Two years ago and in light of a daunting structural budget deficit, Governor Jerry Brown issued Executive Order B-06-011. His order banned both in-state and out-of-state travel by government agencies unless it was “mission critical”. According to the order, travel is “mission critical” if it is directly related to:
- Enforcement responsibilities.
- Revenue collection.
- A function required by statute, contract or executive directive.
- Job-required training necessary to maintain licensure or similar standards required for holding a position.
Travel is not “mission critical” when it is travel to attend:
- Conferences (even those that historically have been attended).
- Networking opportunities.
- Professional development courses.
- Continuing education classes and seminars.
- Non-essential meetings that can be conducted by phone or video conference.
- Events for the sole purpose of making a presentation unless approved by the Department Director.
Last week, the Associated Press’ Judy Lin wrote that notwithstanding this clear directive, Calpers “spent nearly $1.4 million during that two-year period on travel for 84 board members, executives, portfolio managers and investment officers.” Among other non-essential trips, she cites travel “to attend industry association conferences in Toronto, networking opportunities with traders and hedge fund managers in Europe and educational seminars in Boston and Washington, D.C.” She also reported that one trip to attend a climate change meeting in South Africa at a cost of $5,500.
I was particularly interested in this story because last fall, I wrote to CalPERS Chief Executive Officer urging that CalPERS not approve future travel expenses for one of its top officials to attend meetings of the Securities and Exchange Commission’s Investor Advisory Committee in Washington D.C. I noted that CalPERS had already approved expenses of $3,280 in connection with that official’s attendance at the first meeting of the committee:
[The official’s] travel to Washington D.C. does not meet any of these criteria and is clearly not “mission critical” to CalPERS. Although I recognize that CalPERS is not under the direct authority of the Governor, his Executive Order requests that agencies conduct an analysis of the discretionary nature of their travel in order to reduce unnecessary costs. Has CalPERS conducted such an analysis? If so, please provide me with a copy of the analysis (this is a request for an identifiable record pursuant to the California Public Records Act). If CalPERS has not conducted such an analysis, why not?
I strongly urge you to reject any request for authorization to travel to this meeting as not being “mission critical”. [This official’s] first, and only, priority should be attending to his responsbilities to CalPERS. Moreover, less expensive alternatives, such as conference telephone, are undoubtedly available.
Of course, cutting back on travel at CalPERS would not have solved California’s budget deficit. However, any good fiscal manager knows that it is important to watch the pennies. It is all the more important when the manager is a fiduciary. But there is a more important question. That is whether CalPERS managers are engaged in rent-seeking, that is trying to obtain personal benefits for themselves at the expense of others. In the corporate arena, managers are often criticized for rent-seeking behavior. (The term “rent” has nothing to do with leasing, but was coined in 1974 by Professor Anne O. Krueger in The Political Economy of the Rent Seeking Society, 64 American Economic Review 291 (1974).) The question of rent-seeking cannot be avoided when it is reported that CalPERS spends over $80,000 in a two-year period to send one of its managers to to educational and industry conferences in London, Copenhagen and Paris.
CalPERS has posted a link to another view of the subject on its CalPERS Responds website.