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COMMENTARY The Right's Attack on Public Pensions By Phil Angelides
Phil Angelides is treasurer of the state of California.
February 7, 2005
Gov. Arnold Schwarzenegger says getting rid of public pension plans
for California's state and local government workers is about helping to balance
the budget. Peel back the budget wrapping on his plan, though, and
you will find the governor's real agenda: the California prong of a national
attack on the pension funds that have stood up for corporate reform and the
interests of ordinary families and investors hurt by the recent wave of corporate
scandal.
The governor has proposed privatizing government pension plans and
replacing them with individual 401(k)-style private accounts. His
proposal strikes at the power of public pension funds, which have used their
financial clout to protect the retirement savings of 2 million Californians
teachers, police officers and other public servants.
The governor says his proposal is necessary because pension costs are out
of control. Pension costs are certainly worthy of public debate, but his
plan requires running two pension systems: one for current workers, a second
for new workers. That would cost California taxpayers billions more in years
to come $5.9 billion in the first 10 years in the California State
Teachers' Retirement System alone. Tellingly, even four of the governor's
own six appointees to the teachers retirement fund oppose his
proposal.
Why this proposal then? Because for the right-wing ideologues behind his
plan, the issue is not saving money. It is about draining public pension
funds of their clout.
As recent news reports explain, the driving force behind the proposed pension
ban is the same crew of "anti-tax advocates, free-market enthusiasts and
Wall Street interests" that is pushing President Bush's Social Security
privatization plan. They include Grover Norquist, the president of Americans
for Tax Reform, and Stephen Moore, president of the Free Enterprise Fund.
They see the governor's proposal as "one of our highest priorities," and
the governor agrees. "This is a national battle," he told reporters as he
laid out his plans to collect millions of dollars from wealthy out-of-state
political contributors.
Across the country, the governor's ideological soul mates are targeting public
pension funds for elimination because those funds with the California
Public Employees' Retirement System and the California State Teachers' Retirement
System at the forefront have stood up for ordinary investors against
the rampant corporate abuses.
"Just 115 people control $1 trillion in these funds," Norquist said. "We
want to take that power and destroy it." What bothers him and others is that
these funds have rallied other institutional investors to protect the market
from abuses and fraud and to support such corporate reforms as linking executive
pay to performance, requiring auditor independence, separating stock analysis
from investment banking at financial firms, ending insider trading at mutual
funds and opening corporate board elections to shareholders.
Moore calls such actions a "witch hunt against corporate excess and corporate
accounting scandals," as if the abuses at companies like Enron, WorldCom
and Tyco had never happened. Jon Coupal, president of the Howard Jarvis Taxpayers
Assn., which also supports the governor's attack on pension funds, denigrates
the corporate reform efforts as "straying from bottom line of the benefit
of members."
But protecting the bottom line for members is precisely the goal of the corporate
reform movement. To ensure long-term returns and reduce risk, large pension
funds must invest to mirror markets. When scandal hits those markets, the
pension funds made up of taxpayers, teachers, police and firefighters
get hurt. CalPERS and the teachers retirement fund lost more than
$1 billion in the WorldCom and Enron frauds.
In pursuing corporate reform, the pension funds are operating not
just in their own self-defense. They are also giving a powerful voice in
the boardrooms to the interests of millions of families that have invested
their savings in the markets.
That's why the governor and his right-wing ideologues have targeted
the pension funds: not because the funds have strayed, but because they are
leading the fight on behalf of ordinary shareholders to put transparency
and accountability back into American capitalism.
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