Golden State Asks Public Pension Plan to Help

According to "California officials hope for easing of credit crunch" (October 4, 2008), Los Angeles Times reporters Marc Lifsher and Evan Halper paint a gloomy financial picture for this giant state. They explain that Governor Arnold Schwarzenegger may have no choice but to ask for help from Washington if short-term credit markets do not soon improve. An inability to issue Revenue Anticipation Notes with a face value of $7 billion will make it difficult to "get cash to pay for day-to-day operations, including paying workers, funding schools and feeding prisoners, between the end of October and the spring." Click to read the October 2, 2008 letter from the former action hero to The Honorable Henry M. Paulson, Jr.

Vox populi Jon Ortiz (aka Sacramento Bee reporter) and creator of The State Worker blog writes that State Treasurer Bill Lockyer may set his sights on the public workers' pension money pot, CalPERS. Author of an October 3, 2008 letter to The Honorable Bill Lockyer, State Senator Dean Florez writes that "the state should look to one of the world's largest investors, the California Public Employee Retirement System as a reasonable purchaser of short-term California state government debt."

In "Could CalPERS help with California's cash crunch? Maybe" (October 3, 2008), Ortiz posts a response from CalPERS spokeswoman Pat Macht who comments on process. "If we are approached, our investment staff would do their normal due diligence and make an objective evaluation of its merits, including returns as well as how it would fit within our asset allocation ranges and targets which guide our investment selections."

Editor's Questions: Will other cash-strapped states ask public and municipal pension plans to buy state debt? If so, how might this impact the funding status of those employee benefit schemes?

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