SACRAMENTO, CA - While the recall campaign grabs media coverage, state officials and union bosses are escalating the war on privatization. Their efforts could undermine this important mechanism for helping to restore California's fiscal health.

CalPERS, the mammoth $145-billion public employees retirement system is being pressured to desist from investing in companies that could privatize government services.

Steve Westly, state controller and CalPERS board member, told reporters, "I could not be more opposed to contracting out. This is a red herring issue - people who promise to save millions of dollars. It comes on the backs of people who have their health care taken away." Union bosses also got in their salvos.

"Privatization efforts by companies seeking profit from public services represents a significant threat to CalPERS participants," said Dennak Murphy of the Service Employees International Union.

What these powerful players want is investment not based on the best return but political criteria. It fell to state Treasurer Phil Angelides to point out that such a policy "could be fraught with peril." As the prominent Democrat explained to the Bee, "it is very important. . . that we retain access to the top-tier investors. We have to be careful how we fight this. There may be instances where jobs can best be provided by the private sector."

Actually, there are many instances where jobs can best be provided by the private sector. One of them is cleaning government buildings, which used to be contracted out to private firms. The first Davis administration reversed that policy, doubling the costs of that service but adding new employees to state rolls and new members to public-employee unions.

One of the targets of the anti-privatization assault is Edison Schools, a private company that operates charter schools. These are also under attack, with unions in Sacramento seeking jail time for board members who approved a charter petition.

The problem is not privatization, which needs to be expanded, not cut back. The real issues are the incompetence and politicization at CalPERS and extravagant pensions and salaries. For example, the California Administrative Service Authority (CASA) recently gave 10 unearned years of service credit to Sacramento school superintendent Jim Sweeney, which boosts his pension from the range of $43,000 a year to nearly $120,000 a year, a sweetheart deal by any standard.

Mr. Sweeney's final salary was $244,000, more than the governor of California, who makes $175,000. So the system does work for a select few. And speaking of sweetheart deals, the unions pressuring CalPERS have many of their own.

Agency-fee policy allows them to confiscate the money of non-members. Prevailing-wage law gives unions all public-works projects, locking out those whose tax dollars pay the bills. Unions also enjoy a taxpayer-funded lobby ($21 million since 2000) in the form of the California Institute for Labor and Employment, a supposed think-tank at UCLA and UC Berkeley which is, in reality, a front for union-backed legislative campaigns. Together that package amounts to considerable leverage for those who represent a scant 13.2 percent of workers, according to the federal Bureau of Labor statistics.

Now unions and their political allies want to use state pension systems to further attack privatization. They might suggest a new California motto, "everything within the state, nothing outside the state," if it hadn't been used already.

K. Lloyd Billingsley is editorial director of the Pacific Research Institute in San Francisco. He can be reached via email at klbillingsley@pacificresearch.org.