Conflicts of Interest Alleged on Benefits Reform Commission
Two gubernatorial appointees to a new commission responsible for recommending reforms for health care and retirement benefits have investment ties to CalPERS, raising concerns about potential conflicts of interest, the San Francisco Chronicle reports (Lucas, San Francisco Chronicle, 3/8).
Gov. Arnold Schwarzenegger (R) in December 2006 signed an executive order to create the commission as new federal accounting standards that require government entities to disclose health care and pension liabilities take effect.
The state currently spends $1 billion annually on a pay-as-you-go basis to meet the costs of retiree health care benefits. However, the Legislative Analyst Office said the state would need to contribute an additional $5 billion annually for 30 years to cover the cost of current and future retiree health care benefits (California Healthline, 2/21).
Gerald Parsky, chair of the 12-member Public Employee Post-Employment Benefits Commission, works for a firm that invests $150 million for CalPERS. Matt Barger, the second member, works for a firm that invests $600 million for CalPERS.
Both members, along with four others, were appointed by Schwarzenegger. The remaining six were appointed by leaders of the Assembly and Senate.
Parsky said the goal of the commission is not to examine investment strategies of public pensions. The commission will determine the cost of health care and other benefits for public retirees and recommend strategies to reduce unfunded liabilities, according to Parsky.
Schwarzenegger officials said both members disclosed their business ties prior to their appointments. The governor's lawyers said there is no conflict because the commission will make recommendations, not policies.
However, analysts say the connection could impair the credibility of the commission's recommendations (San Francisco Chronicle, 3/8).