California’s pension problems are so massive that any help should be welcomed, even from outside the state.
Enter Texas billionaire Democrat John Arnold, who announced an effort to reform unsustainable public pensions across the United States, starting in California.
According to Reuters, that sparked a response from Lowell Goodman, communications director for the southern California chapter of the Service Employees International Union, “It’s the height of narcissism for a Texas billionaire who doesn’t have to worry about his retirement to come into California to try and meddle with the secure retirement of working class people.”
Of course, the main issue with government pensions is not how beneficial they are to “working class people” — meaning government retirees — but whether the costs are rising so fast that taxpayers can’t possibly pay the tab. As Goodman surely knows, just last year San Bernardino and Stockton declared bankruptcy largely due to an inability to meet massive pension obligations.
It has to be troublesome for Democrats when even their own wealthy campaign contributors want to reform California public pensions to forestall what could burgeon into a nationwide crisis.
Arnold is a hedge fund billionaire centered in Houston. His $3 billion natural gas trading hedge fund Centaurus Advisors was formed in 2002 after he left Enron as an energy trader. Although Enron famously collapsed into insolvency, Arnold left unscathed because at the time he actually was making money for the firm.
His $1.2 billion philanthropic foundation, the John and Laura Arnold Foundation, seeks to improve criminal justice, education, public accountability and research integrity, as well as reform unsustainable public pension systems. Denis Calabrese, a Republican political strategist and consultant to Texas Gov. Rick Perry, heads the foundation.
Despite the high technical credentials of the foundation’s staff in social welfare, education and law, it doesn’t have an expert in pension systems. Instead, the foundation has taken to funding grass roots efforts at pension reform.
Arnold must seem odd to the union-dominated California Democratic Party. He donated $35,800 to Barack Obama’s presidential campaign in 2007 and was an Obama campaign financing bundler in 2008. He also has funded other Democratic candidates. According to Politico.com, Arnold’s philosophy is libertarian and his wife is a Democrat.
For its philosophy that all philanthropy and social welfare should be by the private sector, many have criticized the foundation. But the foundation’s philosophy of reform is technocratic, not based on conservative voluntary religious institutions.
Arnold has put $10 million toward reforming pension systems in 25 jurisdictions in the last two years. His foundation does not disclose which pension reform efforts were funded. Reuters reported no funds have reportedly yet been committed to efforts in California.
But the foundation is reported to have been the secret donor of $150,000 to initially fund the California Foundation for Fiscal Responsibility. The Arnold Foundation is seeking to fund other groups supporting ballot initiatives that would scale back California’s $500 billion hole in financing public pensions.
Democrats criticized First Lady Michelle Obama’s attendance at a fundraiser at the Arnolds’ home in 2011 because John Arnold wants to convert public pensions to 401(k) plans. But needed pension reform may not be coming from the private philanthropic sector, thinks tanks, state legislatures, governors or the local governments, but from the business sector.
The Obama connection also may indicate that President Obama is concerned that the national public pension crisis could explode during his term in office. If that happened, it could damage his presidency much as the collapse of the Lehman Bros. shocked the Bush administration to the core in September 2008 and plunged the country into economic chaos.
The president sees not only the California bankruptcies, but the pending Detroit bankruptcy. CNN Money recently ran an article titled, “On the brink, Detroit halts debt payments, plans pension cuts.” The text began, “Detroit will immediately stop payments on about $2 billion in debt, the city’s emergency manager announced Friday, an effort to conserve cash. The manager, Kevyn Orr, also said Detroit will need to cut pay and pension and health benefits for city workers.”
Instead of flippant dismissals, such as that by the SEIU’s Goodman, California should be open to any reasonable proposal to solve our pension problems, including ideas from Democrats in the private sector.
Wayne Lusvardi is a Political Commentator