JOIN THE CONVERSATION: Do you think voters should have a say in whether to reform public employee pension plans? Or should the issue be decided at the bargaining table? To write a letter, go to sacbee.com/sendletter. Or comment on our Facebook page at facebook.com/sacramentobee.
John Arnold is a Texas billionaire who worked for Enron when electricity trading pirates were chortling about stealing “Grandma Millie” blind. That makes him a rich target, or so organized labor hopes.
Arnold has incurred labor’s wrath by donating millions nationally to roll back the cost of public employee pensions, including $200,000 to help San Jose Mayor Chuck Reed shape a pension initiative for the 2014 or 2016 ballot.
Arnold has been vilified as a right-winger and caricatured as a junior version of the Koch brothers, the secretive oil billionaires who pour tens of millions into conservative and anti-union causes.
Never miss a local story.
Ron Cottingham, of the Peace Officers Research Association of California, a labor group, denounced Reed, a Democrat, for taking money from “the Texas billionaire” who “made his fortune trading in natural gas.”
Rolling Stone’s Matt Taibbi described Arnold as “a lipless, eager little jerk with the jug-eared face of a Division III women’s basketball coach, exactly what you’d expect a former Enron commodities trader to look like.”
On a flier, I employed that old journalistic trick of actually talking to the guy. We spoke by phone so I cannot vouch for the status of his lips. He readily confessed that he lives in Houston, worked at Enron when he was in his 20s, and is a billionaire. But he’s hardly a right-winger. The attacks against him are cheap.
Arnold, 39, the son of a lawyer father and accountant mother, started working for Enron in 1995 when he was roughly 22. He made “lots of money” for the company, but wasn’t involved in the branch of Enron that bilked California and led to blackouts during the energy crisis.
“I cooperated in every one of those investigations,” he said.
After Enron’s collapse in 2002, he started a hedge fund, and became so fabulously wealthy – worth $2.8 billion, according to Forbes – that he retired last year. Now, he spends his time giving his money away, focusing on such issues as education, crime prevention and public finance, which is how he learned of Reed’s effort to overhaul pensions first in San Jose and now statewide.
Arnold and his wife Laura signed the Warren Buffett-Bill Gates giving pledge, promising at least half their wealth to charity. The Arnolds made news in October by donating up to $10 million to keep Head Start preschool programs operating during the Republican-led government shutdown.
His campaign donations include $40,800 to President Barack Obama’s campaign and $30,800 to the Democratic National Committee last year. He hosted a fundraiser for Obama in 2007 when the junior senator from Illinois trailed Hillary Clinton in the Democratic primary, and contributed $59,000 to the Democratic Senatorial Campaign Committee in 2008 and 2009.
He is no fan of Texas Gov. Rick Perry and never liked the late Enron chief executive Ken Lay’s favorite Texan, George W. Bush. He gave $2,500 to Sen. Ted Cruz, after meeting the Texas Republican through their young children, but explained he made the donation before fully grasping Cruz’s tea party politics.
“Government has a strong role to play funding the safety net,” Arnold said.
Still, Arnold and his family never will have to worry about retirement. So why would he care about public employee pensions? The vast majority of government workers never will attain six-figure salaries, let alone six-figure pensions.
“Public employees are not getting rich,” he said. “But we live in a world of scarce resources. If you allow people to retire at age 50, there is a cost to that.”
Pointing to the mess in Detroit, San Bernardino and Stockton, and cuts to services in otherwise wealthy cities such as San Jose, Arnold said:
“The ramifications are terrible. Social programs get cut, libraries get closed, fire departments close stations. Violent crime goes up. All this happens in an attempt to meet the obligations of a broken system. The losers end up being taxpayers.”
As he sees it, government programs must be financially sustainable and not discourage productivity. Current public employee retirement plans fail both measures, he said.
The system allows people to retire in their 50s. But they can figure on living for another 30 years or more, which means they could collect pensions for longer than they were employed.
“Any actuary will say the plans are ticking time bombs,” he said.
Arnold said people need to save money for retirement. To this end, he is intrigued by Sen. Kevin de Leon’s 2012 legislation that seeks to help all workers build nest eggs, a measure the Los Angeles Democrat proposed after watching his aunt work into her 70s as a house cleaner while being unable to save for her retirement.
His legislation, a potential game-changer for the working poor, requires that there be a study to determine whether the retirement fund would be sound.
Labor set aside its antipathy toward Arnold last month, when de Leon, a labor Democrat, and the Service Employees International Union, asked Arnold’s foundation to help fund the study. The foundation last week approved $500,000 for the study, roughly half the cost.
“We’re not anti-worker,” Arnold said. “I support an increase in the federal minimum wage. We try to make good public policy that is beneficial for all.”
Arnold said he’s not sure how much he would be willing to spend on a California pension initiative, though whatever the amount might be, labor will spend more to defeat it.
Reed’s proposal is not intended to affect benefits already earned by public employees. But it would open the way for officials to reduce the cost of future benefits for existing employees through negotiations with union leaders.
Reed figures he can tap three sources to fund a campaign: wealthy liberals who worry that safety net services will need to be cut to pay for retiree benefits; rich conservatives who dislike tax increases; and entities such as bond houses that would be affected by municipal bankruptcy.
“Democrats took the lead getting us into this mess,” Reed said. “Democrats need to lead us getting out of this mess.”
It’s not clear that Reed will proceed with his initiative. If he does, I don’t know how I will vote. Pension questions are complicated. I know this: The campaign against it will need to consist of more than a smear against Arnold, not your typical Texas energy billionaire.