Political Infighting Leaves CalSTRS Board with 7 Members

April 7, 2005 (PLANSPONSOR.com) - California lawmakers have rejected Governor Arnold Schwarzenegger's nominee for the California State Teachers' Retirement System (CalSTRS) board of trustees - leaving the 12-member panel with only seven trustees.

The latest development concerned a rejection by the Senate Rules Committeee of Schwarzenegger nominee Kathleen Smalley to help run the $126-billion fund covering 750,000 Golden State active and retired teachers and their families, the Sacramento Bee reported.

Senate President Pro Tem Don Perata, (D-Oakland), accused Schwarzenegger of injecting politics into the CalSTRS board and said Wednesday’s action regarding Smalley was a “cause-and-effect” response to the governor’s firing last February of his four other CalSTRS nominees who voted to oppose the governor’s controversial pension overhaul plan.

Administration officials have said the four trustees were not qualified to carry out the governor’s overhaul initiative. Schwarzenegger removed the four appointees shortly after they took a stand against his efforts to scrap the state’s defined benefit pension program for future teachers and public employees in favor of 401(k)-style private investment accounts.

Schwarzenegger appoints five of the 12 CalSTRS board members. His finance director also serves on the board.

Julie Soderlund, a spokeswoman for Schwarzenegger, said Senate leaders bowed to pressure from special interests, especially labor and teachers unions. “It was extremely unfortunate that the Senate leadership failed to confirm her,” Soderlund told the Bee. “Ms. Smalley was a well-qualified and talented board member with a grasp of the complex issues before the board.”

But labor and teachers unions cried foul and lobbied strongly against Smalley. “It’s a very dangerous precedent that you set if board members have to carry out an agenda,” said Jennifer Baker, a lobbyist with the Faculty Association of California Community Colleges.

Smalley, however, told senators last month that her vote was not based on the merits of the pension issue. She said she believed CalSTRS shouldn’t take stands on social policy issues. Smalley, who described herself as an independent, said her decisions at CalSTRS weren’t influenced by politics and that she has had little contact with the governor’s office.