California needs pension reform. This is the elephant in the room that CA State politicians refuse to acknowledge. Demonizing the Federal government may prove a useful distraction or “red herring” for incumbent politicians so that CA voters do not focus on the problems that their elected officials should be solving. This is an age-old political ploy to find a scapegoat for all of society’s problems. Simply, the incumbent officials have mismanaged employment contracts with public employees for decades resulting in unsustainable pension plans. These pension plans are ruining the great State of CA, and putting the hardworking government employees at risk. For the sake of all, the elected officials need to do their jobs and fix the public pension plans.
There are numerous articles written on this topic. We do not hope to provide you all of the information in a short blog. However, we urge you to go out and educate yourselves about this topic. We will have more information in the coming months.
An article from the LA Times is a good place to start. “Democrats running for California governor need to stop talking about Trump and start talking about public pensions.” http://www.latimes.com/politics/la-pol-sac-skelton-california-pension-liabilities-20180118-story.html\
There are many estimates of the depth and scope of the pension deficit, all alarming. The estimates ranges from a quarter of a trillion to a trillion dollars.
- According to a recent bipartisan roadshow of Assemblywoman Catherine Baker AD16 (Republican) and Steven Glazer AD7 (Democrat), the pension plans is nearly a quarter of trillion dollars in debt. “Pension reform: The California Public Employees’ Retirement System is more than $138 billion in debt with CalSTRS, the teachers’ retirement system nearly as bad, with $96 billion in debt.” (See https://www.pleasantonweekly.com/blogs/p/2018/03/12/baker–glazer-together-again-on-issues) Others put the debt at a considerably higher number.
- Dan Walters of the Sacrament be wrote that it exceeds $450 billion. ( (See http://www.sacbee.com/news/politics-government/politics-columns-blogs/dan-walters/article100871752.html)
- A Stanford University study by the Stanford Institute for Economic Policy Research, released by the Kersten Institute for Governance and Public Policy, gives the most alarming estimate of the pension deficit an nearly one trillion dollars, or $93,000 per Californian, not that every Californian is willing or could pay $93,000. (See https://www.zerohedge.com/news/2016-12-02/stanford-study-reveals-california-pensions-underfunded-1-trillion-or-93k-household)
- For a detailed analysis by city, county, or special district, go to the site http://www.pensiontracker.org
The Stanford University report places much of the blame on Calpers insisting that they will get a 7.5% return of return (ROR) on their pension assets instead of a more reasonable 6% ROR. The consequence of CALPERS assuming a reasonable rate of return, e.g. 6%, is that municipalities will have to maker greater contributions to the pension fund. Since many CA municipalities are already in poor financial shape, it would put much hardship or local governments.
One should know who or what CALPERS is, since it contributed to all of these problems. It is a CA agency, supposedly under the auspices of the executive branch (the Governor et al.), that manages the pension plans for 1.6 million CA public employees. (It frankly seems without any control.) See ˚calpers.ca.gov for more information. To know the Board of (mis)Direction, please go to https://www.calpers.ca.gov/page/about/board/board-members. I am not superstitious, but is 13 unlucky? Simply the board of 13 is as follows:
- Six are CALPERS elected members
- Two by and from all CALPERS members
- One by and from active state members
- One by and from active school members
- One by and from active public agency members
- One by and from retired members
- Two are appointed by the Governor
- One jointly by the Speaker of the Assembly and the Senate Rules Committee,
- Four Ex Officio members are State office holders:
- The State Treasurer (Elected by the people.)
- The State Controller (Elected by the people.)
- The Director of the California Department of Human Services (Appointed by Government)
- A Representative of the State Personnel Board (Appointed by Government)
The State Treasurer, the State Controller are elected by the people of CA. Surprisingly,ever though half of this board is neither elected by the people nor appointed by our elected leaders, this group can bankrupt the State of CA. CALPERS could gut nearly every municipality in the State, and ruin the retirement for millions of hard working CA employees by their negligence. This is one of the many structural problems with CA government, that this quasi-group has too much power to cause problems. Since half of the board is elected by the pensioners or future pensioners, then they must have some responsibility for the poor performance of their chosen governing board; they do pick half of it. It seems the fox is watching the hen house. This problem has been hidden for too long from the people of CA. This will hurt the pensioners, employees, cities and all State citizens.
The CA Supreme court may change the rules. Governor Brown filed a brief in November, his team writing, “For years, self-interested parties, overly generous promises whose true costs were often shrouded by flawed actuarial analyses, and failures of public leadership had caused unsustainable public pension liabilities.” If the CA Supreme Court upholds the Appeals Court, then the “California rule” will fall, and the state may change the amounts given to pensioners. CALPERS. For more information, start with watching this 5 minute video. http://sanfrancisco.cbslocal.com/2017/12/28/california-supreme-court-pension-benefit-cases/.
This image could be the average Calfiornian, a retired public employee, or both! It should be neither but think about it.
We need pension reform. Other cities and states, even the federal government, have managed progress on this issue. It is California’s turn to grab the Golden Bear by the tale and tackle pension reform.
Alex Glew, Ph.D.
Candidate for CA Assembly District 24