The CSU-ERFSA State Council at its April 6, 2019 meeting at CSU, Dominguez Hills opted not to entertain a "Vote of No Confidence" in the CalPERS Board of Administration. Instead the State Council voted unanimously to instruct CSU-ERFSA President Bill Blischke to send a message to the CalPERS Board of Administration expressing the Council's serious concerns about the recent proposals by CalPERS to establish two independent "captive" private equity funds that would not be subject to the same transparency rules required of "in house" investments. In response president Blischke wrote the following memo, which has been transmitted to the CalPERS Board:

Memorandum to Members of the CalPERS Board of Administration

Subject: CalPERS Direct Plan for Private Equity Investment, Pillars III and IV

From: William Blischke, President, California State University, Emeritus and Retired Faculty and Staff Association (CSU-ERFSA)

I am writing on behalf of the State Council and members of CSU-ERFSA.  Our organization works to both further the interests of the CSU and support the financial interests of our members.  Key among these interests are the retirement benefits administered by CalPERS.

While we are fully supportive of CalPERS’ efforts to restore the Public Employee Retirement Fund to 100% funded status, solutions should not unreasonably increase the fund’s level of risk and must not expose the portfolio to uncertainties that might jeopardize the retirement security of its members. A new and untested approach that did not perform to expectations would require increased contributions from the state, public schools, and participating public agencies. The resulting political and economic pressures could ultimately undermine the viability of our existing defined benefit pension system. The expected benefit to the overall fund value of the proposed private equity expansion is, at best, modest.  It does not justify its risks and uncertainties.

Our primary objection to the current private equity proposal is its inherent uncertainties due to lack of transparency and accountability for all affected parties. We are also concerned that it requires levels of management compensation that would be secret and exceed levels allowed by California law. Arrangements of this kind made behind the scenes would encourage covert activities leading to publicly-aired scandals that would have a devastating impact on the integrity of Public Employee Retirement Fund itself.

We therefore urge that the Board re-direct the staff Private Equity proposal to include trained in-house experts to manage the effort, and to compensate them appropriately within the limits of current state salary ranges.  Staff so augmented would be fully accountable to the PERS Board of Administration—not to new outside entities only vaguely subject to the fiduciary responsibilities of the Board.

The members of CSU-ERFSA deeply appreciate the extraordinary commitment accepted by the members of the Cal-PERS Board in their ongoing responsibility for the security and stability of our Public Employee Retirement Fund.  We feel confident that this deep sense of public commitment will continue to characterize the decisions of each individual board member, especially as new challenges and opportunities for growth are considered.

 [Ed. Note: This memo is intended for public distribution.]