The University of California pension system has $21 billion in unfunded liabilities.
"Consider: Raising the employee contribution to pensions from 2 percent to 5 percent of each paycheck. The UC itself would increase its own contribution from 4 percent to 10 percent.
I know. I know. An outrage. And that's not even the worst part.
While the current system allows employees to retire and receive a pension at age 50, under the recommendations new UC employees would not be able to retire and receive a pension until they reach the highly advanced age of 55."
Maybe if the unions had not screwed up the system, we would all be better off.
There's hell. And then there's pension reform hell.
This observation is based on the news that the University of California's pension plan faces a $20 billion shortfall. So the administration at UC is offering some bitter, bitter medicine.
Consider: Raising the employee contribution to pensions from 2 percent to 5 percent of each paycheck. The UC itself would increase its own contribution from 4 percent to 10 percent.
I know. I know. An outrage. And that's not even the worst part.
While the current system allows employees to retire and receive a pension at age 50, under the recommendations new UC employees would not be able to retire and receive a pension until they reach the highly advanced age of 55.
I don't know why anyone would take this sort of thing lying down. To the barricades!
Emanuelle
1
I've worked for UC for over ten years, am over 50 and could retire tomorrow... albeit I wouldn't be receiving enough pension to pay rent. There are two things that I've noticed about the early retirement age:
(1) Employees retire and then go back to the private sector. They're collecting a pension, using UC's very good health benefits, and still working for a wage.
(2) It's my opinion that there's an incentive to get rid of older workers and hire younger, lower paid workers. I've seen this every time there's a round of layoffs. Older workers are encouraged to retire v. be laid off. I don't have any stats to prove this, although it would be interesting to see some. Also, squeezing out older workers provides open positions for recent UC grads (a jobs program for an underemployed demographic).
For anyone interested, UC recently did a pension comparison with similar institutions, CALPERS and two private companies.
http://universityofcalifornia.edu/news/article/23962
It looks to me that the Democrats in Sacramento have a theory. If the deficit and debt continue to grow, if the pension plan implodes, then government will collapse. The collapsed government will give them an opportunity to grow the power and scope of government, making government even important controlling then it is today.
"I've frequently argued that, as the state faces an unfunded pension liability that’s as high as $500 billion, legislators are not doing anything about a problem that is depleting public services and imposing additional debt and tax burdens on Californians.
In fact, the states legislators are doing something: They are making the problem worse by expanding benefits and making it harder for localities to reduce the crushing burdens imposed by these union-friendly deals.
Against the backdrop of a $19 billion budget deficit, a long-past budget deadline and growing public anxiety over a faltering economy and increasing government debt levels, the state Legislature last week moved forward a union-backed bill that would make it nearly impossible for cities to declare bankruptcy when they can't pay the bills because of ballooning personnel costs."
The Democrats, owned by the unions have decided to make the pension crisis worse! What did you expect, responsible policies from the union owned Democrats? The good news is that this will cause fewer jobs, less crowded freeways and fewer revenues--which mean more pressure for more furlough days, fewer government hiring, and fewer paying bribes to unions in order to work.
Ive frequently argued that, as the state faces an unfunded pension liability that’s as high as $500 billion, legislators are not doing anything about a problem that is depleting public services and imposing additional debt and tax burdens on Californians.
In fact, the states legislators are doing something: They are making the problem worse by expanding benefits and making it harder for localities to reduce the crushing burdens imposed by these union-friendly deals.
Against the backdrop of a $19 billion budget deficit, a long-past budget deadline and growing public anxiety over a faltering economy and increasing government debt levels, the state Legislature last week moved forward a union-backed bill that would make it nearly impossible for cities to declare bankruptcy when they cant pay the bills because of ballooning personnel costs.
Legislators have also recently approved a bill that would expand the cancer presumption for certain classes of government employee meaning that if retirees get any sort of cancer a decade or more after retiring that it is presumed to be caused by their job, which opens up yet another storehouse of taxpayer funds and further burdens a faltering debt-soaked system.
And a much-ballyhooed pension-reform bill with the modest goal of reining in the most egregious pension-spiking schemes was gutted by unions and their lackeys to make it even easier for public employees to pad their pensions by including uniform allowances, sick leave and other benefits as part of the salary formula by which the final retirement benefit is calculated.
The unions have such control over the state and in many cases the Democratic legislators themselves are union officials, dedicated mainly to advancing the interests of their special-interest colleagues that even bills that everyone publicly says are needed to fix abuses get quietly turned into further expansions of the Pension Giveaway game.
To average people, the problem is clear. The public-employee pay and pension situation has gotten out of hand. The state has promised far more benefits than taxpayers can afford. The scoundrels in the city of Bell, where the city manager earned more than $800,000 a year plus 28 weeks of vacation and a pension worth about $30 million, represent the problem at its ludicrous extreme. But the enrichment games have gone on all over the state, and up and down the ladder from rank-and-file government workers to top managers.
This is an unfair situation, especially given the modest retirement programs that most private-sector employees must rely upon. And it is harming those services that the government is supposed to provide. As the Fresno Bee reported, County government is becoming a pension provider that provides government services on the side.
The solutions are clear, also: Reduce pensions, especially going forward. Stop the pension-spiking abuses. Rein in union power, through paycheck protection (reducing unions ability to use mandatory dues for political purposes), and cut the pay packages of government employees to more closely resemble their counterparts in the private sector. Cutting back on government and privatizing services also would help.
To legislators, all of that is heresy. The unions and states Democrats have their solutions: Raise taxes early and often. Spend more. Repeat step one. They want voters to eliminate the two-thirds vote requirement for passing budgets and ultimately would get rid of the two-thirds vote requirement for raising taxes. I’ve increasingly seen those union bumper stickers: Repeal Prop. 13.
So legislative Democrats squelched a modest plan to create a lower but still-generous pension plan for new state employees. And a Senate committee voted for Assembly Bill 155, which would require broke cities to get bankruptcy approval through a commission or submit their financial information to the state auditor before receiving approval to take their insolvency to court. All the usual union subjects and Treasurer Bill Lockyer who had given lip service to the unsustainability of the pension system backed the bill.
The San Jose Mercury News captured the essence of this travesty: The bill would require local governments to jump through hoops in the state bureaucracy before filing for bankruptcy not to protect the taxpayers but to make it more difficult for labor union contracts to be voided in bankruptcy court.
The unions goal is to take off the table every way of dealing with the problem reducing existing pensions, lowering future pensions, bankruptcy, etc. save for one solution raising taxes to sustain the style of living to which our public servants have become accustomed.
Oblivious to the fiscal calamity at our door, the unions keep pushing for more, such as the William Dallas Jones Cancer Presumption Act of 2010. As Matt Smith writes in the San Francisco Weekly, If Gov. Arnold Schwarzenegger signs the bill, it would compel workers compensation officials to presume that firefighters and police officers who get cancer long after they retire became sick because of work. So if chain-smoking cops develop lung cancer nine years after leaving the job, the government will have to pay their workers comp health care costs. But thats not all. In many cases, the government would throw in disability pay on top of retirees pensions.
Still, the most telling story from recent weeks regards Assemblywoman Fiona Mas AB1987, which is designed and still championed as a measure that would fight pension spiking. But after the requisite union amendments, the bill now codifies items that can be added to the final pay calculation, thus making it easier for public employees to enhance their pay and inflate their pensions.
We should be taking away the candy, not adding more, said pension-reform advocate Marcia Fritz in published reports.
Thats Californias Legislature in a nutshell. Take an effort to fix the pension problem, gut it and let the unions add amendments that make the problem worse, while still calling it reform. Then look for more ways to raise our taxes.
chris, Liz
2
what is the end game in an effort to bankrupt our state? where are the philosophers revealing the horrible truth that there are traitors in our midst and at the highest levels of authority!
Just curious. Does California have its own mint, or is it contemplating issuing scrip to its bloated pension system? We're already using IOUs, so why not extend that to pensions of our esteemed unionized workers? A few years of that in a row, and wanna bet they'll settle for normalized pensions on par with the private sector and real money?
CalSTRS has more than $24 billion in unfunded liabilities
Now we need to add to that $21billion in unfunded liabilities.
Worse, "The University of California has a $21 billion deficit in its retirement and pension fund, and that could double in five years.
On Monday the university reported the unfunded liability and said that in five years the shortfall could be $40 billion, which is twice the size of the entire UC system budget.
In order to try and stem this flow of red ink, the University of California hopes to raise the amount of money UC workers and schools pay into the retirement plan by July 2012."
Add to this the $140 billion in deficits in six years, thank you Arnold.
Then the hundreds of billions in debt, more than 12% unemployment, AB 32 and SB 375, highest taxes in the nation and the lack of a budget, with none in sight for months, and you understand why California is in a Great Depression.
The University of California has a $21 billion deficit in its retirement and pension fund, and that could double in five years.
On Monday the university reported the unfunded liability and said that in five years the shortfall could be $40 billion, which is twice the size of the entire UC system budget.
In order to try and stem this flow of red ink, the University of California hopes to raise the amount of money UC workers and schools pay into the retirement plan by July 2012.
The university also wants to set up a new pension deal for UC workers hired after July 2013, which includes raising the earliest retirement age from 50 to 55 years old. Faculty and staff would have to work more years to reach the maximum pension payout, too. Today, workers reach the maximum benefit at age 60, but the new proposals push that to 65.
Typically, university staff retire at age 60, while faculty retire at 66.
Retiree health benefits would also be tinkered with to save money. UC hopes, over time, to cut its contributions to retiree health insurance premiums to 70 percent of the cost.
All these recommendations came from a panel created more than a year ago by UCs president, Mark Yudof, to solve the ballooning pension obligations problem.
UC Regents will talk about these proposals and vote on some of them in mid-September.
Most of these changes, the university said, would be subject to collective bargaining for union workers. That means there will likely be some more bumps in the road before they can be implemented.
CalPers has $525 billion in unfunded liabilities. That, according to the StanfordUniversity study is unsustainable.
Still, in an effort to put one over on the public and steal more money from the workers, CalPers is going to spend $600,000 on a public relations program to fool us, once again.
"CalSTRS is paying two public affairs firms up to $600,00 this fiscal year to help tell system members and legislators about the need to begin closing a huge funding shortfall.
The contract with Edelman and Lucas Public Affairs allows two top executives to bill at the rate of $250 an hour, three others at $225 an hour, two at $210 an hour, and three at $150 to $125 an hour. The firms also can bill CalSTRS for travel expenses."
Is there anybody in government or the finance community that does not know that CalPers is broke? This is a payoff to someone, not a serious effort. If it is to educate about the problem, send a letter. Spending $600,000 is corruption, period.
CalSTRS is paying two public affairs firms up to $600,00 this fiscal year to help tell system members and legislators about the need to begin closing a huge funding shortfall.
The contract with Edelman and Lucas Public Affairs allows two top executives to bill at the rate of $250 an hour, three others at $225 an hour, two at $210 an hour, and three at $150 to $125 an hour. The firms also can bill CalSTRS for travel expenses.
Unlike most public employee pension systems in California, the California State Teachers Retirement System lacks the power to set the annual contribution rate that must be paid by government employers.
Instead, CalSTRS needs legislation to change the annual payments made to the fund by the state. But state lawmakers, two months into the new fiscal year, cannot agree on closing a $19 billion state budget gap, an annual deadlock over cuts vs. tax increases.
A deep recession has forced historic state budget cuts, despite a tax increase last year that was expected to yield $12 billion in new revenue. A state general fund budgeted at $103 billion two years ago plunged to $83 billion in the governors proposal this year.
In an era of widespread budget blood-letting, including teacher layoffs, CalSTRS knows that it wont get a $4 billion annual contribution increase, the estimated amount needed to reach full funding after 30 years.
But CalSTRS wants to lay the groundwork for an increase. As state lawmakers face wrenching budget choices, there is no urgent need to spend more now to begin closing the CalSTRS funding gap.
