Due to voting for CalPERS’ board elections just having stared, it’s a busier period than usual, so please forgive the flurry of coverage. One development is that the voting methods themselves, which we have regularly criticized, have come back into focus due to a protest of sorts by the prominent CalPERS retiree group, Retired Public Employees Association (“RPEA”).
RPEA sent a letter to the California Secretary of State, Dr. Shirley Weber, which we have embedded at the end of this post. I encourage you to read it in full. It provides a detailed description of how CalPERS pretends to count votes in its board elections, which I anticipate readers will find to be revealing.
This missive is noteworthy since CalPERS operatives have done a very good job of cowing stakeholder groups into believing that if they oppose CalPERS publicly, they’ll be punished by being frozen out of access…as if access amounts to anything more than empty flattery. None of that famed access stopped CalPERS from shafting beneficiaries by putting through eyepopping rate increases on its long-term care plan, plus 23% increases for two years running for its comprehensive health care policies.
RPEA has been able to punch above its weight in part due to CalPERS’ arrogance and presumptuousness. The group played an important role in thwarting the giant fund’s effort to pass an indefensible private debt secrecy bill. CalPERS had made the credulity-straining claim that it needed private debt for its high returns, and it somehow needed to keep those deals secret…when CalPERS was already one of the biggest private debt investors in the world and its Sacramento sister CalSTRS is an even bigger player. In other words, both pension fund’s current status disproved CalPERS’ rationale.
Yesterday, the California Senate Judiciary Committee shot down a CalPERS-only bill, AB 386, on a vote of 3 in favor, 4 opposed, and 4 abstentions. That level of abstentions is very unusual and as we’ll discuss, appears to be the result of CalPERS being either unwilling or unable to answer a basic question posed by a Senator: what information does the board get when reviewing private debt investments? As regular CalPERS readers know, the answer is none, since the CalPERS board has reneged on most of its fiduciary duties by handing the keys to the money kingdom over to staff….
This repudiation of an indefensible CalPERS private debt secrecy bill represents a rare victory for democratic processes. A key beneficiary group, the Retired Public Employees Association, had won concessions in the form of amendments requiring disclosure of collateral and covenants, as well as a five-year sunset. Some amendments appeared to have been removed at the latest waystop, the Senate Judiciary Committee.
Worse, CalPERS’ justification for the bill was completely at odds with what it had told the board and the public at large. CalPERS implausibly asserted that it needed secrecy to make high risk, high return distressed loans. It turns out CalPERS actually wanted to make low return loans to private equity funds, called subscription line financing! So CalPERS apparently wanted to shroud its scheme to toady up to and further enrich private equity barons.
Even if CalPERS tries to revive AB 386, since CalPERS pulled a different variant of this legislation last year after then Chief Investment Officer Ben Meng resigned abruptly (the predecessor bill included CalSTRS), it’s now had two unsuccessful attempts. The longer it takes to get something done, the more it accrues an aura of failure.
We’ve been raising alarms for years about CalPERS’ unauditable, fraud-friendly election methods. In 2017, CalPERS added internet and phone voting “channels” to its traditional mail-in paper ballots, with the rationale that they would making voting more convenient and therefore increase turnout. Having more voting methods increases costs and complexity. The addition of these approaches did not increase participation. Yet CalPERS has refused to retreat from its “innovation” despite their failure to deliver. That suggests that getting more beneficiaries to vote was never the real purpose.
Moreover, seemingly unending ransomware attacks and records hacking have served as a wake up call. Even though experts were virtually unanimous in seeing Internet voting as not being remotely secure enough to deploy, noisy promoted and an “all things new” addled press made it seem, for a while, to be far more legitimate than it ever was. But years of Democratic hand-wringing about Russia meddling and now Republican scare-mongering about election theft have both undercut the tech touts.
As we’ve also pointed out repeatedly, and the RPEA letter confirms, voting by internet is a violation of California law. Yet rather than telling CalPERS to cut it out, former Secretary of State Alex Padilla gave CalPERS qualified election certifications, which in the sloppy way everything with respect to CalPERS seems to operate, was treated as legit.
We explained what was really afoot in 2020:
CalPERS gave another display of its signature brazenness and dishonesty on Tuesday at its Finance and Administration Committee meeting. Then, the staff presented to the board their proposals for how to conduct the next set of board elections.
Even though the security and accuracy of voting methods has become a regular news topic, thanks to worries about Rooskie hacking and fiascoes like Iowa caucus app meltdown demonstrating the risks of Internet tabulation, CalPERS’ staff served up nonsensical justifications for doubling down the failure of having phone and Internet voting along with paper ballots. The rationale for this much more costly approach was to increase participation, when the reverse has happened, with turnout continuing to slide. To add insult to injury, the new methods are also more tamper and manipulation friendly. For instance, the Internet “channel” has no paper trail.1
Yet the subcommittee voted to stick with a newfangled turkey rather than revert to a cheaper and more successful approach. The full CalPERS board is set to approve or reverse the Finance and Administration Committee today.
