CalPERS Goes to Court to Escape State Worker Furloughs

August 20, 2009 ( - The California Public Employees' Retirement System (CalPERS) has asked a state court judge to declare the giant pension fund exempt from state-ordered worker furloughs.

In a news release CalPERS said the furloughs, ordered by Governor ArnoldSchwarzenegger, may endanger the fund’s ability to provide disability and retirement checks and health care services to employees and beneficiaries. Further, CalPERS complained, its investment staff might not be able to clearlyreconcile investment trades, post collateral in a timely manner, and monitor the activities of external investment managers for risk and compliance in a timely manner.

The CalPERS suit was filed in state Superior Court in San Francisco.

“State law does not permit general fund budget problems to jeopardize the financial soundness of CalPERS or the benefits that we are obligated to pay retirees,” asserted CalPERS Board President Rob Feckner, in the news release. “Further, the furlough is inhibiting our ability to provide services to our members and to meet our contractual responsibilities to local employers. While we understand and appreciate the fiscal problems experienced in the State’s general fund, we are required under the Constitution to meet our fiduciary duty as trustees to ensure prompt, undisrupted service to our members.”

A Governor’s Office spokesman told the Los Angeles Times that CalPERS’ 2,300 employees would have to share in the disruption felt through the state government and the 200,000 other state employees.“Every California family has been cutting back, and state government has to do the same,” Aaron McLear, a spokesman for Schwarzenegger, told the Los Angeles Times.

CalPERS, with $190 billion in assets, is the largest public pension fund in the U.S. It administers retirement benefits for more than 1.6 million active and retired state, public school, and local public agency employees on behalf of 2,600 California public employers, and health benefits for nearly 1.3 million members.