A new report from an actuary, Milliman, to be presented to the CalSTRS board this week says that without a rate increase the pension fund, worth roughly $130 billion, is not expected to run out of money for 35 years.
But its pay now or pay more later. The new report says full funding after 30 years requires an annual contribution increase of 14 percent of teacher pay, unchanged from an estimate earlier this year.
A February report showed the cost of delay. An increase of 14 percent of pay costs $4 billion a year now. Do nothing for five years and the full-funding cost jumps to 16 percent of pay or $6 billion a year. Wait 15 years and its 22 percent or $12 billion.
You begin to (get) this question at what point does it become unaffordable and the whole thing collapses unto itself, Ed Derman, CalSTRS deputy chief executive, told the board.
CalSTRS began approaching lawmakers and teachers about the need for more funding three years ago, said the February report. A common response was that CalSTRS could invest its way out of the problem.
After all, CalSTRS had a low funding level in the 1970s, about 30 percent of what was needed for future obligations. Proposition 21 in 1984 lifted a lid that kept most pension money in bonds, allowing a shift to stocks and other risky investments.
A booming stock market and the Elder full funding plan (former Assemblyman Dave Elder, D-LongBeach) to increase state contribution helped boost CalSTRS funding to 110 percent by 2000.
As investment yields soared, the California Public Employees Retirement System lowered the states annual payment while sponsoring SB 400 in 1999, a major state worker pension increase setting a trend for local public pensions.
CalPERS told legislators investment earnings would pay for the benefits, leaving state costs unchanged for a decade. Now Gov. Arnold Schwarzenegger says soaring pension costs divert money from other programs and is demanding a roll back of SB 400.
Lesser-known legislation in 1998 and 2000 boosted CalSTRS pensions, mainly targeted at keeping experienced teachers on the job. In exchange, the annual state payment to CalSTRS was cut from 4.3 percent of pay to a little over 2 percent.
Derman told the board in February that Milliman actuaries found that the declining funding level, 78 percent in the new report, is the result of low investment yields and the stock market crash, not the benefit increase a decade ago.
If investments had hit their investment target during the last decade, an annual 8 percent average, CalSTRS would be 109 percent funded, he said. If returns during the last decade averaged 7 percent, CalSTRS would be 100 percent funded.
But CalSTRS had huge investment losses. The investment fund peaked at $180 billion in October 2007 and dropped to $112 billion in March of last year, before rebounding to about $130 billion.
Another change could drive up CalSTRS costs. Amid criticism that earning forecasts are too optimistic, concealing pension fund debt, the CalSTRS board is considering a staff recommendation to drop the assumed rate from 8 to 7.5 percent.
The board delayed action until November. If the annual earning forecast is dropped to 7.5 percent for the next 30 years, the increase needed for full funding jumps from $4 billion a year to roughly $5.6 billion or 20 percent of pay.
Yet another potential problem: If the employer contribution to CalSTRS is increased, would the Proposition 98 school-funding guarantee require more money for schools?
That would make the cost of a contribution increase even more expensive. Derman said the attorney general and the legislative counsel reached opposite legal conclusions on triggering Proposition 98 funding, one yes and the other no.
Who would make an increased payment to CalSTRS is not clear. In the fiscal year ending in June of last year, CalSTRS received $5.3 billion in contributions based on 8 percent of pay from teachers, 8.25 percent from districts and 4.5 percent from the state.
The CalSTRS board adopted a funding strategy four years ago, when the shortfall was smaller, that would increase contributions from districts and the state. A modest member increase would modify the 2 percent cost-of-living adjustment for retirees.
At the February meeting, the board was told that the average CalSTRS retiree receives a $4,200 monthly pension after 29 years of service, replacing 62 percent of the final salary.
A pension reform group lists 3,090 persons retired teachers and administrators receiving annual pensions of more than $100,000 from CalSTRS.
Unlike most state and local government workers, teachers in CalSTRS do not receive Social Security in addition to their pension, and many teachers do not receive retiree health care, which is negotiated with districts.
The funding strategy outlined in a report at the February meeting did not mention the hiring of public relation firms. But the board, on a split vote, increased the authority for the CalSTRS chief executive officer, Jack Ehnes, to approve non-investment contracts.
The previous limit of $500,000 was raised to $1 million. State Treasurer Bill Lockyers representative, Chris Solich, asked for a roll call vote, saying it was no reflection on Ehnes but no executive should have that authority in tough budget times.
Solich, and board member Harry Keiley voted no. Board member Carolyn Widener abstained. Seven board members voted in favor of the expanded delegation of authority.
The CalSTRS contract with Edelman-Lucas for up to $600,000 from June 28 through next June 30 was approved by chief of staff Christine Ford under Ehnes authority. The other bid came from another partnership, Ogilvy and Lincoln Crow.
Contractor shall implement a coordinated, multi-layered outreach strategy with identified communications channels to educate and engage CalSTRS members, school district employers and members of the Legislature about the need for prompt action to address the Defined Benefit Programs unfunded liability, said the contract.
Among other things, said the contract, Edelman-Lucas shall provide overall management of a grassroots effort/campaign and assist in developing internal competences in an engagement of up to three years.
Steve Brackett
1
This blog info seems a bit one-sided. The STATE set-up CalPERS (and CalSTRS) many years ago, with a design that allowed employers (like the State) to make contributions (or not) depending upon fund financial results/forecasts. Meanwhile EMPLOYEES are required to pay a flat 6 1/2% or up to 9% of their salary every month... regardless of the the above fund results.
Sadly, EMPLOYERS have been unwilling to "save for the rainy day" (knowing that their great days of "zero" contributions would soon be erased by higher contribution rates), and subsequently cry the blues about not having the money... when they KNEW such higher rates were inevitable!
If they really cared about their responsibility to employees and the funds, and being financially wise, thye would have "saved for the rainy day", or altered their (variable interest, if you will) contribution method, to a more stable annual, flatter contribution rate (with perhaps 3-5 year adjustments), so that such better fit modern budgeting needs.
They are the ones in control of such plan designs, not the employees!
Much work is needed on Pensions... thus far no one seems to be doing much but throwing mud and pointing fingers!
Steve Brackett
Liberals and Democrats (sorry about being redundant) hate facts.
""Q. The average public employee pension is less than $30,000 a year. So aren't critics only scapegoating public employees because of the current tough times?
"These averages are misleading given that they include all the many people who have worked in the public employee system over the years, many of whom worked for short periods of time. The massive pension increases have taken place over the last decade, so that amount is higher for newer employees. The average new CHP employee has a pension of almost $90,000 a year. Even the lowest number is far higher than the average pension for private-sector workers. And the number of $100,000 Pension Club members in California is at 15,000 and growing by 40 percent a year. The formulas are the formulas. If a person starts work in an agency that offers 2.7 percent at 55, that person will retire with 81 percent of their final years pay after 30 years, period."
Cal Watchdog's Steven Greenhut, a veteran California newspaperman who is also an Examiner contributor, has a superb FAQ piece up that addresses the major myths propounded by the special interest defenders of the outrageously generous public pension systems that have become one of the nation's biggest obstacles to economic growth.
One of the often-heard claims by those defenders is that public pensions really aren't that generous, especially when compared to those of supposed corporate "fat cats." Here's how Greenhut addresses this claim regarding California's system, which is perhaps the nation's sickest:
"Q. The average public employee pension is less than $30,000 a year. So aren't critics only scapegoating public employees because of the current tough times?
"These averages are misleading given that they include all the many people who have worked in the public employee system over the years, many of whom worked for short periods of time. The massive pension increases have taken place over the last decade, so that amount is higher for newer employees. The average new CHP employee has a pension of almost $90,000 a year. Even the lowest number is far higher than the average pension for private-sector workers. And the number of $100,000 Pension Club members in California is at 15,000 and growing by 40 percent a year. The formulas are the formulas. If a person starts work in an agency that offers 2.7 percent at 55, that person will retire with 81 percent of their final years pay after 30 years, period. That’s far more generous than what’s available to most private-sector workers. Reporters need to do more comparisons between private-sector and public-sector benefits."
Now even the rich of Santa Barbara have to reconsider allowing unions to own the city.
"Santa Barbara contributes 40 percent to police and fire pensions and 20 percent to those of other employees. By comparison, the city contributed about 10 percent each to police officers and firefighters, and about 4 percent other employees.
Samario said that even without salary increases, the city is going to continue having to spend similar rates on pensions. In the presentation, he said retirement costs are expected to increase by about $4 million by 2015, just because of losses sustained in 2009.
Were definitely under-funded today, Samario said. Ten years ago we were over-funded.
Armstrong estimated the city is under-funded by tens of millions of dollars when it comes to employee pensions."
Maybe it would be good for Santa Barbara to go belly up due to union excesses. In the 1980's the definition of a conservative was a liberal who was mugged. Now it could be a conservative is a liberal who sold his city to the special interests and the unions.
Employee pensions are increasingly draining Santa Barbaras general fund budget, at a time when the city is locked in heated salary negotiations with public safety bargaining groups as it navigates through tough fiscal years ahead.
Council members met with city staff in a special meeting Thursday in the David Gebhardt Public Meeting Room at the Public Works building.
Employee Relations Manager Kristy Schmidt and Finance Director Bob Samario presented information regarding the way employees are hired, how they’re compensated and how their retirement packages are put together.
The special meeting was held by the request of the council.
The city is a very complex organization, said City Administrator Jim Armstrong. The natures of the duties people perform are very technical and complex.
Armstrong said the citys salary information is very transparent.
Even the two appointed officials, he said, referring to City Attorney Steve Wiley and himself, we get pretty much the same benefits as every other employee.
City employees, like those of most other public agencies, receive pensions through the California Public Employee Retirement System, commonly known as CalPERS.
Employees pay into benefit programs but the city is also required to contribute money from the general fund.
In 2000, the city contributed about 9 percent of money from the general fund to employee pensions. That figure is estimated to be more than 40 percent of the fund this year, and it could grow slightly over the next few years.
Samario said the burden on the general fund is a liability from changes in the CalPERS plans but mostly because of the agencys significant loss in assets in recent years.
Its a cyclical type of funding approach, he said. We had a big surplus in 2000 and now were at a liability.
Santa Barbara contributes 40 percent to police and fire pensions and 20 percent to those of other employees. By comparison, the city contributed about 10 percent each to police officers and firefighters, and about 4 percent other employees.
Samario said that even without salary increases, the city is going to continue having to spend similar rates on pensions. In the presentation, he said retirement costs are expected to increase by about $4 million by 2015, just because of losses sustained in 2009.
Were definitely under-funded today, Samario said. Ten years ago we were over-funded.
Armstrong estimated the city is under-funded by tens of millions of dollars when it comes to employee pensions.
Certainly the PERS consequences are something we have to grapple with, Mayor Helene Schneider said. We have to look at other public agencies. You don’t hire a police officer or firefighter in the private sector.
City staff, as well as some members of council, said the reason for providing such benefits is to retain current employees instead of enduring high amounts of turnover, which could be even more detrimental to finances.
Were going to lose employees to competitive agencies because they’re paying better or providing richer benefits, Schmidt said. At this point in time were not talking at all about salary increases.
Councilman Das Williams said the pressure pensions were putting on the citys general fund was not sustainable.
It’s in the citys best interest that employees should be paying part of these pension costs, he said.
Schneider said the city can’t base its plans on what the private sector has to offer because of the different services provided and must continue to analyze the packages offered by neighboring and regional municipalities.
There might be great benefits in public service but the cost of providing those services is tremendous, she said. That’s why most of the money in the general fund goes to salaries and benefits. That’s how we get things done.
Frank
1
The same thing is happining in Redlands, CA.
