We’re just wondering what took them so long. Turns out, state leaders, led by the Regents of the University of California, are discussing legislation to placate venture capitalists upset by the disclosure of some of their secret info. UC and other state pension funds have irked venture capitalists by disclosing sensitive information like fees they pay to the venture firms to manage state pension and endowment monies, and their financial performance results.

On Monday, the ball started rolling. The Regents enlisted the help of Bill Bagley, the former assemblyman who wrote much of the state’s public record laws, to act as the “ambassador of goodwill” in dealing with the other side, the California Newspaper Publishers Association, to arrive at a legal compromise.

The talks are significant because big state investors like CalPERS, the $170 billion public pension fund, CalSTRS, the slightly smaller teachers pension fund, UC and others make California the biggest state for private equity investing — and so it could help set standards for the rest of the country, if not the world.

Bagley presided over a two-hour off-record meeting Monday between Treasurer David Russ, three of Russ’ legislative and legal aides, Tom Newton, chief counsel of the CNPA, Peter Scheer of the California First Amendment Coalition and a few others.

We called up both sides to see what progress they’d made.

It was the very first meeting, and there was a conciliatory tone. The talks were embryonic, but both sides agreed that UC would now list the sorts of information it wants to keep from disclosing going forward. Apparently, UC has reconciled itself to the need for providing things like performance (internal rates of return) and fee information on its venture investments. But venture capital firms are nervous that UC will start disclosing even more sensitive information — like the value and the names of the individual portfolio investments — and are threatening to eject UC as an investor. So UC wants to pass legislation — with Bagley’s lobbying help — to make clear that future suits won’t force even more disclosure.

(This past summer, Russ said that about 20 venture capital funds the UC had sought out as new partners had rejected the university’s money. It’s that sort of report that’s getting through to the CNPA, and we got the distinct impression from our sources that legislation will indeed be coming.)

The CNPA’s Tom Newton said that he and the others at yesterday’s meeting listened to UC’s pitch, and are willing to consider it. “We made it clear that the CNPA has no intention of hurting the UC Regents system,” he said. “It’s an open issue as to whether a certain high-level of sunshine would do that. Our goal is to make them prove their case.” Now the ball is in UC’s court, he said, as UC goes back to draw up a list of the information it considers too confidential to disclose. Newton said he understood the concern of UC and their VC partners that they are on “a legal slippery slope and that they want to make it less slippery.” Newton hopes to arrive at a deal that won’t compromise California’s open records laws. “I expect them (UC) to move fairly quickly.”

UC spokesman Trey Davis didn’t want to comment directly on the meeting, but did say “we have had problems participating in VC funds because of disclosure and we’re discussing ways to find disclosure limitations.” He added: “We’re exploring options that other states and institutions have been looking at across the country.”

Indeed, Michigan, Colorado, Massachusetts, Virginia and Illinois and others have all already taken such steps, or are considering them. Michigan’s legislative steps were talked about the most Monday, because it’s the other state where its public university system (the University of Michigan) had access to top-tier venture firms like Kleiner Perkins and Sequoia. That legislation calls for underlying portfolio company valuations to be kept confidential.

The shocker Monday was a confession by the UC side that they’d wanted to disclose IRRs to the Mercury News when it and others first filed suit over a year ago asking for that information, but that UC’s outside lawyers had told them not to (using the slippery slope argument: “You give them an inch, they’ll take a mile”). The state then spent around $500,000 in taxpayer dollars to fight the suit, paying high priced ($600 an hour) lawyer Jerry Falk. The state then lost the suit, and the other side didn’t ask for underlying portfolio company valuation information after all.

Full disclosure: The Mercury News, for which we write, is a member of the CNPA.