Chiang urges CalSTRS to divest from gun maker

California Treasurer John Chiang is concerned that the state’s teachers’ pension system still has investments managed by a firm that hasn’t kept its promise to sell off its firearm-manufacturing holdings.

This all started with the December, 2012 schoolhouse massacre in Newtown, Conn., in which a Bushmaster AR-15-type semi-automatic rifle – which fit California’s definition of an assault weapon – was used to kill 20 children and six adults. Bushmaster – along with Remington, Marlin and several other firearm brands – belongs to the Freedom Group, which in turn is owned by Cerberus Capital Management.

Bushmaster XM15

Soon after the Newtown shooting, the California State Teachers’ Retirement System (CalSTRS) issued a statement expressing concern that Cerberus – which manages some private equity funds in which CalSTRS is invested – owned Freedom Group. But Cerberus had just announced that it intended to sell Freedom Group, so CalSTRS was satisfied.

Yet Cerberus still owns Freedom Group today.

“Two years ago, I was proud to support the effort of CalSTRS to divest from assault weapon manufacturers,” Chiang wrote this week CalSTRS investment committee chairwoman Sharon Hendricks. “I am frustrated that two years have passed and the Freedom Group remains in their portfolio, indirectly financed by the pension contributions of California teachers.”

Chiang acknowledged the pension fund is obliged to find sound investments, but “it must consider how those investments may be used to finance business interests that run counter to the beliefs of CalSTRS and its members.”

“We rightly determined that there is significant risk in investing in the Freedom Group, a business that manufactures weapons that are susceptible to sanctions, regulations, and actions that could be detrimental to the fund,” he wrote, urging the CalSTRS board to do whatever is necessary to fully divest from the Freedom Group.

Chiang also asked that Cerberus’ leadership attend the CalSTRS board meeting this Friday “to explain why the Freedom Group remains in its portfolio despite agreeing to remove it more than two years ago. It is vital that Cerberus understand the strong desire of CalSTRS, its Board, and teachers in California, that none of its funds be used to fund the manufacturing of weapons used to commit such terrible atrocities.”


State oversight avalanche bears down on ABAG

State officials are rushing to put new oversights in place following the embezzlement of almost $1.3 million by an Association of Bay Area Governments official from a bond-funded San Francisco development account.

State Treasurer John Chiang on Thursday announced a partnership with Senate President Pro Tem Kevin de León, D-Los Angeles, to conduct legislative oversight hearings to make sure money raised through government bond sales is safe from fraud, abuse, and mismanagement. Chiang also said he has created a special task force to develop best-practices guidelines on the care of bond proceeds that will be issued to all state and local governments.

California and its local governments over the past decade have issued more than $700 billion in public debt, Chiang noted in a news release.

“We rely on these borrowed moneys to build and maintain the critical infrastructure upon which our communities and economy depend – from schools and roads to levees and libraries,” Chiang said. “The ease in which one of ABAG’s leaders allegedly fleeced more than a million dollars in bond funds raises concerns regarding whether there are sufficient safeguards at the thousands of State and local agencies which are responsible for nearly three-quarters of a trillion bond dollars.”

And state Controller Betty Yee announced Thursday her staff will audit ABAG’s internal administrative and accounting controls.

“As California’s chief fiscal officer, I am charged with protecting state resources,” Yee said. “When public money goes missing, I need to determine how it happened and whether effective controls are in place.”

Yee’s audit will initially focus on FY 2012-13 and 2013-2014, but that might expand if investigators discover accounting weaknesses that may have affected earlier years. The Controller’s Office sent a letter today to ABAG asking that the association make available documents that will be used in the audit including ledgers, contracts, invoices, personnel records, meeting minutes, policies and procedures. The audit work will begin Feb. 20 and is expected to take a few weeks.

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California’s budget finished 2013-14 in the black

California finished its fiscal year in the black for the first time since 2007, state Controller John Chiang confirmed Thursday.

California in the blackThat means the state had funds available to meet all of its payment obligations without needing to borrow from Wall Street or from the $23.8 billion available in its more than 700 internal special funds and accounts.

“While this is welcome news after seven years of record-high borrowing just to pay our everyday bills, we still have much work to do,” Chiang said in a news release. “We should remain laser-focused on paying down the Wall of Debt, reversing the many accounting gimmicks to which we’ve become addicted and keeping the State as liquid as possible to avoid experiencing the payment delays and IOUs that plagued our State during the Great Recession.”

The economy inevitably will decline again sooner or later, he noted. “We should be vigilant about preparing for that day while we celebrate the great progress we’ve made to date.”

Chiang’s report found the General Fund had $1.9 billion in cash on June 30, marking the first time it has ended the fiscal year in the black since 2007, when it ended the year with $2.5 billion in the bank.

For the 2013-14 fiscal year, revenues came in at $101.6 billion, or $2.1 billion (2.1 percent) more than projected in the Governor’s budget released in January. Personal income taxes totaled $66.2 billion, coming in $1.7 billion above the January estimates (2.6 percent). Corporate taxes totaled $8.5 billion, which was $725 million more than expected (9.3 percent). Retail sales and use taxes came in at $22.2 billion, or $415 million under (1.8 percent) the estimates.