The City of Redlands wants a tax increase rather than cut the outrageous pay and pensions.
http://www.redlandsrecall.com/
Top 3 of 28 City of Redlands employees that are paid in excess of $ 100,000.00 a year. http://www.redlandsrecall.com/100k-club/city-redlands-employees/
Position a year
Redlands Police Chief
Jim Bueermann $ 435,364.87
Redlands City Manager
N. Enrique Martinez $ 341,044.20
Redlands Fire Chief
Jeff Frazier $ 326,891.88
Some of these numbers are so large that they are difficult to comprehend. So, let’s take a look at Jim Bueermann, Redlands Police Chief’s $ 435,364.87 annual pay, and break it down.
$ 435,364.87 a year
$ 36,280.41 a month
$ 8,372.40 a week
$ 1,674.48 a day
$ 209.31 an hour
Top 3 of 29 former City of Redlands employees that receive pensions in excess of $ 100,000.00 a year. http://www.redlandsrecall.com/100k-club/city-redlands-pensions/
Name a year
Cletus Hyman $ 173,383.56
Larry Egan $ 170,429.64
John Habant $ 167,976.84
Top 3 of 10 former Redlands Unified School District employees that receive pensions in excess of $ 100,000.00 a year. http://www.redlandsrecall.com/100k-club/redlands-unified-school-district-pensions/
Name a year
Robert Hodges $ 166,465.92
Sharon Regalado $ 144,899.28
Yolanda Contreras $ 129,904.68
According to a Stanford study, the State pension plans have approximately $525 billion in unfunded liabilities. This is money we taxpayers will have to pay.
"Unfunded public pension liabilities, which a PewCenter on the States report calculates is now as high as $1 trillion nationwide, threaten to bankrupt states that fail to address this ticking fiscal time bomb. But in California, which has an unimaginable $500 billion public pension problem and became the object of national ridicule for outrageous pension abuses in Bell, state lawmakers still couldn’t bring themselves to pass legislation preventing highly paid government employees from using unused vacation and sick days accumulated during their last year on the job to pad their life-long pensions."
Even marginal changes that could save a few billion are held up by the Democrat controlled Sacramento legislature.
Utah, under Republican control was able to change their problem pension plan.
"Utah doesn’t have that problem anymore. In March, the state legislature became the first in the nation to pass a major overhaul of the states defined benefit pension system after it lost 30 percent of its assets ($4 billion) in the stock market. All current employees will continue in the present system. But all new workers hired after July 1, 2011 can choose to enroll in either a 401(k) or a hybrid pension system that caps state contributions at 10 percent of employees salaries no matter what the stock market does."
This explains why so many California companies are moving to Utah. That State has a responsible legislature; we have one owned by the unions and a Governor who on September 9 will go on a six day tour of Asia, even if we do not have a budget. California is in a Great Depression and those running the State like it like that.
By: Barbara Hollingsworth, Washington Examiner, 8/25/10
Unfunded public pension liabilities, which a Pew Center on the States report calculates is now as high as $1 trillion nationwide, threaten to bankrupt states that fail to address this ticking fiscal time bomb. But in California, which has an unimaginable $500 billion public pension problem and became the object of national ridicule for outrageous pension abuses in Bell, state lawmakers still couldnt bring themselves to pass legislation preventing highly paid government employees from using unused vacation and sick days accumulated during their last year on the job to pad their life-long pensions.
The watered down legislation allows public employee unions to negotiate what should be counted towards pension benefits. We should be taking away the candy, not adding more, Marcia Fritz of the California Foundation for Fiscal Responsibility complained to the Los Angeles Times.
Utah doesnt have that problem anymore. In March, the state legislature became the first in the nation to pass a major overhaul of the states defined benefit pension system after it lost 30 percent of its assets ($4 billion) in the stock market. All current employees will continue in the present system. But all new workers hired after July 1, 2011 can choose to enroll in either a 401(k) or a hybrid pension system that caps state contributions at 10 percent of employees salaries no matter what the stock market does.
Utah state Senator Dan Liljenquist, who sponsored the legislation, said it was the only way to honor current pension commitments and also keep unfunded pension liabilities from bankrupting his state.
Other states have tried increasing retirement age, scaling back retiree benefits, freezing cost of living increases and requiring employees to start contributing to their pension plans, but hybrid plans like Utahs are increasingly viewed as the best way to keep government promises to current employees while scaling them back to sustainable levels for future workers.
We’ve completely eliminated the pension-related bankruptcy risk. This is exactly what California needs to do, Liljenquist told The Examiner, adding that all the public unions in Utah were initially opposed to the idea. But they eventually realized that we preserved benefits for current employees, and if we go bankrupt, all pensioners will be out of luck.
The statutes requirement that all current pension obligations must be funded before the cap is raised, which Liljenquist estimates may take as along as 15 years, will make it difficult for future legislatures to increase it. This was the only rational way to go, or we wouldn’t survive, he added.
Contrast that with Californias irrational ability to make even minor adjustments to its unsustainable pension system, virtually guaranteeing its own demise.
TheRandyGuy, Veronica
2
The really good (or terrible) thing is that with the money gone, this state will face the specter of bankruptcy because no matter how much money the government takes, it always spends more. Even now, with a $20 billion deficit, the legislature refuses to cut spending. They're like junkies who are literally killing themselves with drugs but continue to use in spite of the reality. As sad as the situation is, it'll at least be entertaining.
Obama will not let Ppogressive California fail. He will bail us out, further enabling our liberal legislature to spend with abandon.
"The embattled Chief of Police of San Jose, California, Ron Davis, is retiring. Mr. Davis is barely 50 years old. If he lives to an average US male age of 78, he will receive $6,000,000 dollars in pension benefits plus lifetime health insurance for himself and his dependents.
A retirement package is potentially worth $7 to $8 million over his expected lifetime. Given his age, and his recent candidacy for the Chief's job in Dallas, Texas, we can expect that he will be able to improve on this number.
The Chief is an example of typical public employee retirement packages. And these packages are bankrupting state and local governments across the country."
Words for this:
Disgusted Angry Corruption Abused Hurt
"I don't begrudge a good pension to anyone. But, we must begin to ask ourselves how much money should we borrow from China and United Arab Emirates to fund pensions for some while arguing that we cannot afford Social Security for many?"
It is time to end the practice of giving any pensions. Instead, force all government employees to have 401(k) plans. In that way there is equality. And I would begin that today, convert the pensions into 401 (k) and end the unfunded liability disaster that will within three years bring down a majority of cities in the State.
You think only CEOs of big companies get these golden parachutes? $18M for Tony Hayward at BP, $32M for Mark Hurd at HP?
Think, again.
The embattled Chief of Police of San Jose, California, Ron Davis, is retiring. Mr. Davis is barely 50 years old. If he lives to an average US male age of 78, he will receive $6,000,000 dollars in pension benefits plus lifetime health insurance for himself and his dependents.
A retirement package is potentially worth $7 to $8 million over his expected lifetime. Given his age, and his recent candidacy for the Chief's job in Dallas, Texas, we can expect that he will be able to improve on this number.
The Chief is an example of typical public employee retirement packages. And these packages are bankrupting state and local governments across the country.
Last week, the House of Representatives rushed back to Washington to pass a $30B "emergency" bill to help states with teacher salaries for the 2010-11 school year and Medicaid payments for the first half of 2011. The bill is partly paid for by a cynical reduction in food stamp funding - in 2014.
The President hailed the bill for saving thousands of jobs for teachers. In California, the $1.2B in additional funding will create or extend the teaching careers of 16,500 teachers. That works out to $72,727.00 per teacher.
But - the devil is in the details - states are required to accept the money. However, states cannot qualify for the money unless they fund education at the small level as they did in 2009-2010. Puzzling, you say. If there is the same level of funding, how were there layoffs in the first place?
Why did the parents and grandparents in our school district tithe themselves $250 to maintain our teacher/student ratios? The FIRST DEMAND on state budgeted school funding to pay the unfunded liability for teacher pensions - not educating your children!
Even acknowledging that teachers make only a third as much as police chiefs and cannot retire until they are 55 years old, the public liability per teacher can easily top $1 to 1.5M.
By comparison, a private employee paying in the maximum +/-$13,500 a year in employee and employer contributions (requiring an income exceeding $100K) and retiring at age 65, can expect to receive $335,244 in retirement benefits.
I still remember the first 401K briefing I attended at Unisys in the mid 1980s. We had a wonderful presentation from someone from corporate (should have been my first clue). If I made the maximum allowed contribution for the next 20 years - I would have a $1M or more when I retired. I signed up and stayed sign up for the next 20 years - until I left Gartner to found Cordi and Associates. There is no $1M dollars because there was the crash of '87, the recession of '93, the bubble of 2000 - you get the picture, because you, too, are living the story.
I don't begrudge a good pension to anyone. But, we must begin to ask ourselves how much money should we borrow from China and United Arab Emirates to fund pensions for some while arguing that we cannot afford Social Security for many?
We need to finally face the fact that the current economy is not a short-term anomaly but, rather, a long term reality. We need a 10 Year Fiscal Sanity Plan that reflects this new reality for both Public and Private Sector employees and their retirement planning.
Raising taxes on tax payers making over $250K may be the only way we can insure that public employees help pay their own pensions!
ONTIME, dhg2
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RE-PARE AMERICAS'S GOVERNMENTS....The examples as to why are becoming far to numerous.
How sweet it is to retire at 50 with six million dollars to look forward to. Mr. Davis must have been a hell of of cop during his working life.
Arn't taxpayers suckers? Arn't politicians a bunch of crooks? Arn't so called public servants a bunch of whores?
By 2015, one third of the revenues of the City of Los Angeles will go to pay for pensions.
"Vallejo appears to have been the poster child for excessive pension benefits and public worker salaries. A report by the Cato Institute released last year said 74% of Vallejos budget went for police and firefighter salaries and pension benefits. Regular public employees can retire at age 55 with at 81% of their final years pay. Police and fire employees have it even better, retirement at 50 at 90% pay. This certainly seems real cushy as well as financially unsustainable to me."
But, Vallejo is trying to repeal the laws that promote and protect unions. "Four years ago, Vallejo became the first California city to allow private arbitrators to settle pay disputes with its union workers. This June, Vallejo became the states first city to repeal such arbitration. You better believe other cities are watching this carefully and may well follow suit."
Until unions become voluntary, with no special protections or agreements, California will stay in the Great Depression (we also need to deport illegal aliens and repeal phony laws like AB 32).
Who owns California, the people or special interests--the time to decide is now.
by Bob Morris, California Independent Voter network, 8/23/10
In 2008, the California city of Vallejo took the unprecedented step of filing for bankruptcy. A combination of falling revenues caused by the collapse of the real estate bubble and rising public pension costs cratered their finances. Other California cities and counties are watching how Vallejo manages, and may well follow suit.
Indeed, former Los Angeles Mayor Richard Riordan recently said the City of Los Angeles will likely declare bankruptcy by 2014, with excessive pensions being the primary reason why, and that the current administration is ignoring the approaching fiscal tsunami. A primary problem, he says, is the utterly unrealistic assumption that Los Angeles public pension funds will return 8% a year. A steady return of 8% is difficult even in good times, and nearly impossible in rough economic periods like we are facing now. Such rose-colored glasses estimates were also made by state public pension funds like CalPERS, and resulted in equally disastrous results. Rather than making money, the pensions have been losing money. This means state and municipality pension funding now must make up a serious shortfall. Riordan concludes that for Los Angeles to survive it must slash pensions, raise the retirement age, make employees pay more, and eliminate Cadillac pension benefits.
Vallejo appears to have been the poster child for excessive pension benefits and public worker salaries. A report by the Cato Institute released last year said 74% of Vallejos budget went for police and firefighter salaries and pension benefits. Regular public employees can retire at age 55 with at 81% of their final years pay. Police and fire employees have it even better, retirement at 50 at 90% pay. This certainly seems real cushy as well as financially unsustainable to me.
