Any business that bids to supply public services better or cheaper than government itself has just been put on notice -- back off or risk ruin. In an action extraordinary for its blatant attack on free enterprise and taxpayers, the board of the California Public Employee Retirement System instructed its staff on Monday to research ways to restrict investments in companies that supply public services and thus, the board argues, replace some of CalPERS' 1.4 million members out of work.

Worth $144 billion, the fund is so massive that it can move markets. Any business that runs afoul of CalPERS now risks having investments withdrawn. That's absurd and wrong.

The PERS broad, dominated by public employee unions, has a fiduciary responsibility to safeguard retirement funds of PERS members. But they have a responsibility to protect taxpayers as well. Controller Steve Westley, one of the statewide elected officials on the board, in particular, failed to do so. He strongly backed the proposed policy change.

Alone among the board members, state Treasurer Phil Angelides raised concerns, calling the policy pushed by his colleagues "fraught with peril. ... There may be instances," Angelides stated correctly, "where jobs can best be provided by the private sector."

Over and over, the PERS board has made decisions that have benefited public employee unions at the expense of taxpayers. But when a public board attempts to use its unchecked power to punish businesses and local governments that try to deliver efficient services through contracting, it threatens democracy itself.