The move by the $145-billion pension fund comes at a time when cash-strapped school districts, cities and other government agencies are looking to privatize services. This, CalPERS fears, will eventually lead to the loss of public employee jobs, and a damper on wages and benefits, according to a Sacramento Bee report.
“I could not be more opposed to contracting out (government services),” said CalPERS board member and California state Controller Steve Westly. “This is a red herring issue, people who promise to save millions of dollars. It comes on the backs of people who have their health care taken away.”
Joining CalPERS in its fight are union officials who see the potential for lost union jobs through privatization. In the past two months, union leaders have urged CalPERS to use its financial clout to take a tough stand on government contracting and send a message to its outside money managers who oversee more than 300 private equity funds. Those funds have about $21 billion in investments or commitments from CalPERS.
As evidence of the potential devastating effect of privatizing government jobs, these groups point to a small school district that hired a private bus company – that one CalPERS fund has an investment stake in – three years ago and ultimately laid off 48 unionized drivers.
“Privatization efforts by companies seeking profit from public services represents a significant threat to CalPERS participants,” Dennak Murphy, a director with the Service Employees International Union, (SEIU) wrote in a letter to CalPERS.
Not All For
However, all of the board is not behind the decision. California State Treasurer Phil Angelides , who sits on the board of CalPERS and the California State Teachers’ Retirement System (CalSTRS), cautioned his CalPERS colleagues about hamstringing the fund. “This policy could be fraught with peril. It’s very important … that we retain access to the top-tier investors in this country,” Angelides said. “We have to be very careful about how we fight this. There may be instances where jobs can be best provided by the private sector.”
Additionally, Adam Tucker, a spokesman forEdison Schools Inc., which operates charter schools in California that were originally funded with private equity investments, called the criticism misplaced. “People assume that we contract to run schools and eliminate jobs. We do not eliminate jobs. That is a misconception. It is disappointing that CalPERS would consider eliminating an (investment) option that has proven to help students, districts and schools.”
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