But wait. Ive quoted Riordan and the Cato Institute. Riordan is a Republican with a net worth of $100 million. The Cato Institute is a right-tilting libertarian think tank in DC. Such folks probably have little use for unions, so maybe all this is just a stealth effort to destroy or cripple public employee unions? Because that’s what the battleground is here. Public employee unions are facing off against their own municipalities, with all manner of players jumping in both sides. Do some on the Right see this as an opportunity to clobber the unions? Sure. But Ive not seen anyone dispute what Cato said about Vallejos finances or say that public pension obligations are not the primary reason that such cities are facing financial disaster.
The machinations continue. A pro-union bill, AB 155, was floated in the State Senate which if passed, would have made it much harder for municipalities to file bankruptcy by making them get permission from a state commission first. This could take several months, stalling things, and if you don’t think unions would try to stack the commission with those favorable towards them, then I’ve got a nice bridge to sell to you. (And of course, anti-union forces would do the same.) However, the bill has been placed in the Senate Inactive file, probably after a broad coalition, including over 200 local government agencies opposed it.
Four years ago, Vallejo became the first California city to allow private arbitrators to settle pay disputes with its union workers. This June, Vallejo became the states first city to repeal such arbitration. You better believe other cities are watching this carefully and may well follow suit.
Nearly two weeks ago, a municipal bond insurance firm asked the Vallejo bankruptcy court to force the city to pay off their default by using money from vehicle registrations. They say the law does not exempt the city from seeking refuge under bankruptcy laws. Lawyers for the city disagree.
So, you can see how convoluted this is getting. It’ll take years to work out. Vallejo is just the most prominent of the municipal bankruptcies. Others most certainly are coming. We need to prepare for it now.
Lying by omission is the way most government agencies operate. CalPERS has over $500 billion in unfunded liabilities. Part of the reason is that they did not tell the truth to the Legislature
"CalPERS will begin showing state and local governments how much their costs will go up if investment earnings fall short, a risk critics say has been concealed in the past.
The giant public pension fund told legislators that a major benefit increase for state workers a decade ago, SB 400 in 1999, could be paid for with investment earnings, leaving state costs unchanged for a decade.
What legislators weren't told was that CalPERS actuaries had made a remarkably accurate forecast of what could happen if earnings fell short annual state costs that had been $160 million in 2000 could soar to $3.9 billion by 2010."
CalPERS will begin showing state and local governments how much their costs will go up if investment earnings fall short, a risk critics say has been concealed in the past.
The giant public pension fund told legislators that a major benefit increase for state workers a decade ago, SB 400 in 1999, could be paid for with investment earnings, leaving state costs unchanged for a decade.
What legislators werent told was that CalPERS actuaries had made a remarkably accurate forecast of what could happen if earnings fell short annual state costs that had been $160 million in 2000 could soar to $3.9 billion by 2010.
Unfortunately, thats almost precisely what happened as earnings sagged during the past decade, then plunged in a historic stock market crash two years ago.
Now the giant California Public Employees Retirement System, responding to criticism, is changing the annual reports given to the state and the 3,000 local governments and school districts in the system.
Actuaries told the CalPERS board this week that the annual valuation report to government employers will be expanded with an investment return sensitivity analysis that shows five scenarios.
In addition to the usual forecast, two scenarios will show what happens to the employers cost if the earnings are a little or a lot below the target of 7.75 percent. Two more scenarios will show what happens if earnings are above the target.
Staff believes providing this sensitivity analysis will allow employers to better budget for the future by being more aware of the potential risk to their employer contribution rates, said a report from CalPERS actuaries David Lamoureux and Alan Milligan.
This will also be a useful tool for any employer contemplating a benefit improvement by ensuring they are fully aware of potential increases in employer rates in the event of another investment loss, said the report.
The expanded report is an acknowledgement that California public pension funds, once limited to investment in fixed-income bonds, now get most of their revenue from stocks and other unpredictable investments.
A ballot measure in 1966, Proposition 1, allowed pension funds to put up to 25 percent of their investments in blue-chip stocks. Another measure in 1984, Proposition 21, completely lifted the limit, allowing any prudent investment.
In the decade before SB 400 made a big increase in state worker pensions in 1999, CalPERS received 78.6 percent of its revenue from surging earnings, 12 percent from the state, and 9.4 percent from workers.
CalPERS had a large surplus that was expected to help fund the major benefit increase for current and retired workers. The annual state CalPERS payment, $1.2 billion in 1997, was dropped to $160 million by 2000, what some call a contribution holiday.
An Assembly floor analysis of SB 400 said the sponsor, CalPERS, expected to pay for the big benefit increase with surplus assets, investment earnings and an accounting change inflating the value of assets from 90 to 95 percent of market value.
They anticipate that the states contribution to CalPERS will remain below the 1998-99 fiscal year for at least the next decade, said the Assembly analysis. The state contribution to CalPERS in fiscal 1998-99 was $766 million.
An unusual 17-page CalPERS sales brochure for SB 400 told legislators the same thing. A quote from the CalPERS president at the time, William Crist, said the benefit increase would not cost a dime of additional taxpayer money.
SB 400 sailed through the Legislature on a 39-to-0 vote in the Senate, 70-to-7 in the Assembly. But what the bill analysis and the sales brochure did not say is that actuaries had given the CalPERS board three SB 400 scenarios.
If earnings fell short, said one of the forecasts, the state contribution to CalPERS could be $3.9 billion by 2010 a virtual bullseye on the new state rate last month, a $600 million increase from last fiscal year in an era of deep budget cuts and big tax increases.
The new CalPERS plan to give government employers five scenarios, the bad and the good, should no longer conceal risk. The expanded CalPERS reports also address the criticism of hidden debt.
The critics contend that the annual earnings rate assumed by CalPERS, 7.75 percent, is too optimistic. CalPERS hit the target during the last two decades, a period that included a long bull market.
What happens if earnings fall short was dramatically revealed by a Stanford graduate student study in April. Using a risk-free bond rate of 4.1 percent, they calculated that the three state pension funds have a staggering unfunded liability of $500 billion.
The combined unfunded liability reported at the time by CalPERS, the California State Teachers Retirement System and the UC retirement system was about a tenth of that amount, $55 billion.
CalPERS is mid-way through a year-long look at its earnings assumption. Some consultants are forecasting a 7.3 percent earnings rate during the next decade. CalSTRS is considering lowering its earnings rate from 8 to 7.5 percent.
The new CalPERS plan to give employers five scenarios, including two when earnings fall short, should give government employers a view of how pension costs could soar if the critics are right.
The Governmental Accounting Standards Board is considering a proposal that would have public pensions use a bond-based earning rate to report some of their debt. Any change is several years away, and there are mixed reports about the impact.
This week the federal Securities and Exchange Commission accused New Jersey of fraudulently claiming its pensions were properly funded. The action was said to be intended to dissuade other governments from hiding bad fiscal news about pensions.
In New York, California and other places, financial advisers have told lawmakers that benefits could be sweetened at virtually no cost, only to be proved wrong once those benefits were adopted, a New York Times story said.
Gov. Arnold Schwarzenegger is pushing to roll back state worker pensions for new hires to the pre-SB 400 level. He has agreements with a half dozen labor unions, including the trendsetting California Highway Patrol.
Pension reform got an endorsement this week from former Gov. Gray Davis, who was ousted by Schwarzenegger in a recall election seven years ago. Davis told Reuters he thinks controlling pension costs will be the next governors biggest challenge.
Pension reform is essential. You just cant afford the benefits that have been promised because all the actuarial studies turned out to be wildly optimistic, said Davis, who signed SB 400. We have no choice now and if I was governor I would be doing exactly what Arnold is trying to do, which is require people to contribute more to their pensions.
Former Mayor Richard Riordan must be losing it. He is blaming bad policy on pensions as the cause of the soon to be declared bankruptcy of the City of Los Angeles. Guess he forgot HIS role in this mess.
"Los Angeles voters were told in 2001 that a pension increase package for police and firefighters would save the city $196 million a year topping a better known but equally faulty CalPERS forecast that only said a state pension hike would not raise costs.
The voter-approved pension increase in Los Angeles was among the factors mentioned when the city council was told earlier this month that soaring pension and retiree health costs could eat up a third of the citys general fund by 2015.
An irony is that a leading advocate of the pension increase in 2001, then-Mayor Richard Riordan, warned in a Wall Street Journal article last May that Los Angeles is likely to declare bankruptcy by 2014, mainly because of out-of-control retiree costs."
As a private citizen he is preaching "small government". While in office he outbid the Democrats on building bigger government--the pensions are just one example. Confusing?
Here is a hint. Do not listen to his words, watch what he does--who does he endorse or donate to, who does he speak for and what policies he is promoting. His history is not a good one for those who support freedom.
Los Angeles voters were told in 2001 that a pension increase package for police and firefighters would save the city $196 million a year topping a better known but equally faulty CalPERS forecast that only said a state pension hike would not raise costs.
The voter-approved pension increase in Los Angeles was among the factors mentioned when the city council was told earlier this month that soaring pension and retiree health costs could eat up a third of the citys general fund by 2015.
An irony is that a leading advocate of the pension increase in 2001, then-Mayor Richard Riordan, warned in a Wall Street Journal article last May that Los Angeles is likely to declare bankruptcy by 2014, mainly because of out-of-control retiree costs.
The pension increase for Los Angeles police and firefighters was a move to match benefits offered by other government employers, a round of increases that began when CalPERS sponsored legislation, SB 400 in 1999, that raised pensions for state workers.
The major change started at the state of California with the CHP (California Highway Patrol), and then there was a trickle effect which happened across the board among local jurisdictions to sort of meet that new threshold, Miguel Santana, chief administration officer, told the council (Aug. 3).
Keeping pace was one of the reasons for the pension increase given by Riordan and others who signed the ballot argument for the measure on the June 2001 ballot, apparently so uncontroversial that no opposition argument was submitted.
The Citys Fire and Police Pension System used to offer benefits at least equal to those of other public safety agencies in California, but now the City lags behind, said the ballot argument. Charter Amendment A will make city benefits comparable again, allowing us to compete for and retain the best firefighters and police officers.
The giant California Public Employees Retirement System (covering state workers and 3,000 local governments and school districts, but not most major cities like Los Angeles) told the Legislature SB 400 would not raise state costs for a decade.
CalPERS said the new benefits could be paid for with investment earnings, which had been providing about 75 percent of the systems revenue, dwarfing the annual contributions from employers and employees.
But earnings fell far short of the forecast, particularly after a historic stock market crash two years ago. Now state and local governments face sharply increasing pension contributions and questions about whether current benefits are sustainable.
The trendsetting California Highway Patrol union has agreed to lower pension benefits, but only for new hires. Once a worker is vested in a public pension, its regarded as a contract that cant be cut without providing something of equal value.
Santana told the council the much-touted pension reform at the state level, agreements with the CHP and five other unions, will only provide short-term relief. He said increased worker pension contributions had to be offset by a later pay increase of equal or like value.
So at the end of the day it pretty much is a wash, said Santana.
Pension increases such as SB 400 are approved with little or no discussion of the risk to taxpayers, say critics, even though some argue that pensions guaranteed current government employees are Californias biggest debt.
Stanford graduate students, echoing work done by other financial economist academics, have estimated that the three state pension funds have a combined debt of about $500 billion, far greater than the reported $55 billion pension debt.
The academics use a lower forecast of investment earnings based on risk-free bonds, rather than the 7.5 to 8 percent annual earnings assumed by CalPERS, the California State Teachers Retirement System and the UC Retirement system.
In his article last May warning of bankruptcy, Riordan said the fiscal woes of Los Angles can be traced to a growing city workforce and the myth of that 8 percent earnings forecast.
The ballot pamphlet argument in 2001 for the Los Angeles pension measure does not mention the risk to taxpayers if revenue forecasts fall short. Instead, the measure was presented as a way for the city to save money.
An actuarial study shows that the City should save $196 million in the first five years, said the ballot argument. After that, additional cost savings are expected to continue for another five to ten years.