Despite going through the pretense of having formal criteria for evaluating which approach to prefer, it’s clear the real driver is to help union leadership to influence the elections. Union leaders were clearly behind the CalPERS decision to add these insecure methods; Operations Chief Kim Malm even thanked the two union officials who have long had considerable clout at CalPERS, Dave Low of CSEA and Terry Brennan of SEIU, for their help in getting the additional methods approved.2
As we’ll show, the staff presentation and many board member remarks were nonsensical and even blatantly dishonest. They added up only when SEIU California’s Terry Brennan cleared its throat in public comments, pushing hard for current methods to stay in place and contending that CalPERS needed to throw even more money at them than in their forecast, when sticking with the bad new normal pencils out at $8.5 million versus $5 million for going back to paper ballots only.
Brennan tried to present online voting as a success when the percentage of online voting was 34.7% in the 2018 election, which had the pathetic turnout of 6.4%, and a mere 16,200 votes. The next year, in the ugly and bitterly contested 2019 election, online voting was only 17.4% of the 117,600 votes cast, a lower ratio than in 2017 and 2018 elections.
To the extent that Brennan has a bona fide claim, his argument is that “restricting access” to voting will reduce turnout. In fact, three years of CalPERS’ experimentation, including ever-more aggressive outreach, shows the reverse, that these additional “channels” cause voter confusion and among the ones who can parse the now-demanding ballot package, complacency about voting. Both lead to fewer votes being cast.
SEIU wants them to assure that CalPERS board seats remain under their, as opposed to beneficiary, control. That’s why they poured unprecedented amounts of dark money into the retiree election last fall and even ran a phone bank out of New York, despite the fact that this seat has never been one of “theirs”. Only a trivial number of CalPERS retirees are active union members.
History of CalPERS’ Election Chicanery
For those of you new to this sorry tale, in the 2017 board election, CalPERS changed its voting method for the six board members (out of a total of 13) elected by various beneficiaries.
Since the mid-1990s, CalPERS used voting by mail. That change was forced on CalPERS to keep the heavy hand of union pressure out of CalPERS elections.
Until the 1994 board election, the unions were able to exercise a great deal of influence over the vote. Ballots were distributed at work, either by the shop steward or with the steward close on the heels of the responsible party, telling voters who they should pick.
A court ruling invalidated this procedure and forced CalPERS to implement mail-in ballots.
The unions, led by SEIU, are now seeking to turn the clock back and reassert control over the election.
Back to the current post. The RPEA letter throws down a marker by carefully, but still at a high level, setting forth the serious legal and practical deficiencies in CalPERS election methods.
But as much as this letter is welcome, one has to wonder, “Why now”? Just as an election is starting seems an odd time to tell the Secretary of State that something is rotten in Denmark, unless one of the reasons is to prevent her from trying to say she didn’t know she was certifying a dodgy election.
The reality is that unless some wild cards come out of the gubernatorial recall vote on September 14, the executive is not the way to pressure CalPERS. CalPERS fears the legislature. RPEA has succeeded in checking CalPERS once this way. The facts are so obviously bad here that if they can get anyone on the relevant committees to notice, it’s not unreasonable to think they might ask CalPERS a few uncomfortable questions.
1 CalPERS staff points out that its contract with its election vendor calls for CalPERS to be able to audit the election results. However, CalPERS has claimed that it does not receive vote by candidate by voting channel, which is a bare minimum metric to check for anomalies that might point to systematic tallying errors or tampering. CalPERS has maintained that it cannot get this information, which in turn indicates its election vendors have sorely deficient records. In keeping, CalPERS’ past Internet vendors have said they don’t have a paper-based backup, which experts regard as essential to assure the accuracy of Internet voting.
00 Letter to Shirley Weber 8-27-21
Consider this section of a transcript from a CalPERS board meeting in August 2016, when the first version of the change in CalPERS voting procedures was presented to the board (emphasis ours):
Operations Support Services Division Chief Kim Malm: At this time, I’d like to take a minute of personal privilege, Mr. Chair. I’s like to thank the staff that have worked really hard on this over the last couple of years. Anthony Martin, Christina Nutley, Nina Dinsdale, and Dallas Stone from my staff. Also Erin Lopez and Renee Salazar from the Legal Office, and also Public Affairs. We would not have been able to do this without them, in addition to the constituents that have been extremely supportive over the last couple of years. And especially Dave Low and Terry Brennand who kind of got this in front of some people – important people to help us push this forward. So I’d like to say thank you to all of them, in addition, of course, to my Executive, Doug Hoffner and the Board.