part of your job that you were trusted with then that's when you would lose your pension," Johnson said.

Questions remain in the legislature if state employees would lose their entire pension or be able to keep the income they paid in to the system.

"There is some debate about that," Johnson said. "States do it both ways."

Half the states in the country have some sort of pension forfeiture law, and they run the gamut. Some strip state employees of their retirement for any crime in office, while others allow convicts to pass down their pension to a family member.

Arkansas will have to decide how far it will go.

"We will comply with all of the court precedents to address that to not only do the correct thing but also the thing that ensures the integrity of the pension systems for all of our state employees," Johnson said.

One of Johnson's colleagues filed a similar bill the same day he did. He said he plans to work with Sen. Gary Stubblefield, R-Branch, on the legislation once the session starts. It has already received the thumbs up from other notable Republicans, like Lt. Gov. Tim Griffin.

"I don't think he'll have any issue getting it passed," Griffin said during the latest episode of Capitol View. "That's a great incentive or disincentive for would-be criminals."

The 92nd General Assembly convenes Jan. 14 for its regular session.


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NEW JERSEY

https://burypensions.wordpress.com/2...f-nj-benefits/

Quote:
Bramnick on Generosity of NJ Benefits
Spoiler:
Jon Bramnick happens to be my representative in the New Jersey Assembly and he is concerned about the public pension crisis we have here:
.


.
But he completely misses the point about the generosity of employee benefits as being the root cause of the crisis.


You do not create a $100 billion+ debt (or any debt) by providing benefits that are more generous than what other states provide. You build up a $100 billion+ debt by providing benefits (any benefits) that you DO NOT PAY FOR. You could provide the most generous benefits in the history of mankind and there would be no debt if you actually funded those benefits at the time they were earned.

Because New Jersey is a pay-to-play cesspool there is a need to free up tax money to keep the gravy trains we run here stoked. To that end (and as abetted by the actuarial hierarchy) we have been paying our employees, in part, with scrip on the resources of future taxpayers.


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CALIFORNIA
CALPERS

https://www.ai-cio.com/news/calpers-...ficer-resigns/
Quote:
CalPERS No. 2 Investment Officer Resigns
In a sudden departure, CalPERS Chief Operating Investment Officer Elisabeth Bourqui has resigned just months after moving from Europe to take a key spot at the Sacramento-based pension plan.


Spoiler:
Elisabeth Bourqui has resigned just seven months after she was hired by the California Public Employees’ Retirement System (CalPERS) as its chief operating investment officer, leaving vacant a critical spot at the largest US pension plan.

Sources tell CIO that CalPERS new Chief Investment Officer Ben Meng announced Bourqui’s departure in a staff memo on Monday. Meng started last week at CalPERS.

It is not clear if Meng requested Bourqui’s resignation, so he could place his own candidate in the spot, the No. 2 position in the investment office.

Bourqui, Meng, and CalPERS public relations officials could not immediately be reached for comment

CalPERS officials announced in April that Bourqui had been selected to the role after a global search. Bourqui led the investment office’s business and operations functions, including managing investment compliance, operational risk, and audit-related functions.

She was also a key advisor on investment policy.

CalPERS has more than $340 billion in assets under management.

Bourqui started on May 14, the same day that CalPERS officials announced that CIO Ted Eliopoulos would be leaving by the end of 2018 because of family matters. It is unclear if she was informed of his decision before taking the job.

During CalPERS investment committee meetings, Bourqui often sat next to Eliopoulos and provided additional detail on investment policy following Eliopoulos’ comments.

Eliopoulos left CalPERS in mid-November to move to New York, where his daughter is attending college. He subsequently joined Morgan Stanley as vice chairman of investment management and head of strategic partnerships, starting this month.

Bourqui moved to the United States from Zurich, Switzerland, to take the CalPERS job. She had been head of pension assets and liabilities management at ABB Group. Prior to ABB, Bourqui worked as an investment consultant in Canada for Mercer, specializing in public and private pension funds.

Bourqui replaced Wylie Tollette in the CalPERS spot. Tollette left CalPERS in January 2018. He had worked as chief operating investment officer for approximately three years before rejoining money manager Franklin Templeton Investments.



https://www.nakedcapitalism.com/2019...the-cause.html
Quote:
CalPERS Star Hire Elisabeth Bourqui Resigns Suddenly After Only Eight Months, an Indictment of CEO Marcie Frost; Insiders Speculate Private Equity Was the Cause
Spoiler:
It’s becoming harder and harder for CalPERS to hide its dirty laundry.

Last May, Elisabeth Bourqui joined CalPERS as its Chief Operating Investment Officer. Bourqui had an extremely impressive background and if anything was overqualified for the role,1 to the degree that some thought she might be a Chief Investment Officer in waiting.2

Bourqui departed suddenly on Monday, with interim replacements Dan Bienvenue and Eric Baggesen taking up her duties.

