Democrats Stymie Gov. Over Panel

SACRAMENTO —  Senate Democrats are refusing to confirm Gov. Arnold Schwarzenegger’s nominees for the state teachers retirement board, saying he compromised the board’s independence last month by firing four of the appointees when they voted against his wishes.

A fifth nominee, Kathleen Smalley, retained her appointment after declining to join the board in denouncing Schwarzenegger’s plan to overhaul state employee pensions. But Senate President Pro Tem Don Perata (D-Oakland) said Tuesday that the Senate Rules Committee would reject her today, and would not confirm future nominees until Schwarzenegger and lawmakers addressed the degree of independence the trustees should have.

The five were serving on the board while awaiting Senate confirmation.

The fight is part of an impasse over Schwarzenegger’s effort to convert California’s public pension system to private, 401(k)-style accounts. The proposal is a cornerstone of his legislative agenda this year and has sparked fierce resistance from Democrats and their allies, the public-sector unions.

The 12-member California State Teachers Retirement Systems Board said Feb. 3 that his plan would damage the state’s $116-billion teacher pension fund and hinder future recruiting of teachers.

Perata said that Smalley was “very qualified,” but that if Schwarzenegger required his appointees to follow administration policy, senators would use the same criterion in casting their votes.

“You can’t have it both ways,” Perata said. “She is a battlefield casualty in a fight over public pensions.... We need to have some consistency.”

Democrats and teachers unions say board nominees must be free to determine what is in the fund’s best interest. But the Schwarzenegger administration justified the firings by saying the board was meddling in policy decisions that were beyond its purview.

The governor’s spokeswoman, Margita Thompson, said Perata was caving to the teachers unions. “It just shows that the politicians react when their chains are yanked, and they heed,” she said. “This sends a horrible message to California: Special interests reign supreme or you won’t get confirmed.”

The Senate Republican leader, Dick Ackerman of Irvine, said Schwarzenegger’s actions were reasonable. “I think when any governor appoints any person to any position, he or she is going to be expected to further the general agenda,” he said. “That’s the governor’s prerogative.”

Schwarzenegger also wants school districts to start paying the state’s contribution to the pension system, which funds the retirement of about 754,000 educators. The state’s current contribution is $469 million a year.

On that subject, Smalley joined her fellow trustees in criticizing the governor’s plan.

Neither of the board’s resolutions has legal force, but both were a political embarrassment for Schwarzenegger.

At a March 16 Senate hearing on her nomination, Smalley said that the subject was beyond the trustees’ jurisdiction, and that she would have not supported the board taking any position on the matter.

“As trustees, we must devote our attention to our beneficiaries and to maximize their returns, not to trying to make social policy for the state,” she testified. “Our personal views on the best retirement package for future teachers are no more within our responsibility as trustees than our views on class size, summer pay, educational qualifications, and so on.”

Becky Zoglman, a spokeswoman for the California Teachers Assn. -- which opposed her confirmation -- said Tuesday: “We believe that anybody who’s appointed to this board has a duty to look out for what is in the best interest of the [retirement system’s] members.”

The retirement board’s trustees serve fixed terms and cannot be removed by the governor or lawmakers except in exceptional circumstances. But Smalley and the other four nominees had been sitting on the board since March 2004 awaiting their confirmation hearings in the Senate, and thus had no protection for their positions.

Smalley is managing director of a real estate financial services firm. She has been a lecturer at the Harvard and Stanford law schools and is a Los Angeles resident. She is registered as a decline-to-state.

Schwarzenegger has not yet nominated anyone to replace the four fired trustees.