Gov. Arnold Schwarzenegger’s top economic adviser and close personal friend, David Crane, is up for confirmation Wednesday for his seat on the powerful CalSTRS board that directs the investment of billions of dollars in teacher pensions.
Crane, a Democrat, was first appointed to the CalSTRS board by Gov. Schwarzenegger in July, and three times has had his confirmation hearing postponed. Members can serve on the board for up to one year without Senate confirmation. Today, Crane’s fate is in the hands of Senate Democrats, as they mull over whether to confirm a board member who openly advocates a shift to a defined contribution pension system.
Most Democrats, and their union backers, strongly oppose a shift to defined contribution. Earlier in the year, Crane’s support for defined contribution made his confirmation look unlikely. Democratic sources now say Crane’s fate is up in the air.
The office of Senate leader Don Perata, D-Oakland, declined to comment on the pending hearing.
Two other sitting Schwarzenegger-appointed CalSTRS trustees, Kathleen Brugger and Elizabeth Rogers, will also have their confirmation Wednesday. But neither is expected to draw as much attention as Crane.
Earlier this year, Crane was one of only two votes in favor of a proposal by Assemblyman Keith Richman, R-Northridge, that would have shifted the state away from defined benefit public pensions.
Crane is expected to receive support from both Republicans on the Senate Rules committee, Sen, Jim Battin, R-La Quinta, and Sen. Roy Ashburn, R-Bakersfield. He needs one Democratic vote to have his nomination considered by the full Senate.
All three Democrats on the committee, Perata , Sen. Gil Cedillo, D-Los Angeles, and Sen. Debra Bowen, D-Marina del Rey have previously said that the most important qualification off a CalSTRS or CalPERS nominee is the ability to fulfill their fiduciary responsibility, i.e. make sure pensions are there for retirees.
Crane certainly has had investment success in the past. In 1979, he was hired as the fifth employee of Babcock & Brown, then a small San Francisco firm. The company has since grown into a multi-national corporation with 18 offices, in 13 countries and 600 employees.
One of Crane’s main charges at Babcock was investing the company’s assets. His success there made him a wealthy man. In filings with the Fair Political Practices Commission last year, Crane declared eleven separate investments worth more than $1 million.
In 1997, Crane’s company, Babcock & Brown, was hired by then-actor Schwarzenegger. The firm helped broker Schwarzenegger’s controversial jet-lease deal with Singapore Airlines, allowing the governor to defer paying taxes on millions in income. The company has declined to comment on whether Crane worked on the account, though Crane himself has said that he and the governor “did some business together” in the past.
CalSTRS trustees first became a political hot potato last year, when Schwarzenegger was pushing his special election reform package. The package originally included shifting state pensions from a defined benefit system, where retirees are guaranteed a certain sized paycheck, to defined contribution, where they receive payments based on the amount they contributed.
But Schwarzenegger’s proposal was dealt a setback when the 12-member CalSTRS board of trustees rejected the proposal, with the only dissenting votes coming from then-Director of Finance, Tom Campbell, and Schwarzenegger-appointed trustee Kathleen Smalley.
Schwarzenegger responded by yanking the rest of his appointees off the board. The Senate retaliated by rejected Smalley’s confirmation.
Crane, along with Brugger and Rogers, were appointed to replace the removed trustees.
The hearing is set for 1:30pm Wednesday in Room 113.