Payback: Senate reject governor's nominee to CalSTRS Board

SACRAMENTO, (AP) -- Two months after Gov. Arnold Schwarzenegger fired four of his nominees to the California State Teachers Retirement System board for opposing his privatization plan for public employee pensions, the Senate retaliated Wednesday by refusing to confirm a Schwarzenegger appointee who supports the idea.

The Senate Rules Committee refused to confirm Kathleen Smalley, a real estate finance specialist from Los Angeles, to oversee the $125 billion retirement system, making her the newest casualty of a fiercely partisan struggle over the future of California's $300 billion pension systems.

"Ms. Smalley's 'no' vote on the motion to oppose the pension privatization measure put her in favor of decreased take home pay and decreased benefits and put her at odds with her duty to protect teachers and the retirement funds upon which they depend," said Senate President Pro Tem Don Perata, D-Oakland.

"Regrettably Ms. Smalley chose the governor who appointed her over the teachers who needed her," said Perata, who chairs the rules committee.

Schwarzenegger was disappointed the committee "decided to cave into the special interests," said spokeswoman Julie Soderlund, adding that Smalley was well qualified for the CalSTRS board.

Smalley was one of two CalSTRS board members who sided with Schwarzenegger Feb. 3 when 10 other members opposed his plans to make new public employees after 2007 use 401(k)-style individual investment accounts. The advisory-only opposition vote included four of the governor's other nominees to the board — and Schwarzenegger fired them all Feb. 11.

A governor's spokeswoman at the time said he concluded that the four — Mark Battey, Miguel Pulido, Gloria Hom and James Gray — were "not best suited to implement his mission for reform."

Two Republicans on the five-member committee, Sens. Jim Battin of Palm Desert and Roy Ashburn of Bakersfield, voted for the confirmation. Perata joined Democratic colleagues Gil Cedillo of Los Angeles and Debra Bowen of Redondo Beach in voting no.

Ashburn called the action "very unfortunate" and said Smalley was well qualified and deserved to be confirmed.

Treasurer Phil Angelides, a CalSTRS board member, said the committee gave taxpayers and teachers "assurances that Gov. Schwarzenegger will allow his appointees to act independently and will not improperly pressure them to disregard their fiduciary responsibility to support his agenda."

Schwarzenegger's pension plan is among four ballot measures he aims to qualify for a special election later this year. The governor has called the teachers system and the $182.9 billion California Public Employees Retirement Systems "another government program out of control" and wants employees to take more financial responsibility for their retirements. The state's pension bill this year is $2.6 billion, a dramatic rise from five years ago following market losses by the pension funds during the 2001 and 2002 stock market downturn.

But the move has set off a battle between organized labor and their Democratic allies and the governor's supporters. The CalPERS board also voted 9-3 on Feb. 16 to oppose the governor's plan. Among the three supporting the governor was his new nominee Marjorie Berte, a California State Automobile Association vice president who still faces her own confirmation hearing.

I thought her name sounded familiar. She worked for Catellus (the firm of Diane Feinstein's husband's--Richard Blum).

http://www.joinarnold.com/en/press/pressdetail.php?id=373

Smalley is currently managing director of Greenbrier Associates, a real estate financial services firm. She was recently a lecturer at Harvard and Stanford Law Schools in 2002 and 2003. Smalley was previously senior vice president and general counsel to Catellus Development Corporation from 1997 to 2001. She was general counsel and an investment manager at Trammell Crow Interests from 1990 to 1996, a partner at the Trammell Crow Group from 1987 to 1990, and general counsel of the Trammell Crow Company from 1984 to 1987. Smalley served as a law clerk to United States Supreme Court Justice Sandra Day O'Connor and Judge John Minor Wisdom of the Fifth Circuit Court of Appeals. She is a member of the Council on Foreign Relations and a fellow with the British-American Project. Smalley earned her bachelor's degree from Rice University and juris doctorate from Harvard Law School. She is a member of the California, Texas, and Arizona State Bars. Smalley, 46, is a resident of Los Angeles and is registered decline-to-state.

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