Revenues for June alone totaled $14.8 billion, beating estimates in the 2014-15 Governor’s Budget by $304 million (2.1 percent). Income tax collections for the month of June came in $635 million (7.4 percent) above estimates. Corporate taxes topped estimates by $289 million (13.2 percent). Sales taxes came in short of estimates by $265.8 million (11.6 percent).


Court: Chiang shouldn’t have held lawmakers’ pay

State Controller John Chiang overstepped his legal authority in 2011 by deciding to dock lawmakers’ paychecks because he deemed the budget they had passed to be unbalanced, a state appellate court ruled Friday.

“(W)here the Legislature is the entity acting indisputably within its fundamental constitutional jurisdiction to enact what it designates as a balanced budget, the Controller does not have audit authority to determine whether the budget bill is in fact balanced,” Court of Appeal Associate Justice M. Kathleen Butz wrote; associate justices Cole Blease and William Murray Jr. concurred in this affirmation of a lower court’s 2012 decision.

Proposition 25 of 2010, approved by 55 percent of voters, lets the Legislature approve budges on a simple-majority vote, but it also says lawmakers must forfeit their pay and per diems for each day the state is past its constitutional deadline without a budget.

Chiang announced in June 2011 that his office’s review of the budget, which had been passed on the day it was due, “found components that were miscalculated, miscounted or unfinished. The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the governor.” He ended up withholding about $583,000 from the lawmakers.

Assembly Speaker John Perez, D-Los Angeles, and state Senate President Pro Tem Darrell Steinberg, D-Sacramento, sued on principle, without seeking recovery of that back pay.


John Chiang: California’s books still look good

California took in $15.03 billion in revenue in April – $119.9 million short of estimates, but still leaving the Golden State in relatively solid financial condition, state Controller John Chiang reported today.

Total revenues for the first 10 months of the fiscal year exceeded Gov. Jerry Brown’s January projections by $4.6 billion (6.1 percent), due largely to $4.4 billion (8.5 percent) in better-than-expected personal income tax revenue.

“We’ve reached an important milestone in California’s economic recovery. For the first time in nearly six years, we closed out a month without borrowing from internal state funds to pay our bills,” Chiang said in a news release. “But, there remains significant debt that must be shed before we can claim victory and these unanticipated revenues provide us with an important opportunity to take further steps toward long-term fiscal stability.”

Chiang said California had to borrow at unprecedented levels over the past six years from its own internal special funds and from Wall Street to meet its payment obligations; the state also withheld some payments and used IOUs for only the second time since the Great Depression. June 2007 was the last time the State was able to pay its bills without leveraging its internal funds.

California ended the last fiscal year with a $9.6 billion cash deficit, but April 30, that deficit narrowed to $5.8 billion, Chiang said. The gap is being covered by $10 billion in external borrowing, which the state will start repaying later this month.

Personal income taxes for April came in $275 million (2.2 percent) below monthly estimates outlined in the governor’s budget, due mostly to fewer returns filed and more refunds paid out than expected in the month of April. But corporate taxes for April were $6.6 million (0.5 percent) above monthly estimates and sales tax receipts were $113.4 million (26.6 percent) above estimates.


Honda’s endorsers & Khanna’s ‘digital advocates’

The battle for the 17th Congressional District continues as Rep. Mike Honda, D-San Jose, rolls out a new batch of endorsements and Democratic challenger Ro Khanna fires up his digital grassroots.

honda.jpgHonda on Tuesday announced the endorsements of state Senate President pro Tempore Darrell Steinberg, Assembly Speaker John Perez, Superintendent of Public Instruction Tom Torlakson, Controller John Chiang, Insurance Commissioner Dave Jones, Treasurer Bill Lockyer, Board of Equalization member Betty Yee, and 14 current and former state lawmakers. He’d previously announced he has Attorney General Kamala Harris’ endorsement, while Khanna last month announced he has Lt. Gov. Gavin Newsom’s nod.

Perez said Honda “has been a thoughtful and effective leader, with a distinguished track record of bringing both parties together to find solutions for the very difficult challenges facing our country. Our state is lucky to have such a phenomenal representative fighting for us in Congress, and I am proud to support him for reelection.”

And Torlakson said Honda “is working to improve science, technology, engineering and math (STEM) education in our classrooms, which will provide our children with a 21st century education and keep our country a leader in the global economy. I am proud to support Mike’s campaign for Congress and look forward to continue working with him to ensure that each and every child has the opportunity to get a quality education.”

Honda said he’s grateful for the state officials’ support: “We will continue working together for quality jobs, good schools, and a bright future for California’s families.”

Ro KhannaMeanwhile, Khanna is continuing his effort to “bridge the gap of digital and traditional involvement” by inviting people to become “digital advocates” to spread word of his campaign throughout Silicon Valley. The campaign’s first digital training for volunteers is scheduled for 7 to 9 p.m. tonight, Tuesday, May 7, at 43255 Mission Blvd. in Fremont; more trainings will be held in the coming months.

And Khanna will hold a meet-and-greet to answer district residents’ questions at noon this Friday, May 10, at 3333 Bowers Ave., Suite 130 in Santa Clara.