The savings would come from merging four separate funds in the Los Angeles Fire and Police Pension System, tiers one through four, into a single fund, allowing surpluses in one fund to be used to cover liabilities in another.
At the same time, the measure would offer current police and firefighters a new fifth tier with higher benefits: a minimum of 50 percent of final pay at age 50 after 20 years of service, with a maximum of 90 percent after 33 years.
The city council was told this month that contributions to the Fire and Police system for pensions and retiree health were 3.7 percent of the general fund in 2001, 8.67 percent this year and could be 19 percent in 2015, more than $900 million.
Santana said the ballot measure approved by voters in 2001 made a dramatic increase in pension payments for police and firefighters, who retire at an average age of 51.
If you are a retiree in Tier 4 your average retiree benefit when you retire is $45,324, said Santana. If you are a retiree at Tier 5, which the majority of our sworn personnel are, the average benefit is $83,004.
The council was told that a separate system for non-sworn employees, which unlike Police and Fire gets significant special funds, could have pension and retiree health costs in 2015 amounting to about 17 percent of the general fund.
This is obviously unsustainable, said Councilman Bill Rosendahl, who asked for the pension report showing that retirement costs could take a third of the general fund. We cant pay pensions at the expense of basic services, correct?
For every dollar that you pay into your pension systems, replied Santana, you are not paying into libraries, parks and a variety of other services that we provide as a city.
In addition to the 2001 ballot measure, said Santana, other retirement cost drivers are health care (up an average of 10 percent annually), longer life spans, a recent early retirement program and big investment losses in the stock market crash.
He said the administration is talking to unions and considering a new tier of benefits, mainly for new hires. Among the changes being considered are extended retirement ages, a lower formula, a benefit cap, more employee contributions, inflation adjustments, and a lower retiree health subsidy.
The goal is to have the actuarial work for a new plan completed by the end of September, Santana said, and then to put a cost-cutting retirement plan for police and firefighters before voters in March.
Like any totalitarian State, the unions yell scream, intimidate and harass those who fight for responsible government policies.
San Jose has a government pension system, like most systems in California that will force the City into bankruptcy in the future. This has caused legitimate people to suggest, and pay for, a ballot measure that would save the pension plan and protect the financial health of the city government.
Unions hate having real people getting involved in "their" pension scam.
"Michael Moritz, one of SiliconValleys’ most successful venture capitalists, keeps a low profile. An early backer of Yahoo and Google, Moritz avoids the press, though he was himself once a journalist. You never see him at industry conferences. While he has given money to President Obama and a few other politicians of both parties, he has no discernible political ambitions.
But he does apparently feel strongly about the need to change the public employee pension system in San Francisco and his recent decision to contribute $245,000 to that cause has provoked a furious counterattack by public employee unions. Deriding Moritz as a billionaire speculator, a group of unions organized a noisy protest last week in front of his San Francisco home.
The demonstration followed the unions’ vituperative denunciation of an accountant named Craig Weber, who made the mistake of endorsing a pension overhaul while serving on a civil grand jury investigating the issue. Though Weber (no relation) had cleared his action with the grand jurys presiding judge and the city attorney, union leaders have demanded a criminal investigation."
This is why all unions need to be voluntary. Any organization based on extortion, pay us a fee or you are not allowed to work, should not be protected by government, it should be prosecuted.
In this instance the unions prefer the City of San Francisco Go belly up then allow an affordable pension plan. Shame on us for allowing this.
Michael Moritz, one of Silicon Valleys most successful venture capitalists, keeps a low profile. An early backer of Yahoo and Google, Moritz avoids the press, though he was himself once a journalist. You never see him at industry conferences. While he has given money to President Obama and a few other politicians of both parties, he has no discernible political ambitions.
But he does apparently feel strongly about the need to change the public employee pension system in San Francisco and his recent decision to contribute $245,000 to that cause has provoked a furious counterattack by public employee unions. Deriding Moritz as a billionaire speculator, a group of unions organized a noisy protest last week in front of his San Francisco home.
The demonstration followed the unions vituperative denunciation of an accountant named Craig Weber, who made the mistake of endorsing a pension overhaul while serving on a civil grand jury investigating the issue. Though Weber (no relation) had cleared his action with the grand jurys presiding judge and the city attorney, union leaders have demanded a criminal investigation.
On one level, all of this simply underscores a political reality here: you cross the unions at your peril. (Moritz evidently missed the memo; after last weeks hoo-ha, hes refusing to discuss the issue.)
But there is another political reality at play: public resentment of government employees job security and fat benefits at a time when many workers are suffering.
And that raises another question: Are union leaders shooting themselves in the foot?
Playing the class-war card against someone like Moritz is a questionable tactic. Sure, hes very rich, but he got that way doing exactly what makes the local economy tick investing in innovative companies that grow to create good jobs and wealth. In any case, none of the city workers I interviewed at last weeks protest had any idea who Moritz was.
The assault on Weber also seems over the top, given that there is no evidence he is anything other than a concerned citizen volunteering his time to wrestle with a difficult policy issue.
The unions contend that the voter initiative, known as Proposition B and spearheaded by the San Francisco public defender, Jeff Adachi, is really about slashing health benefits. City workers have already agreed to give-backs, union leaders note. Yet Proposition B, besides forcing bigger employee contributions to the pension plan, mandates large increases in their contributions for dependent health care premiums.
Bob Muscat, a local union leader who is heading the anti-Proposition B campaign, is unapologetic about the tactics. There is nothing sincere in what they are saying or doing, Muscat said, so it does get very personal. His anger at Adachi, who he believes is merely trying to advance his political career, is unconcealed.
While Proposition B will clearly save the city a lot of money, its specific long-term impacts depend on the investment performance of the pension funds, actuarial calculations and the cost of health care. Adachi says benefits, if not reined in, will lead to even more cuts in services and ultimately bankrupt the city. The unions disagree, and cite health care premium increases of as much as $350 a month.
Yet the fact remains that San Francisco city workers are among the best paid anywhere. The average salary is $93,000. Workers can retire at 55 in some cases, 62 in others, with pensions of up to 75 percent to 90 percent of their salaries.
This is not lost on voters, so it seems an inopportune time for the unions to go to war. Transit workers have already set themselves up for defeat this fall, when voters will most likely revoke a charter provision guaranteeing their high pay.
If the city unions were to make a more measured case against Proposition B, they might win more support. The health care rollbacks could garner sympathy. The unions could also show more clearly how they are sharing the pain.
But the scorched-earth approach of trying to intimidate the opposition into silence looks politically risky, and perhaps even desperate. When you’re in court and you don’t have a good case, you attack your opponent, Adachi said.
Surely San Francisco voters would be better served by an honest and civilized debate.
ONTIME
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I would be hard pressed not to agree that all union membership should be voluntary and there is no need for closed shops anywhere, it would be more fitting and ethical were there no government unions and employees were allowed a association. Who in the hell gave unions the idea they can control the governments of this country?
When the San Diego County Employees Retirement Association board did not agree to a waiver of more staffers, or going above the cap on salaries, that did not stop the SD pension system.
"But the fund's CEO, Brian White, went ahead, sending a July 7 letter to the county's chief administrator, Walt Ekard, asking for the necessary approval to waive the salary cap and expand the staff. White didn't have his board's approval.
If White's request had been forwarded to the Board of Supervisors, they could've waived the salary limits (or kept them in place) -- without any actual request ever coming from the very people who oversee the county's $7.2 billion pension fund."
The only question I have is why hasn't Brian White been fired? It is obvious that rules mean nothing to him, that he can not be trusted, that the people's money is in the hands of a backdoor operator, not an honest financial leader.
Why are Cal pension plans in trouble? Because they have too many people like Brian White in charge.
If the elected officials will not get rid of Brian White, then it is time to get rid of the elected officials. Get angry or get poor.
When the county's pension fund moved to outsource its investment team to a consultant, County Supervisor Dianne Jacob, a pension trustee, asked to first see how much it'd cost to staff an expanded investment system internally.
Neither Jacob nor the San Diego County Employees Retirement Association board formally agreed to expand the staff, nor did they agree to seek a waiver of pension fund employees' salary limits. Jacob just asked for a comparison so they'd have another option.
But the fund's CEO, Brian White, went ahead, sending a July 7 letter to the county's chief administrator, Walt Ekard, asking for the necessary approval to waive the salary cap and expand the staff. White didn't have his board's approval.
If White's request had been forwarded to the Board of Supervisors, they could've waived the salary limits (or kept them in place) -- without any actual request ever coming from the very people who oversee the county's $7.2 billion pension fund.
Ekard instead sent the proposal back, telling White that the pension board should first decide on it.
White's proposal envisioned creating four positions earning $450,000 annually in base pay and bonuses and another 13 earning $300,000 annually including bonuses. None were slated to earn more than the top investment officer, Lee Partridge, who's listed as a public employee making $886,000 in base pay and incentives.
Those salaries would make the pension fund's employees the highest-paid in county government. Today, no county employee makes more than $274,000.
White now says that his proposal was preliminary and had been sent to see whether the county would be agreeable. He said late Tuesday that he didn't believe he'd exceeded his authority by making the request without his board's approval.
"This is the first step in a process," White said. "I don’t think the county was under the impression that we are asking them to take that schedule and stick it in their salary ordinance."
But Ekard said Wednesday that he believed White's letter was a formal request -- the letter says so -- that sought necessary approval from the Board of Supervisors.
"Since it'd be a fairly radical change to our compensation ordinance and result in a significant decision to pay salaries we've never seen before in county government," Ekard said, "I wanted to make sure it was a decision from the Board of Retirement and not the executive director."
White said the letter was "only part of the story." He said his agency would hire a consultant to study salaries before seeking any changes to its pay structure.
"It's pretty darn difficult to have every word in a background document portray exactly what you're trying to do," he said.
White said Partridge would not become a public employee -- though his proposal outlined a 30-member internal investment team and included Partridge. White said he'd included Partridge only so the internal model's costs would be fully detailed.
He acknowledge the proposal would be a tough sell to the Board of Supervisors, which would have to approve raises for investment staff at the same time it's been laying off other county employees.
"I don't disagree that in these times that where the county is cutting back that this would be a very, very difficult sell," White said. "But if you look at the big picture, it'd save the system potentially a large amount of money."
White estimates that an internal investment staff would save by cutting management expenses. The organization currently budgets $90 million for the outside investors who actually move the fund's money around. Expanding the staff and moving some of those positions in-house, he said, could cut outside fees by $30 million -- netting about $21 million in annual savings.
Ekard said he'd want to know more before forwarding any subsequent request to the Board of Supervisors.
"A proposal like this is not something I'm going to willy-nilly take to the Board of Supervisors," Ekard said. "I'm going to raise a lot of questions. I want to know it's something coming from the full retirement board."
The supervisors could be shut out, though, if state legislation passes.
The county pension fund's employees are currently classified as county employees, subjecting them to county salary limits. The proposed legislation, Assembly Bill 1987, would allow county pension funds to drop the county worker classification, clearing the way to pay employees whatever they wanted.
The pension board is scheduled to meet Thursday at 8:30 a.m. to discuss the legislation and White's salary waiver request.
In fifteen years San Diego will pay triple in pension outlays. It will go from $150 million to $520 million.
What will the city cut to pay that much? Will they attempt to raise taxes? Maybe the air tower at Lindberg Field could have murals selling cars painted on the sides?
"Appearing on KUSI, DeMaio argued against increasing the sales tax to offset pension costs. Even after increasing the sales tax by half a cent and collecting an estimated $103 million annually, he said the city still wouldn't have enough money to overcome future pension costs. "No tax is big enough to feed that monster," DeMaio said."
The bigger question is why the "professionals" running the pension system called Councilman DeMaio a liar? Could it be that they are concerned the facts will frighten the public if they knew the government pension plan was unsustainable.
We are close to cities and the State collapsing under the weight of pension plans. Before the next Governor runs for re-election the whole pension system in California will tank. Where is the leadership?
