California Pension Reform

By Chuck McDougald | Daily Journal — Gov. Jerry Brown is proposing deep cuts in health and welfare programs and warning of cuts to schools, universities and courts if voters refuse to pass tax hikes in November. Taxpayers might find that odd, given that this year’s projected tax revenue is flat or even slightly higher than last year.

Same or higher tax revenue, but draconian cuts in the budget. What are we missing?

Missing from Brown’s cuts versus taxes propaganda are pensions for state workers. A pension tsunami is rolling over California taxpayers, destroying all budgets in its path. Years of out of control pension grabs by politicians, unions and complicit managers have left California taxpayers on the hook for close to half a trillion dollars in unfunded state pension liabilities, according to a recent Stanford University study.

State, county and city budgets are also drowning in pension red ink. San Mateo County is one of the worst offenders. According to a study by Northwestern University’s Kellogg School of Management, our county’s taxpayers owe close to $2.5 billion in unfunded pension liabilities for current and future retirees. Read the entire op-ed . . .

By Mike Genest | The Sacramento Bee — During my four years as director of the state Department of Finance I signed off on the Legislative Analyst’s Office analyses of hundreds of initiative proposals – and I almost always agreed with their conclusions. I have the highest regard for the LAO, where my career in state government began. So, I was surprised and disappointed with its analysis of the two pension reform measures filed by California Pension Reform.

The LAO says, essentially, that both measures will create both costs and savings. While the potential to create billions of dollars of savings for taxpayers in California is obvious – and acknowledged by the LAO – it may be less obvious how such aggressive pension reform plans could create additional costs. The LAO suggests that costs would arise for two reasons, both of which are theoretically correct but, in my opinion, misleading.  Read the entire op-ed . . .

By Dan Pellissier | Capitol Weekly — As many Californians fill up gyms, bike trails and jogging paths to act on their New Year’s resolutions to improve their personal health and fitness, this year California voters will fill voting booths to kick the $240 billion pension debt habit that is overwhelming our budgets and damaging our fiscal health.

Over the years, CalPERS and other pension fund administrators have worked hard to minimize the impact of the stock market losses that make it much more difficult to service this huge pension debt, yet repayment periods can only be extended so far and rosy market return assumptions are looking more ludicrous each quarter.

CalPERS and other government pension plans assume they will earn at least 7.75 percent return on their investments, while the world’s most successful investor, Warren Buffet, assumes his pension funds will earn just 6.2 percent over the next decades. If Buffet is right, California’s true pension debts approach $500 billion. In 2009, former CalPERS head actuary Ron Seeling called the state’s pension systems “unsustainable” and said we have to “find some other solutions.”  Read the entire article . . .

Dan Pellissier is president of California Pension Reform.

By John Eastman | Fox & Hounds — California is broke.  Every year we spend about $20 billion more than we take in, despite a constitutional requirement of balanced budgets.  Our elected officials have tried every trick in the books to make it appear that they have not been acting unconstitutionally.  They’ve “borrowed” from local governments and schools with phony promises to repay next year, much as Wimpy used to promise Popeye that he’d pay on Tuesday for a hamburger today.  Total outstanding tab on these gimmicks – about $40 billion and counting.  They’ve bond-funded current operating expenses as well as everything else they can think of, from school buildings to stem cell research.  Current tab – more than $77 billion, the second-highest per capita general obligation debt load in the country.

But by far the largest part of our bankruptcy-inducing debt is unfunded pension and health care benefits promised to public employees, extracted over the years from public employee union bosses who practically own the legislature in Sacramento.  Even in the best scenario of investment returns that match the average rate over the past century, the unfunded liability is a quarter of a trillion dollars.  Read the entire article . . .

By David G. Crane | The Sacramento Bee — In the 17th century the Catholic Church attacked Galileo for advocating Copernicus’ view of the universe. Three centuries later, Pope John Paul II apologized for that persecution.

Hopefully it won’t take California’s finance officials that long to accept some basic financial truths, but based on the venomous reaction of some of those officials to a recent academic study by my Stanford colleague Joe Nation, one can’t be sure.

Nation reached three conclusions:

• The state’s pension debt is greater than the state reports.

• The state is counting on unlikely investment returns to meet that debt.

• Because those returns are unlikely, state pension costs are likely to soar.

Read the entire op-ed . . .

By John Dickerson | Ukiah Daily Journal — Statewide public pension reform will make next year the most intense in California politics since Prop 13.

We will watch a three-player statewide chess game. Jerry Brown recently introduced a 12 point pension reform plan. Californians for Pension Reform (“CPR” ­ get it?) will place a more extensive initiative on next November’s ballot. Unions will use their influence in Sacramento to pass less extensive reform hoping that’s enough.

Rapidly emerging city and county reform efforts will threaten to create a crazy patchwork of different systems. But the main game will be the statewide drama.  Continue reading . . .