A California state court judge said CalPERS does not have the authority to set its own payroll system for 10 internal portfolio managers, circumventing other state agencies. The tentative ruling from the Superior Court of California provides an initial victory for state Controller Kathleen Connell, who had sued the board of the $151 billion California Public Employees’ Retirement System, Sacramento, for setting up its own pay system.
The court ruling, which has been stayed temporarily, said CalPERS is subject to state law like other state agencies. Judge Charles C. Kobayashi found that Proposition 162 "does not give CalPERS the power it claims here.” If CalPERS officials believe they are right, they should have challenged the controller and Department of Personnel Administration in court, the judge ruled.
Last year, the state Department of Personnel Administration refused to put through 11% raises for the affected portfolio managers. Claiming authority under Proposition 162, an amendment to the state constitution that gives CalPERS protection from political interference, the CalPERS board issued pay letters to Ms. Connell to implement the pay hikes, which she refused to honor. The board then decided to set up its own payroll system and cut checks directly to the affected employees, leading to Ms. Connell’s court challenge.