True Statement: "The pension payment last year went from $150 million to $235 million. It's going to go to $318 million in the year 2016. It's going to rise to $520 million in the year 2025," City Councilman Carl DeMaio said on KUSI recently.
Determination: True
Analysis: The rising cost of employee pensions contributes to San Diego's structural budget deficit -- meaning the city is set to spend more than it takes in. Because pension costs continue to rise faster than revenue, the city ends up cutting its budget each year in order to pay its pension bill.
Now, an effort to address the structural deficit is on the November ballot. If passed, the measure would increase the sales tax after the city completes a series of reforms. Some aim to cut future pension obligations.
Appearing on KUSI, DeMaio argued against increasing the sales tax to offset pension costs. Even after increasing the sales tax by half a cent and collecting an estimated $103 million annually, he said the city still wouldn't have enough money to overcome future pension costs. "No tax is big enough to feed that monster," DeMaio said.
To support that argument, he pointed to the pension system's projections. Apart from his appearance on KUSI, DeMaio has also used this argument in constituent mailers, press releases and this recent Union-Tribune editorial.
In fact, his numbers are pretty close. According to the pension system's most recent estimates, the city's pension payment went from $154 million last year to $229 million this year, and it's projected to reach $340 million by 2016 and $508 million by 2025.
Since DeMaio's numbers nearly mirror the pension system's estimates, we're calling his statement true. Starting this fiscal year, employee pensions are estimated to cost about $20 million more every year until 2025. After that hump, changes to the pension system are projected to reduce the city's annual cost dramatically.
In December, the pension system's outgoing administrator called DeMaio's use of the numbers misleading. He criticized DeMaio for ignoring inflation adjustments and not mentioning the drop after 2025. While valid concerns, they don't affect the accuracy of DeMaio's statement. He got the numbers straight from the pension system.
When SB 400-the massive expansion of pensions without money to fund it--passed, Sacramento knew what a disaster it would be.
"As CalPERS publicly said a decade ago that a major pension increase, now targeted for rollbacks, could be paid for with investment earnings rather than higher state costs, its actuaries made a startlingly accurate forecast of the impact if earnings fell short.
The actuaries said the annual state payment to CalPERS, $159 million in 1999, could soar to $3.954 billion in fiscal 2010-11 a long-range forecast that scored a near bulls-eye on the $3.888 billion state payment for the fiscal year that began this month.
Legislators were told in a 17-page CalPERS brochure that the pension increase, SB 400 in 1999, would not increase state costs. And as critics have pointed out, the brochure did not mention the state would have to pay if investments faltered."
On be of the authors of this crisis maker, is a Democrat who claims to be a conservative--Lou Correa, now a State Senator, then an Assemblyman.
Beware of Democrats who claim to be conservative, Correa and his friends steal our money, but with a smile. It is time to retire this phony.
As CalPERS publicly said a decade ago that a major pension increase, now targeted for rollbacks, could be paid for with investment earnings rather than higher state costs, its actuaries made a startlingly accurate forecast of the impact if earnings fell short.
The actuaries said the annual state payment to CalPERS, $159 million in 1999, could soar to $3.954 billion in fiscal 2010-11 a long-range forecast that scored a near bulls-eye on the $3.888 billion state payment for the fiscal year that began this month.
Legislators were told in a 17-page CalPERS brochure that the pension increase, SB 400 in 1999, would not increase state costs. And as critics have pointed out, the brochure did not mention the state would have to pay if investments faltered.
But the agenda for a meeting of the CalPERS benefits committee meeting on June 15, 1999, shows that the board was informed of the risk. One of the members asking for more information was the office of then-state Treasurer Phil Angelides.
The board was given hypothetical scenarios of what would happen under three different investment returns during a 10-year period that ended, as it happens, with the current fiscal year.
If investments hit the earnings target assumed by CalPERS, an annual average of 8.25 percent (since lowered to 7.75 percent and now under review), the state payment this fiscal year would be $679 million.
But if earnings during the decade averaged 4.4 percent, a repeat of the decade from 1966 to 1975, the state payment would be $3.954 billion. If earnings averaged 12.1 percent, a repeat of 1947 to 1956, the payment would be zero.
A scenario based on a recent decade when earnings averaged about half of the CalPERS target was a grim reminder of the unpredictable business cycle, with its ups and downs.
As it turned out, a scenario based on a 4.4 percent average return was not down enough. CalPERS earnings during the last decade averaged 3.1 percent, according to a Wilshire consultants report in March.
The big swings in the forecast of state costs, from zero in boom times to nearly $4 billion if the economy slowed, shows how dependent public pensions have become on unpredictable investment earnings.
The transformation of the pension funds began with a little-known ballot measure, Proposition 21 in 1984, that shifted investments away from bonds. A cap limiting stocks to 25 percent of the portfolio was lifted, allowing the riskier pursuit of higher yields.
Another chart in the agenda given the committee in 1999 shows how employer-employee contributions, not investments, once provided most of the revenue for the giant CalPERS state and local government Public Employees Retirement Fund.
But after the passage of Proposition 21 investment earnings surged with a historic bull market. By 1999 earnings had provided 78.6 percent of the revenue in the previous decade, giving CalPERS a surplus and fueling the push for a benefit increase.
A history of strong earnings apparently helped give the CalPERS board confidence that pensions could be increased without driving up state costs. But there also was a fallback position.
While being shown how state costs could balloon if earnings were below the target, the CalPERS board received reassurance about steps that could be taken to avoid a rate shock if earnings fell short.
Staff believes the proposals (SB 400) are justified, reasonable and economically prudent, said a staff memo accompanying the scenarios.
Further, staff believes that in the event, in future years, lower markets do not permit CalPERS to achieve our expected investment target, said the memo, we have at our disposal various actuarial funding procedures and methods which would allow us to manage and help mitigate such negative impact.
The CalPERS board adopted one change in 2005 as Gov. Arnold Schwarzenegger briefly backed a proposal to switch state and local government new hires from pensions to a 401(k)-style individual investment plan, now common in the private sector.
A rate smoothing plan spread CalPERS investment gains and losses over 15 years, up from three years, and the corridor allowed for valuing assets was expanded from 10 to 20 percent of their market worth.
A second change adopted last year phases in rate increases from losses during the 2008 market crash over three years. It briefly expands the corridor to 40 percent and treats market-crash losses separately, paying them off over 30 years.
Despite the changes, the $3.9 billion contribution CalPERS imposed on the state this year is a $600 million increase from last year. The 18 percent increase in pension costs comes as the deficit-ridden state faces another round of deep cuts to most programs.
Now the current governor, Schwarzenegger, and the two leading candidates to replace him, Democrat Jerry Brown and Republican Meg Whitman, are all calling for state worker pension cuts to reduce costs.
Schwarzenegger wants to roll back pensions for new hires to the pre-SB400 level and has tentative deals with a half dozen unions. Whitman proposes switching new state hires, except police and firefighters, to 401(k)-style plans and extending retirement ages.
Brown unveiled an eight-point plan last week that would renegotiate pension formulas for new hires and extend retirement ages, increase employee contributions. and have the governors finance director monitor the basic CalPERS activities.
In 1999 another part of the governor’s office took a hard look at the pension increases sponsored by CalPERS in SB 400. The position of former Gov. Gray Davis was outlined in an update to state managers on bargaining with unions.
The personnel administration director, Marty Morgenstern, said in the memo that the administration believed the record high CalPERS investment earnings might not continue and that state contributions could soar if the economy weakened.
If future returns are more like those earned between 1966 and 1975, the state could end up contributing over $3.9 billion a year to maintain the new benefit level, according to CalPERS actuaries, said the Morgenstern memo.
In 2003 Morgenstern told a Sacramento Bee columnist, Daniel Weintraub, that he had been able to trim the cost of the CalPERS proposal in labor negotiations by tweaking retirement formulas and shifting some costs to workers?
Morgenstern said he reminded Davis of what happened in 1979 when Jerry Brown was governor, Davis was Browns chief of staff, and Morgenstern was the personnel director.
Brown had refused to negotiate a pay raise for state employees, only to see the Legislature send one to his desk, Weintraub wrote. Brown vetoed it and the Legislature overrode his veto. Then he vetoed the money out of the budget and they overrode that, too.
Government can not allow honest people to audit it. When they do, they find the incompetence and corruption that only government is allowed.
"Weber decided to sign up. He and his fellow jurors spent hundreds of unpaid hours examining San Franciscos public employee pension fund. On June 24, they issued a report titled, Pension Tsunami. It warned that the soaring obligations jeopardize the citys future.
Weber, 59, is a self-described nobody who graduated from Lowell High and the University of California, Berkeley. But he is no longer unknown. His volunteerism has placed him directly in the cross hairs of unions vigorously fighting efforts to overhaul the pension fund. The unions say they have made huge concessions in recent years."
Remember, San Fran government is owned by the unions. Politicians beg for their money and then return the favor with sweetheart union agreements--high wages and very high benefits.
I should mention that thanks to this corruption, and that is what it is, the City is $483 million in deficit--but the bad news is that in a short time it will reach one billion dollars.
"More than anything, Webers odyssey shows how pension overhaul has become a blood sport not only in San Francisco but also across the Bay Area, where the issue is convulsing municipalities contending with shrinking resources and rising costs, directly affecting social services.
The situation in San Francisco is serious. The grand jury report noted that the citys annual pension and health-care costs would more than double, to about $1 billion, by 2014. The citys entire annual budget is about $6 billion"
In just three years 16% of the San Fran budget will be paying for pension and health care costs--that is unsustainable. This is a city on the brink of bankruptcy.
Two years ago, San Francisco accountant Craig Weber noticed a flier posted at the Mission Bay public library. It sought volunteers for the civil grand jury, a panel of 19 citizens empowered to investigate local government.
Weber decided to sign up. He and his fellow jurors spent hundreds of unpaid hours examining San Franciscos public employee pension fund. On June 24, they issued a report titled, Pension Tsunami. It warned that the soaring obligations jeopardize the citys future.
Weber, 59, is a self-described nobody who graduated from Lowell High and the University of California, Berkeley. But he is no longer unknown. His volunteerism has placed him directly in the cross hairs of unions vigorously fighting efforts to overhaul the pension fund. The unions say they have made huge concessions in recent years.
They accuse Weber of abusing his power as a grand juror by supporting a pension-reform initiative sponsored by the citys public defender, Jeff Adachi. That measure would greatly increase pension contributions from city employees.
A union lawyer, Peter Saltzman, stood on the steps of City Hall on Thursday and declared, Weber has impugned the integrity of the civil grand jury. Saltzman called for civil and criminal investigations into whether Weber violated conflict-of-interest laws or improperly used public resources for political purposes.
Weber said he had done nothing wrong, and he seems astonished by the political storm swirling around him.
Weber said he went to the city attorney in March to ask if he could work in support of the pension measure while continuing to serve as a grand juror.
The response, he said, was this: Yes, as long as you dont present yourself as a member of the grand jury.
I was very careful that my grand-jury work was totally separate, he said.
More than anything, Webers odyssey shows how pension overhaul has become a blood sport not only in San Francisco but also across the Bay Area, where the issue is convulsing municipalities contending with shrinking resources and rising costs, directly affecting social services.
The situation in San Francisco is serious. The grand jury report noted that the citys annual pension and health-care costs would more than double, to about $1 billion, by 2014. The citys entire annual budget is about $6 billion.
Pension and health benefits enjoyed by San Francisco retirees are unsustainable, the report said.
The unions have attacked Adachi and his supporters with ferocity. After a Bay Citizen article last week noting that Adachis pension measure had drawn support from business and civic leaders, including the venture capitalist Michael Moritz, the union described Moritz as a billionaire acting in concert with cronies and a farm team for Gov. Arnold Schwarzenegger, who advocates pension overhaul at the state level.
Craig Weber is a good guy, said Sean Elsbernd, a city supervisor who sits on the board of the citys pension fund. Labor is using him as a red herring, to distract from the fundamental problem of the pension funds financial predicament.
