Sacramento Bee, 6/8/06.
By Gilbert Chan — Bee Staff Writer
Saying his “high-octane qualifications” aren’t the right fit, a key Senate panel Wednesday ousted a close adviser to Gov. Arnold Schwarzenegger from the influential state teachers’ retirement board.
The Senate Rules Committee’s rejection of David Crane to the board of the $142 billion California State Teachers’ Retirement System deals the governor his second setback in 14 months. A year ago, the committee turned down another Schwarzenegger appointee who was under fire from teachers groups and unions.
To win support from lawmakers, Crane had offered to quit his $90,000-a-year post as the governor’s special adviser for jobs and economic growth if Senate Democrats would let him keep his CalSTRS seat.
“He is a talented individual,” said Senate President Pro Tem Don Perata, D-Oakland.
But he said Crane has “high-octane qualifications for a job that truly requires a much more moderate world view. He’s got a lot of views that would not make a lot of people in that fund very comfortable. It’s just a bad fit.”
Crane was appointed to the board in July but needed Senate approval to stay beyond a year. Teachers and unions targeted Crane for his refusal to oppose a plan to overhaul traditional public pension plans.
“We felt it was important to take a stand with Mr. Crane. We believe he violated his fiduciary responsibility as a STRS member,” said Dolores Sanchez of the California Federation of Teachers.
Crane’s nomination Wednesday mustered support from only Senate Republicans Jim Battin of Palm Desert and Roy Ashburn of Bakersfield. Sen. Debra Bowen, D-Marina del Rey, and Sen. Gilbert Cedillo, D-Los Angeles, joined Perata to oppose confirmation. His ouster takes effect immediately.
Crane was unavailable for comment. A spokeswoman for the Governor’s Office criticized the vote.
“It’s unfortunate that the Senate did not recognize David Crane’s unique financial expertise (which would) have been of great value to California teachers and taxpayers,” said Margita Thompson, the governor’s press secretary.
Battin said Crane’s outspoken personality and investment savvy would have brought a refreshing perspective to CalSTRS, the nation’s second largest public pension fund.
“He’s going to do what he feel is right. It is important we would have someone like that,” Battin said.
Crane’s removal plunges CalSTRS into political controversy once again. Last year, the Rules Committee rejected another gubernatorial nominee, Kathleen Smalley, as a political payback over Schwarzenegger’s removal of four appointees who opposed his plan to revamp public pensions across the state.
In making his case for the retirement board position, Crane wrote lawmakers last week that with his investment expertise, he could be more helpful at CalSTRS than as part of the governor’s inner circle, contributing more to the state’s economic and job growth as one of the fund’s 12 trustees.
A self-made millionaire investor and free-market economy advocate, Crane spent 25 years as a partner with Babcock & Brown, an international financial firm in San Francisco. He has close ties to Schwarzenegger and was part of the governor’s transition team in 2003.
In his letter, Crane cited the fund’s $20 billion long-term funding gap and “extremely difficult task” of generating investment gains to erase the deficit and ensure there is enough funding to meet future pension obligations without requiring larger state contributions.
Improved benefits and stock market losses during the early 2000s gobbled up funding levels at many public funds nationwide, leaving them billions short to cover benefits over the long term. If these unfunded liabilities continue to grow, the state and local governments could be forced to shift more money from other programs to fund pension programs whose benefits are guaranteed by law, he said.
It was the pension issue that proved to be Crane’s downfall.
For weeks, opponents argued Crane breached his legal duty by refusing to join fellow trustees in opposing the latest pension overhaul proposal by Assemblyman Keith Richman, R-Northridge. The measure would convert traditional plans to hybrid programs featuring 401(k)-style accounts and a guaranteed pension component for newly hired workers.
“Unless it has an impact on members, we should not take a position on legislation,” Crane had told lawmakers last month.