Exclusive: CalPERS Separates Board From Public Due to Virus Concerns

Starting Monday, spectators will be confined to the pension plan’s auditorium with directors in a separate room, six feet away from one other.

California Public Employees’ Retirement System  (CalPERS) board members will be separated from each other by six feet during board meetings next week, and the public will be put in a separate room to watch the meetings on television screens due to concerns about the new coronavirus outbreak.

“Per guidance from public health officials for Sacramento County, we have fully implemented social distancing guidelines for public meetings, which includes our committee and board meetings next week, Marcie Frost, the pension system’s chief executive officer, said in a letter to board members obtained by CIO.

The radical change will affect the meeting of the CalPERS Investment Committee set for Monday and the full 13-member board meeting set for March 18. The investment committee, which is made up of nine of the 13 board members, sets investment policy for the largest US pension plan.

Frost’s letter comes after California Gov. Gavin Newsom called two days ago for all events with more than 250 people to be cancelled at least until the end of March.

The CalPERS meetings, which are held in the pension plan’s auditorium at its main headquarters in downtown Sacramento, are usually attended by fewer than 100 people. So the meetings could have still been held with the public present without violating the governor’s order.

But Newsom said smaller events “should proceed only if the organizers can implement social distancing of six feet per person.”

The changes by CalPERS as to how it conducts its meetings will likely be imitated by other large pension systems across the United States as more states ramp up rules ending large meetings and put in social distancing edicts.

Most certainly, the rules will be put in place by CalPERS’ neighbor, the California State Teachers’ Retirement System (CalSTRS) in west Sacramento.

The configuration for board members in the CalPERS auditorium is tight, putting board members only several feet from each other at most.

Frost’s plan does not have the board sitting in the auditorium in a reconfirmed seating scheme.  Instead, it puts the board members in a conference room, along with key CalPERS officials and board consultants.

The public will be in the auditorium without the board members.

“All other attendees will be housed in the auditorium where they can observe through live streaming,” Frost said.

She said to handle public comment, those speaking to CalPERS board members will be asked to join the board in the conference room—but one at a time.

CalPERS officials did not respond to requests for comment on the new plan.

The  CalPERS Investment Committee meeting set for Monday is the first since November and the first since financial markets have seen a severe downturn due to the coronavirus outbreak.  

CalPERS Board President Henry Jones told CIO that it was essential that the meeting be held so board members could get an update on investment matters. He said meeting format changes were being made to ensure the safety and health of both board members and the public.

“We are concerned about coronavirus,” he said.

CalPERS had more than $400 billion in assets as recently as the week of Feb. 16. The following week, as stock markets reacted to coronavirus fears, CalPERS was down to $385.15 billion.

The latest pension plan data as of Wednesday shows assets had dropped to $371 billion.

The data did not include stock market results from Thursday, when the Dow Jones Industrial Average suffered a nearly 10%overall loss, the worst day since the 1987 stock crash.

Jones would not comment on pension plan financial data.

 Pension plan losses expected to be detailed by CalPERS Chief Investment Officer Ben Meng on Monday won’t be pretty. While the plan has disclosed total assets, it has not broken down equity losses.

The last time CalPERS disclosed its stock results was on Dec. 31, when the pension had $206 billion in its equity portfolio. Equity losses have been estimated at more than $30 billion since then, excluding the Thursday losses.

Losses on Thursday alone were likely to amount to around 10% of the remaining equity portfolio, meaning as much as $17 billion, said J.J. Jelincic a former CalPERS board member and investment staffer for the pension system.

Jelincic said that given the size of CalPERS, its equity market losses are going to be similar to overall market drops.

That would mean that CalPERS’ equity portfolio has dropped by around $50 billion in a little over two  months.

CalPERS is only around 71% funded and severe declines in assets could meet an increase in the system’s unfunded status and require even more contributions from cities, towns, school districts, and the state. Those groups have seen recently rate hikes of as much as 20% due to past pension system losses and lowered expectations as to what the pension plan expects to earn in the future.

Cities and towns in particular have expressed concern about bankruptcy or having to lay off employees to cover their CalPERS bills.

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