Business gives 'F' to teachers pension contribution limits: State Chamber says regulations would hurt other industries.

A proposed regulation to rein in so-called "pay-to-play" practices at the state s second largest public pension fund has stirred opposition from the state's business community for being too broad.

The groundbreaking California State Teachers Retirement System regulation, set for a March 15 heating, would limit campaign contributions from companies engaged in or seeking business with the pension fund that generates more than $100,000 in income or fees.

The limit of $1,000 would apply to all campaign contributions to any existing or candidate CalSTRS board member. It also applies to candidates and existing officeholders in the posts of state controller, state treasurer and the governor. The controller and treasurer sit on the CalSTRS board as ex-officio members.

According to a Calstrs "statement of reasons," the regulation is designed to address what is known in the investment industry as "pay-to-play" practices, where money managers and investment houses make campaign contributions to officeholders connected with public pension funds and then receive lucrative contracts from those funds.

Last year, press reports revealed that several investment-related entities benefited from this practice, winning contracts from both CalSTRS and the California Public Employees Retirement System after making contributions to then-Treasurer Phil Angelides and then-Controller Steve Westly, both of whom were running for governor. Among those singled out in a Los Angeles Times investigation was Boston-based real estate investment firm Beacon Capital Partners.

There have been other attempts to rein in "pay-to-play" practices, but few as far-reaching as this one put forward late last year by CalSTRS. And in part because of its broad language, it has stirred opposition from the California Chamber of Commerce, which recently testified against the proposed regulation and announced the formation of a coalition of business associations to fight the rule.

While the regulation is aimed at money managers, the Chamber said it would likely ensnare far more businesses. "This blanket restriction could apply to businesses that provide information technology services, food products, insurance, building or maintenance supplies, legal services, copying services, office supplies and more," the Chamber said.

What's more, the Chamber argued, enacting this regulation could prompt other agencies to pass similar regulations, enacting in piecemeal fashion a stringent statewide campaign contribution limit. "This would have an impact on many more companies across the state," the Chamber said.

In making its case, the Chamber cited recent state court rulings throwing out campaign contribution limits that went beyond Proposition 34, which was approved by voters in 2000; it limits individual contributions to statewide officeholders to $20,000.

Staff reporter Howard Fine can be reached at [phone], ext. 227, or at [e-mail].