It is hard to convey adequately how badly this resignation reflects on CEO Marcie Frost. It confirms her inability to attract and retain competent professionals. Recall that Frost not only hired but doggedly defended resume fabulist Charles Asubonen, who was booted shortly after CalPERS did what it should have done when we presented Frost and the board with detailed documentation of his fabrications.

For such an accomplished professional as Bourqui to join CalPERS said that the institution still had enough cachet to attract top people. Her unceremonious exodus is sure to give pause to anyone capable that CalPERS tries to recruit for a senior position.

The fact that Bourqui left without any transition or advance warning means it is well nigh certain that she had a dispute with Marcie Frost. Recall that the departures of the head of private equity, Real Desrochers, the former Chief Operating Investment Officer Wylie Tollette, and Chief Investment Officer Ted Eloupoulos were all announced in advance.

Initial reports indicated that Bourqui was well liked and well respected by employees, so it seems inconceivable that her performance was sub-par. It seems pretty clear what the real issue was. As one said:

There is no way this is not about private equity.

And from another prominent stakeholder:

This is bad. She was honest.

It was part of Bourqui’s job to assess investment risks and operational implications. Just as her predecessor Wylie Tollette regularly discussed private equity fees and costs with the board in public session, and presumably in private too, cost and operational issues related to the new private equity scheme would have fallen to Bourqui.

CalPERS’ staff has been forced to ‘fess up, late in the game, to expectations that argue for ditching the private equity plan: that it will have higher expenses in the early years and will also earn less. Worse, General Counsel Matt Jacobs gave the apparent real reason for CalPERS’ determination to push through the program anyhow: that it will enable CalPERS to reduce disclosure.

So the giant pension is hell bent to get this program launched even though it has admitted it will hurt beneficiaries, just because staff wants to escape press and public scrutiny. The board, the senior staff, and the professional advisers on this scheme have just put a monster target on their backs. Expect a big ticket breach of fiduciary duty suit a few years down the road if the board is so foolish as to approve this scheme.

Bourqui previously headed Mercer’s National Funds Group in Montreal, meaning its public pensions group in Canada. She is certain to have first-hand knowledge of the Canadian public pension funds’ successful efforts to bring private equity in house. With the benefit of hindsight, it is noteworthy that CalPERS made non-PE expert John Cole the front for this initiative, and never let Bourqui present about it or take questions from the board in open session. If she was also kept away from the board in closed session, that would be a monster red flag.

As a former CalPERS senior officer wrote:

I was really impressed when CalPERS announced Elisabeth’s hiring just a few months ago. She appeared really well qualified and a real catch for them. So the fact that she is out after only a few months is a bad sign no matter how you cut it.

I think there are two possibilities, both troubling:

1) As a competent, sophisticated individual, Elisabeth raised concerns about the PE plan and Marcie couldn’t stand to be contradicted so essentially fired her; or

2) As a competent, sophisticated individual, Elizabeth looked around at what a joke CalPERS has become, which she didn’t expect based on its old reputation, and figured she needed to quit before she got caught up in the bad stuff.

The fact that her resignation was effective immediately is a terrible sign. It means that Marcie didn’t want her in the building, which probably is because Marcie didn’t want any board members to be able to talk to Elisabeth and ask her why she is leaving.

Axios focused on the fact that high turnover is a sign of institutional weakness at CalPERS, but if anything, the truth is likely to be worse. Given Marcie Frost’s fondness for shows of fealty in the form of burgundy attire and ribbons, it’s all too obvious that she values personal loyalty over professionalism and doing the right thing for beneficiaries and California taxpayers. Frost’s misrule is diminishing CalPERS’ competence and reputation. But as long as she is accountable to only a captured, cronyistic board, she may wind up crashing and burning the institution before anyone is willing to oust her.

____

1 From the CalPERS announcement:

Bourqui has more than two decades of experience with pension asset management, consulting, and investment banking. She currently is the head of pension assets and liabilities management at ABB Group. Prior to ABB Group, she was an investment consultant with Mercer specializing in public and private pension funds.

Bourqui holds bachelors and masters degrees in mathematics, and a PhD in mathematics and financial mathematics, from the Swiss Federal Institute of Technology, Zurich. She also is a member of the Swiss Society of Actuaries. She is fluent in French, English, German, and Japanese. In 2017, Bourqui was one of the winners of Chief Investment Officer Magazine’s Industry Innovation Award, and was recognized by IPE in its Pension Fund Achievement of the Year category at its annual awards ceremony.

2 Bourqui did apply for the CIO position. Since she did not have an investment background, the idea that she might have been led on during the hiring process and then resigned when the promotion did not come through seems far fetched, particularly since she had moved her family to Sacramento. It would be imprudent to have relocated if she planned to stay with CalPERS only if she won the CIO position after Ted Eliopoulos left.


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