The new policy restricts CalPERS private equity managers from investing in companies that outsource public sector jobs, according to a CalPERS news release. It was developed by private equity consultant Pension Consulting Alliance (PCA).
Under the policy, a company financed through CalPERS private equity investment would be considered an outsourcer if in the last three years it or its affiliates converted or replaced existing public jobs in schools, public authorities or prisons with institutions staffed by private sector employees, including units such as mailrooms, and food, waste collection, health care, and security guard services, according to the announcement.
Activities not considered outsourcing include:
- the sale of goods, software or services that reduce government jobs but increase productivity or efficiency
- investments in assets on sale from public entities where the public interest was served by the sale of the asset
- the provision of services that may cause job loss, but not through private sector outsourcing.
CalPERS policy will require its private equity general partners to identify outsourcers, monitor and report violations. “Money provided by public workers should not be used to cannibalize public jobs and cost taxpayers more money in the end,” said Sean Harrigan, outgoing president of CalPERS Board. “It is our duty to strengthen the financial security of our members not destroy it.”
CalPERS is one of four US public pension funds with a privatization policy, according to the press release. The others include the New York City Employees Retirement System (NYCERS), Ohio Public Employees Retirement System (OPERS) and Los Angeles County Employees Retirement Association (LACERA). The City of San Francisco also has a similar policy in effect.