CalPERS sues governor over forced staff furloughs

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CalPERS, the state’s main public pension fund, sued Gov. Arnold Schwarzenegger late Wednesday, demanding to be exempted from the governor’s plan for forced employee furloughs.

The California Public Employees’ Retirement System said Schwarzenegger has no authority to order the fund’s workers to take unpaid furloughs three days each month.

CalPERS said it took legal action to protect its ability to provide timely disability and retirement checks to 1.6 million active and retired state and local government workers and their families.

The furloughs on the first three Fridays of each month also harm CalPERS’ ability to manage its $190-billion investment portfolio, including monitoring the investment firms the fund employs, the agency said.

Like other big pension funds, CalPERS suffered heavy losses in financial markets’ meltdown last fall and winter. The fund’s assets dived 23% in the fiscal year ended June 30.

Pension officials are asking a San Francisco Superior Court judge to rule that CalPERS is exempt from the governor’s order because the system’s operations aren’t funded from the state’s general budget. ‘While we understand and appreciate the fiscal problems experienced in the state’s general fund, we are required under the Constitution to meet our fiduciary duty as trustees to ensure prompt, undisrupted service to our members,’ CalPERS Board President Rob Feckner said in a statement.

The governor’s office countered that the 2,300 CalPERS employees should share the same sacrifices as the 200,000-plus other state government workers. ‘Every California family has been cutting back, and state government has to do the same,’ said Aaron McLear, a spokesman for Schwarzenegger.

During tight economic times, the state can benefit from salary savings at CalPERS and other so-called special fund agencies, said H.D. Palmer of the governor’s finance department. ‘We can borrow from them for cash management,’ he said.

Schwarzenegger has won initial rounds in related furlough lawsuits filed by the state attorney general, treasurer, controller and other independently elected officers. The State Compensation Insurance Fund, a state-backed company whose workers are civil servants, also has sued the governor over the furlough issue.

The California State Teachers’ Retirement System hasn’t taken Schwarzenegger to court but said it was looking at possible legal action.

-- Marc Lifsher