Weber was well into his second year of jury service when he spotted a November 25 op-ed article by Adachi about the citys budget crisis and the need for a pension overhaul.
In its January meeting, the pension board determined that the citys new contribution to the pension fund a number determined by the funds performance and the cost of contractually guaranteed benefits would be 13.5 percent of each employees salary for the 2010-11 fiscal year.
A huge, huge increase, said Weber. The civil grand jury report forecasts that the citys pension contribution rate may climb to 30 percent in five years.
Around this time, the foreman of the previous years grand jury invited Weber to a meeting with Adachi, Elsbernd and another former grand-jury member to talk about pension issues. As Adachis plan for a ballot initiative to require increased contributions from all city employees developed, Weber said he wished to help.
He asked the City Attorneys Office in March if acting as a proponent of a pension effort would conflict with his grand-jury role.
We advised him that, under law, he was not precluded, the city attorney, Dennis Herrera, said in an interview.
Weber was cautioned to not use city resources for a political purpose, Herrera said, adding: I was trying to protect the process, and to protect Weber. The last thing I want is for the grand jury to run afoul of ethical restrictions.
Then, Weber said, Adachi asked him to act as the treasurer of the overhaul effort and prepare its tax forms. Weber said that canvassing for signatures one day and preparing the forms were the extent of his active involvement before the grand jury report was issued.
In April, when Herreras office learned of Webers role as treasurer, a call was placed to Judge James McBride, the presiding judge of the San Francisco Superior Court who oversees the civil grand jury. After speaking with Herreras office and meeting with Weber, McBride was not then convinced that a conflict of interest existed, according to a letter from Herrera to the judge recapping the exchange.
When meeting with McBride, Weber said he offered to resign from the Adachi effort.
Meanwhile, the grand jurys focus on compliance with a 2002 amendment to the city charter, Proposition H, was causing tension with Herreras office.
Proposition H enhanced police and firefighters pension benefits, but required workers to contribute more if the pension fund stopped running a surplus. The fund was showing a surplus when Proposition H passed in 2002, but has been running a deficit since 2004. The grand jury report asserted that the city had never sought to collect the proposition-mandated additional contributions from employees, and that an unfunded pension liability of $276 million was the result.
On June 8, Weber sent a letter to Herrera asking pointed questions about what he said were the city attorneys responsibilities to enforce Proposition H.
The issue became that the city attorney did not enforce the city charter, Weber said. That is the controversy. That is the issue the city attorney is trying to avoid.
Herrera said it was the role of the pension board, not his office, to determine the proper contribution levels to the pension fund, and he produced a section of the charter to support his view.
Gary Amelio, the executive director of the citys pension system, says that enforcing Proposition H is not his role, either. We are not involved in policy or who pays, said Amelio, who added that the $13 billion pension fund was 97 percent funded.
Micki Callahan, San Franciscos human-resources director, said Proposition Hs requirement to cost-share we believe has been met in cyclically renegotiated labor agreements. It is not possible to segregate pension costs when negotiating a labor contract.
Herrera did not respond to Webers June 8 letter, but instead sent a letter on June 14 to McBride.
I have serious concerns, he wrote, that Webers dual roles create a conflict of interest, or at least the appearance of a conflict of interest, which could undermine the integrity of any civil grand jury investigation into these issues.
Herrera asked McBride to screen Mr. Weber from any involvement in the civil grand jurys examination of the pension issues.
Herrera now says, I have not made any allegations about Mr. Weber.
It is too early to know whether Herrera, District Attorney Kamala D. Harris or the San Francisco Ethics Commission will heed the unions call to investigate Webers activities.
But drawing more public attention to the civil grand jury report may only undermine the unions position in the end.
Craig Weber made a mistake, a political mistake, said Elsbernd, the city supervisor, but labor is making a big mistake.
Typically, he said, a grand jury report is read by a few hundred people.
Not this one, not anymore.
Sal Massaro, dhg2
2
Thank God someone is watching and reporting what happensEE
It looks like the unions in S.F. has sucked the life out of S.F. and now the body is a mummy the only out for cities like S.F. is bankruptcy.
You thought that the financial problems caused by $50 million, in a lifetime, of pensions for three people is their problem, you are wrong. KTLA in Los Angeles believes the first year of retirement will bring the fired city manager $884,000--and he is 55 years old. By the time he reaches 83, the check will before $1.47 million. The police chief starts at $450,000 per year.
"Fritz, of the California Foundation for Fiscal Responsibility, said Bell is pooled with 140 similarly sized California towns and public entities like water and sanitation districts, and together their taxes will be used to support Rizzo in the style to which Bell got him accustomed. Assuming she's right a spokesperson for the California Public Employees Retirement System said the agency is still trying to unravel the Bell situation and wouldn't be able to confirm Fritz's analysis until Monday that could spell trouble for a lot of innocent towns.
Barstow? Congratulations. If Rizzo wants caviar on his crackers, you'll help pick up the tab. You too, San Gabriel, La Canada Flintridge, Imperial Beach and El Cerrito. And the same goes for taxpayers in Norco, YuccaValley, the Goleta Water District and the Big Bear Regional Wastewater Agency."
It is time to unravel the corruption of the cities, end the unsustainable pension plans and demand that government make massive cuts. This again proves that government has too much money--$884,000 per year government pension?
Those sweet Bell retirements may cost you too A pension reform activist says that since Bell is pooled with 140 similar-size California towns and public entities, their taxes will help support the three high-priced officials who have resigned.
Steve Lopez, LA Times, 7/25/10
The sad reality, dear Californian, is that depending on where you live, you may be personally contributing to the insultingly fat pension of ousted Bell city administrator Robert "Ratso" Rizzo.
And if the estimates of pension reform advocate Marcia Fritz of Sacramento are accurate, the 55-year-old Rizzo's bloated $787,637 salary could translate into even more than an earlier guess of $600,000 a year.
"I estimate the pension will be $710,000," said Fritz, an accountant. That alone would add up to more than $14 million if Rizzo lives to 75. But Fritz says that on top of his pension and other benefits are you ready for this, folks? Rizzo will collect a monthly Social Security check and get cost of living increases in his pension.
Now that Ratso has resigned, I'm applying for his job immediately.
Fritz, of the California Foundation for Fiscal Responsibility, said Bell is pooled with 140 similarly sized California towns and public entities like water and sanitation districts, and together their taxes will be used to support Rizzo in the style to which Bell got him accustomed. Assuming she's right a spokesperson for the California Public Employees Retirement System said the agency is still trying to unravel the Bell situation and wouldn't be able to confirm Fritz's analysis until Monday that could spell trouble for a lot of innocent towns.
Barstow? Congratulations. If Rizzo wants caviar on his crackers, you'll help pick up the tab. You too, San Gabriel, La Ca񡤡 Flintridge, Imperial Beach and El Cerrito. And the same goes for taxpayers in Norco, YuccaValley, the Goleta Water District and the Big Bear Regional Wastewater Agency.
You'll all be helping "Bobby the Rat" Rizzo pay the mortgage on his nifty horse ranch in Washington state where I have to believe the thoroughbreds will be dining on fresh arugula and Evian and his sprawling digs a few blocks from the water's edge in Huntington Beach.
I went to the latter location Thursday for a first-hand look at the good life, but Rizzo wasn't home. I did, however, bump into his next-door neighbor, Mike O'Brien, an unemployed convention planner.
"I wish I would have known him better," said O'Brien. "Maybe I could have gotten a job in Bell."
O'Brien said that Rizzo who was arrested on suspicion of driving under the influence in March after allegedly plowing into a neighbor's mailbox moved in a couple of years ago but hasn't been around lately.
Maybe he's already riding off into the sunset with a smile on his face. The same might be said for the assistant city manager, who made $376,288, and the police chief, who made $457,000. They were forced to retire last week along with Rizzo after a head-smacking expose by Times scribes Ruben Vives and Jeff Gottlieb, but they'll be in high cotton too with big pensions.
Fritz said a huge end-of-career spike like the one Police Chief Randy Adams got in Bell means his pension will be based on his final pay, and it will be covered in greater proportion by residents of Glendale, where he spent the bulk of his career.
Congratulations, Glendale.
Who would have thought you could bring back that old TV series "Lifestyles of the Rich and Famous" and base it entirely on public servants in a blue-collar burg like Bell, population 37,000, where the chief industry is survival?
O'Brien told me he knew Rizzo was "living pretty well" when the city executive bought his house a few years ago and spent roughly a year on a huge remodeling project.
"I figured he had some family money or had made some wise investments," said O'Brien, who told me Rizzo drives a Cadillac and his wife drives a BMW. "The thing I object to more than anything is the public pension program. People are looting the pension program when, for the private individual, pensions went away years ago."
Hear, hear. And let's not forget that the state and many cities are in the poorhouse.
Fritz told me she likes aspects of the pension reform proposals by gubernatorial candidates Meg Whitman and Jerry Brown, but they would apply only to state employees not municipal ones. Fritz said a city council can reform its employee retirement system, and if it refuses, a citizen uprising can put the matter before voters.
The uprising has already begun, said Rocio Lopez, a Bell resident and member of the Bell Assn. to Stop the Abuse.
"We have to take back City Hall," she said, echoing a demand that four of the five council members resign from posts that pay them roughly $100,000 a year for part-time work, an arrangement the D.A.'s office is looking into.
As I wrote on Wednesday, there's a long history of corruption in southeastern L.A.County, with city officials acting like dictators, withholding information from the public and exploiting largely poor, immigrant residents, many of whom aren't citizens and can't vote.
Antonio Gonzalez of the Southwest Voter Registration and Education Project told me he thinks there ought to be a discussion about consolidating all those towns, eliminating the political fiefdoms and overlapping services, and creating one city that better serves the economic and social needs of the community.
Gonzalez crunched some numbers for me along with consultant Steven Ochoa, and they found that in Bell and eight nearby communities, which are roughly 90% Latino, just under half of all adult Latinos can't vote because they are either undocumented or don't have full citizenship.
That may help explain why, as The Times reported Friday, only 336 of Bell's 9,000-plus voters cast ballots in 2005 in favor of a stealth measure, quietly pushed by city officials, that lifted state-imposed salary limits. Lopez is one of several Bell residents who told me she was completely unaware of that special election.
"And I'm an educated woman with a master's in public administration and a bachelor's in urban planning," said Lopez.
If she and others needed yet another reason to storm the gates, it was provided last week in a bonehead letter to the community by Mayor Oscar Hernandez. In it, he defended those ridiculous paychecks, called Ratso's salary justified, and criticized The Times for reporting the numbers.
As they're chanting these days in Bell:
Recall, recall, recall
juicy couture, Patricio Vigil
2
great post...It's very useful for us..Thanks.
Charge the whole bunch with a criminal offense because the salaries were obtained by fraud. There was some conspiracy in there also. Those salaries were not the act of one person. State law does not allow some of the stuff that went on. Also sue the POS and let them try to fight it. As city manager and chief of police they should have known the law. By the time the case is settled they will be happy to get what would be correct. I hope the voters remove every one of those, that did not resign, out of office and then GET A ROPE AND A TALL TREE.
We all know that Charlie Rangel is a New York hustler. Even the Democrats in Congress have decided he should be tried for corruption. Due to high pension costs, as well as massive incompetence and corruption, Oakland had to fire 10% of its police force, 80 cops.
""This is not unique to Oakland," said Ron Cottingham, president of the Police Officers Research Association of California. "Stockton is having this happen. So is Sacramento."
David Crane, Gov. Arnold Schwarzenegger's special adviser for jobs and economic development, called the pension crisis "the largest single financial issue facing state and local governments."
The problem traces its roots to the dot-com boom of the late 1990s."
StanfordUniversity did a study and found that CalPers had an unsustainable $525 billion of unfunded liabilities. Here is why, "Budget data from the state Department of Finance show that, over the past 30 years, annual state contributions to sustain pension and health plans for public employees have averaged 3.4 percent of the general fund. In this fiscal year, these payouts will total 5.64 percent.
