June 25, 2013 / 4:11 PM / 4 years ago

Texas hedge fund billionaire seeks California pension reform

LOS ANGELES, June 25 (Reuters) - Texas hedge fund billionaire John Arnold is taking his campaign to reform America’s public pension systems to California, pension reform groups and a spokesman for his foundation told Reuters.

Arnold, the founder of Houston-based hedge fund Centaurus Advisors and a former trader at Enron, the defunct energy company, is looking to fund groups supporting ballot initiatives that would scale back what critics regard as overly lavish public employee pension deals.

Unfunded pension liabilities for U.S. states - the difference between what they have promised workers for their retirement and the assets they have to pay for them - have risen to a total of more than $1 trillion, according to the latest analysis from the nonpartisan Pew Charitable Trust.

The issue is especially acute in California, where public employee pensions have exceptionally strong legal protections even as many local governments and state agencies struggle with chronic budget deficits.

Two California cities, Stockton and San Bernardino, have filed for bankruptcy protection in part because of soaring pension costs.

Arnold, 38, amassed a personal fortune estimated at $3 billion running Centaurus, a natural gas trading hedge fund he established after leaving Enron shortly before it collapsed in 2001.

Last year he closed Centaurus as natural gas prices hit a slump and turned full-time to running a philanthropic foundation with his wife, Laura. According to the John and Laura Arnold Foundation, the fund has assets of $1.2 billion.

The foundation’s stated goals on its website are improving outcomes for criminal justice, education, public accountability and research integrity.

“The cost of public employee benefits in most states and communities is unsustainable,” the website states.

According to the Federal Election Commission database, Arnold gave money to Barack Obama’s presidential campaign in 2007 and 2008. He also gave money to other Democratic politicians, and the committee that funds Senate campaigns for Democrats.

The foundation has spent about $10 million in the past two years backing pension reform efforts in 25 jurisdictions, according to Josh McGee, the foundation’s vice president for accountability.

McGee did not specify what those jurisdictions were but said the efforts included support for groups that successfully backed pension reform packages in Rhode Island and Kentucky, where laws that cut benefits for current and new workers were passed.

McGee attended a private “pension retreat” in Sacramento on May 22 where California city officials, lawyers and taxpayer groups concerned with pension debt shared information and plotted strategy.

He stressed that no decisions by the Arnold Foundation had been made over whether, or how, to deploy funds in California.

“We don’t want to do a bunch of one-off efforts,” he said. “We want to see if we can build momentum for a sustained reform effort in the state, and nationally.”

Two pension reform advocates in California say they have received calls from officials at the Arnold Foundation in recent weeks asking about ballot initiatives.

McGee said he attended the May 22 retreat as part of an “outreach effort” as the foundation looks at ways to approach pension reform in California.

He said the foundation is interested in fairness for workers as well as employers. The foundation’s website said efforts must be fair to “all parties.”

Unions, however, are not necessarily happy with Arnold’s involvement with pension reform.

“It’s the height of narcissism for a Texas billionaire who doesn’t have to worry about his retirement to come into California and try to meddle with the secure retirement of working-class people,” said Lowell Goodman, communications director for the southern California chapter of the Service Employees International Union.

A request for comment by Arnold was made through McGee, but was declined.

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