California union sends misleading texts on CalPERS election. Here are the facts [The Sacramento Bee]

Sep. 20—Many SEIU Local 1000 members recently received misleading texts from their union related to the CalPERS Board of Administration election.

The texts, presented as survey questions, included an inaccuracy related to a board vote and presented information on other votes cast by board members Margaret Brown and David Miller without context. Brown and Miller are both up for re-election, with mail ballots and votes by phone or online due Sept. 27.

Brown, a retired school administrator, faces new challenger Jose Luis Pacheco, a community college IT administrator. Miller faces newcomer Tiffany Emon-Moran, a retired police officer.

The texts, written to present Brown in a favorable light, followed a campaign mailer that Local 1000 sent to many of the union's members expressing support for Brown and Emon-Moran.

The 13-member CalPERS board oversees a state retirement fund recently valued at about $489 billion. It makes consequential decisions regarding retirement and health benefits for about 2 million public employees and retirees.

Local 1000's support for Brown and Emon-Moran puts the organization — representing about 100,000 state employees — at odds with other SEIU branches and most of organized labor in California. A labor-funded expenditure committee that has supported Miller and Pacheco has collected about a half-million dollars and has paid for multiple mailers and advertisements since voting started Aug. 27.

Local 1000 is going its own way primarily at the direction of newly elected union president Richard Louis Brown, who told union members in a recorded online meeting two weeks ago that he decided to spend nearly $30,000 on the flyers to support Brown and Emon-Moran after reading about the candidates on the internet.

Brown said the texts, sent about a week after the flyers, were intended to "inform people of the CalPERS election."

"We were stating the facts of the voting records of Margaret Brown and David Miller," he said. "Was it really an endorsement? No. Did I vote for Margaret and say so on camera? Yeah."

Mech Block-Sherles, a Local 1000 union steward, said she didn't find the texts helpful.

"They didn't give us all the information we needed; they just gave us very biased information," she said.

The first text said Miller had voted to increase health insurance premiums by "as much as 23%," to increase long term care insurance premiums by 90% and to "spend $550 million on a new office building for CalPERS executives."

The text asked how likely the recipient would be to vote for him.

Then came a second text saying Brown voted against raising health premiums and said she "opposed spending $550 million on new office space in downtown Sacramento."

Office building

The description of the $550 million office building in the Miller text is inaccurate.

CalPERS owns a long-vacant lot at the corner of Third and Capitol, known colloquially as the "hole in the ground." In June 2018, board members cast a preliminary vote to approve a $550 million development proposal for the lot.

Miller voted in favor of the proposal, and Brown against it. But the building was never intended for CalPERS "executives" or any CalPERS staff, according to public summaries of the proposal.

With apartments, office and retail space, the building would have been a real estate investment intended to support CalPERS operations and the pension fund.

In the June 2018 vote by 12 board members, eight supported the proposal while three opposed it and one board member abstained.

CalPERS cut ties with the project's developer, CIM Group, in 2019 and started working with Hines Real Estate. New details have not been released.

Brown said the texts included information on the vote "as it was relayed to (him)."

"There were no tenants for the building, so did think it would be used for executives, since there were no tenants? Maybe yes. How it was relayed to us, the way we interpreted it, that's what it meant to us," he said.

Health insurance prices

The CalPERS board voted on 2022 health insurance rates in July. Employee plans will cost an average of 5.65% more next year, while the Medicare Advantage plans offered by CalPERS will see an average reduction of nearly four-tenths of a percentage point.

The CalPERS board voted 11-1, with one absence, to approve the rates, which the system's representatives had negotiated with insurance carriers. Brown was the "no" vote.

One plan, the PERS Select PPO, will go up in price by 23% next year. The plan has been the cheapest option among the 14 plans CalPERS offers to everyone who's eligible for its health insurance, and about 110,000 people are enrolled in it.

The board approved the 23% increase for that plan as part of a shift to a new way of pricing its health insurance products. Under the old pricing structure, policyholders were rushing from expensive plans with the best benefits to the cheapest plans with fewer benefits.

The richest plans, generally favored by older and less healthy people, were entering into "death spirals" and would have become unsustainable, Health Plan Research and Administration Division Chief Marta Green told the board last year. Premiums for those plans are set to drop next year under the board's change.

The "risk adjustment" program adopted by the board essentially shifts money from plans with lower health risk to those with higher risk. Under the plan, prices will increase again in 2023 and then begin to stabilize, Green has said.

Brown said she couldn't support the new pricing structure.

"The low-cost PPOs are now subsidizing the better, more expensive plans and I just could not do it," she said.

Miller said the change was necessary for the stability of the health insurance program.

"Our responsibility, as painful as it may be, is we have to make prudent decisions that are in the best interests of all of our members," Miller said of his vote. "And trying to mitigate the impact by spreading costs over time is one of the kinds of things we can do, but ultimately we have to make the decision that put us on fiscally responsible ground and provide for the benefits our members need and there really was no good alternative."

Long-term care insurance

The board voted 10-1 in November, with one abstention and one absence, to approve the long-term care price increases referenced in the texts. Brown was the "no" vote.

CalPERS vastly underpriced its long-term care insurance policies when it started offering them in the 1990s, and the system has been raising the prices ever since, including an 85% rate increase spread over 2015 and 2016 that prompted a lawsuit.

The board approved a rate hike of 90% over this year and next year after the pension system's insurance experts said the insurance products wouldn't remain sustainable over the long term without the new increases.

"It's been a disaster," Miller said of the insurance. "I feel very sorry for what's happened with that and the impact to a lot of our members. But just voting no and hiding our head in the sand and not addressing the financial and legal realities would not be serving our members."

Brown said she wanted CalPERS to revisit the assumptions used to estimate future costs for the insurance, particularly given increased mortality rates of the last year.

Union endorsements

Local 1000 President Brown's process in deciding to throw the union's support behind CalPERS board member Brown and Emon-Moran is a big break from past practice, said Theresa Taylor, an elected member of SEIU Local 1000's 65-member board of directors and a CalPERS board member.

Taylor said that in the past, Local 1000's Committee on Political Education would make recommendations to the board on any political spending, and then the board would vote.

The board hasn't weighed in specifically on the CalPERS election, but voted in late 2019 to support candidates endorsed by SEIU California State Council, which Local 1000 is a member of. At the time of the 2019 vote, former president Yvonne Walker represented Local 1000 at the council.

The council supports Miller and Pacheco, and has put the group's name on campaign mailers supporting the candidates.

Brown said the decision to support Brown and Emon-Moran had to be made "quickly," and asserted he is within his authority to authorize spending on the CalPERS election.

"Sometimes the direction from one president will be different from another president," he said.

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