Crane said annual outlays are bound to rise as more state employees, getting better pension payouts, retire in the years ahead."
At some point, the system will collapse, and the taxpayers will be on the line to pay for it. My guess is that taxes will go significantly higher, causing those that can leave the State to leave, making the situation worse for those remaining.
The recent layoff of 80 police officers in Oakland could be the harbinger of things to come as government officials find that public employee pension deals made when the stock market was booming are helping bust their budgets today.
"It's regrettable, but we had no choice," said City Council President Jane Brunner of the layoffs that were Oakland's response to a growing public pension crisis.
Forced to make a $30.5 million budget cut - Brunner said that's more than the city's discretionary spending - Oakland had asked police officers to pay 9 percent of their salaries toward their pensions and accept a later retirement age for new hires.
Dom Arotzarena of the Oakland Police Officers Association said his members would have agreed to the pension givebacks but wanted a three-year, no-layoff pledge in return.
City officials refused and cut about one-tenth of the city's uniformed officers instead. Oakland not alone
"This is not unique to Oakland," said Ron Cottingham, president of the Police Officers Research Association of California. "Stockton is having this happen. So is Sacramento."
David Crane, Gov. Arnold Schwarzenegger's special adviser for jobs and economic development, called the pension crisis "the largest single financial issue facing state and local governments."
The problem traces its roots to the dot-com boom of the late 1990s.
Back then, soaring stock prices swelled the value of pension funds to the point where many state and local agencies were able to reduce or eliminate their annual benefit payments - using Wall Street gains to offer public employees a perk that appeared to have little or no cost to taxpayers.
"Everybody was raising benefits without thinking of the long term," said Kil Huh, director of research for the Pew Center on the States, which recently surveyed this nationwide problem.
California started down the path of more generous public employee pensions in 1999 when state lawmakers passed SB400.
The law permitted state public safety officials to retire earlier and at higher pay than was previously the case. Comparable benefits soon spread to local police officers and firefighters and eventually became the norm for most public employees.
But when stocks crashed during the current recession, so did the portfolios of the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System, largest of the state's pension repositories.
As these investment portfolios shrank, government officials had to make bigger payments to meet their pension obligations - just as the recession created a $19 billion state deficit whose ripple effects influence every city, county and school district. Conventional wisdom
Now, even if public pensions seem overly generous and a strain on government budgets, the conventional wisdom holds that they are contracts that require city and state officials to do whatever is necessary to pay the benefits workers have been promised.
"We've never seen any legal theory that has successfully challenged that," Dwight Stenbakken, deputy executive director of the League of California Cities.
The state's public pension system touches nearly 3.9 million people, according to the controller's most recent Pension Retirement Systems Annual Report. Of these, 62 percent are public sector workers paying into the system; 23 percent are beneficiaries; the rest are former state or local workers who have a right to future benefits. Annual contributions
Budget data from the state Department of Finance show that, over the past 30 years, annual state contributions to sustain pension and health plans for public employees have averaged 3.4 percent of the general fund. In this fiscal year, these payouts will total 5.64 percent.
Crane said annual outlays are bound to rise as more state employees, getting better pension payouts, retire in the years ahead.
Rising retiree costs are likely to have an even greater effect on cities and other local governments, which not only employ more workers than the state, but also dedicate most of their payrolls to police officers and firefighters, who enjoy the best benefits and earliest retirements.
Stenbakken, with the League of California Cities, said police and fire departments account for about 60 percent of local general fund expenditures. Pension contributions for public safety employees run upward of 20 percent of payroll. With a large chunk of their expenses on the rise when revenues are in a slump, many cities have asked public employees - in public safety and other occupations - for concessions.
"I've seen a sea change in the local collective bargaining process," he said. Workers stepping up
Carroll Wills, spokesman for California Professional Firefighters, said government workers understand the situation.
"There are concessions being negotiated right and left," he said. "Employees are stepping up to pay a larger percentage of their pension and health costs."
At the same time, local initiatives aimed at forcing further concessions are moving toward the ballot. In San Francisco, Public Defender Jeff Adachi is pushing an initiative to require city employees to pay a larger share of pension costs. Menlo Park voters will be asked whether they want future nonpolice employees to get lower pension benefits than current city workers. Whitman's solution
At the state level, Republican gubernatorial candidate Meg Whitman has proposed raising the retirement age for many state workers already enrolled in pension plans. She also has proposed that government workers hired in the future should get 401(k) plans instead of pensions, as is common for those private-sector workers who enjoy an employer-provided retirement benefit.
Last week, state Attorney General Jerry Brown, Whitman's rival on the November ballot, outlined a reform plan that would, among other things, seek to raise retirement ages for new hires and increase contributions from current employees, while preserving pensions for future employees, in contrast to his Republican adversary.
Brown on Friday also said he would cooperate with CalPERS in an investigation of the city of Bell (Los Angeles County), which has been paying its city manager nearly $800,000 a year and setting him and other highly paid local officials up for huge pensions.
Scandals like this fuel public outrage and overshadow the reality that while abuses occur, and fatter pension payouts are on the rise, the average CalPERS beneficiary currently gets just over $24,000 a year, and 78 percent of all the fund's recipients get $36,000 or less. The outcry
Teresa Ghilarducci, an economics professor at the New School for Social Research who has testified before California officials about the public pension crisis, said the popular outcry is understandable.
"You can't expect taxpayers to provide pensions to public employees that are much better than they're getting," she said.
But she thinks reforming public pensions is better than replacing the promise of a guaranteed benefit with the less certain payback of a 401(k).
"We need to bolster the private sector pensions," she said, adding that too many Americans "plan to take a late retirement and an early death."
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Liz
1
"The problem traces its roots to the dot.com boom of the late 1990s?" No, its roots lie in short-sighted greed and self-serving deals between civil servant unions (a contradiction in terms!) and our so-called representatives. The latter wanted unions to be beholden to them such that they would be sure to get reelected ad infinitum, and the unions promised them the moon and the stars in return. The taxpayers are the one who got skinned. And now the bureaucrats make nice and say they can't very well renege on those lovely contracts. Wow, aren't they noble!
Corruption has many faces, CalPers is one of them.
"A nonprofit public interest organization has sued CalPERS to obtain records that may shed light on why the pension fund would invest $100 million in Page Mill Properties, which until recently was the biggest residential landlord in East Palo Alto and came under fire for substantially raising rents.
"CalPERS' investment of $100 million in a project that has yielded nothing raises significant questions," states the lawsuit filed Friday by the First Amendment Coalition."
There should never have been a lawsuit filed, that is a waste of money. CalPers, a public agency should have immediately upon request given the information--the fact that they were hiding the documents shows CalPers was doing something corrupt.
Were I in charge, anybody working for CalPers who refused to turn over the requested documents would be fired, on the spot--regardless of how "important" they are. First, I would fire the "attorneys" giving them advice.
By Bonnie Eslinger, San Jose Mercury News, 7/20/10
A nonprofit public interest organization has sued CalPERS to obtain records that may shed light on why the pension fund would invest $100 million in Page Mill Properties, which until recently was the biggest residential landlord in East Palo Alto and came under fire for substantially raising rents.
"CalPERS' investment of $100 million in a project that has yielded nothing raises significant questions," states the lawsuit filed Friday by the First Amendment Coalition.
The suit focuses on CalPERS' investment in Page Mill Properties II, a real estate investment fund connected to the controversial company's real estate holdings in East Palo Alto. Last year, after Page Mill defaulted on a $50 million balloon payment, all 101 of its rental properties in East Palo Alto were assigned to a court-appointed receiver and reverted to Wells Fargo Bank. CalPERS wrote off the investment.
Critics had attacked Page Mill Properties for taking advantage of East Palo Alto's flawed rent stabilization ordinance by raising rents by more than one-third in some cases and forcing out tenants who couldn't pay the hefty increases.
The suit notes that CalPERS' records show a $900 million loss on a real estate investment in the San Joaquin Valley as well as investment losses in Manhattan properties that, like Page Mill, have been accused of abusive management practices that pushed out low-rent tenants.
Peter Scheer, executive director of the First Amendment Advertisement Coalition, said the records request is an effort to gain insight into what influenced CalPERS' financial decisions regarding its Page Mill investment. It specifically seeks the offering memorandum and partnership agreement for the deal, as well as related internal e-mails and other communications.
"How did CalPERS come to the apparent conclusion that despite significant debt levels, despite problems with ousting low-rent tenants to replace them with higher rent tenants, and other known risks, that the East Palo Alto investment and others like it were appropriate for the CalPERS portfolio?" Scheer said.
A CalPERS spokesman, Brad Pacheco, told The Daily News that the organization would not comment on pending litigation.
The First Amendment Coalition's legal complaint also notes that Attorney General Jerry Brown sued two former CalPERS officials in May for fraud, alleging that tens of thousands of dollars were spent on key senior executives with the pension fund in an effort to influence investment choices.
"This petition should be granted so that the public can see how CalPERS manages the staggering $210 billion in assets with which it has been entrusted by government retirees, their dependents, California taxpayers and the public generally," the suit states.
The First Amendment Coalition also sued CalPERS in 2004 to get information on the management fees it pays to individual venture capitalists, hedge fund managers and others handling the private equity funds in which the pension fund invests.
The unfunded liability of the CalStrs pension fund, teachers’ retirement, has gone done a tiny bit.
"The $130-billion California State Teachers' Retirement System posted a 12.3% return Monday for the fiscal year that ended June 30, a step toward recovering from steep losses during the recession. The CalSTRS portfolio lost 25% of its value in its previous fiscal year and dropped 3% for the 2008 fiscal year."
Regardless, it is still in trouble. "But critics noted that surpassing the target for one year doesn't translate into success every year. The CalSTRS board is considering lowering the target rate to 7.5%.
The lower assumed rate would make it more difficult to deal with a $43-billion shortfall that was projected a year ago, when the retirement system's assets amounted to only 77% of its future pension payouts. Experts have set 80% of total obligations as a minimum amount required for a more financially sound system."
Who makes up the difference? You, the taxpayer--now you know why California is in trouble.
For the first time in three years, California's second-largest public pension fund reported positive annual earnings.
The $130-billion California State Teachers' Retirement System posted a 12.3% return Monday for the fiscal year that ended June 30, a step toward recovering from steep losses during the recession. The CalSTRS portfolio lost 25% of its value in its previous fiscal year and dropped 3% for the 2008 fiscal year.
"We've taken steps to position the portfolio for long-term growth, but we're not out of the woods yet," said Christopher J. Ailman, CalSTRS' chief investment officer.
"The American economy suffered a near-death experience in 2008, and it's going to take some time to fully recuperate from that," he said. "This year's performance is a solid start alonSg that road to recovery."
CalSTRS' portfolio garnered gains of 14.5% for global equities, 12.3% for fixed income and 21.7% for private equity and a loss of 12.4% in real estate.
The good performance exceeds a benchmark: On average, the fund needs an 8% annual return rate to meet its obligations to current and future retirees, according to CalSTRS actuaries.
But critics noted that surpassing the target for one year doesn't translate into success every year. The CalSTRS board is considering lowering the target rate to 7.5%.
The lower assumed rate would make it more difficult to deal with a $43-billion shortfall that was projected a year ago, when the retirement system's assets amounted to only 77% of its future pension payouts. Experts have set 80% of total obligations as a minimum amount required for a more financially sound system.
Independent actuaries said the level could fall to as low as 13% by 2039 and zero by 2045 if the Legislature and governor do not approve a CalSTRS request to increase the contributions paid into the fund by school districts, the state and community colleges.
For the fiscal year, CalSTRS' portfolio outperformed the bigger California Public Employees' Retirement System. The $200-billion CalPERS released preliminary results last week, saying it gained 11.4%. CalPERS lost 23.4% the previous year.
