San Jose Mercury News: Opinion: How did CalPERS dig a $153 billion pension hole?

During the next five weeks, the CalPERS board, custodian of $326 billion in assets needed to fulfill retirement promises for 1.8 million California public employees and beneficiaries, will make decisions affecting government budgets for decades to come.

The problem is, despite their fiduciary duty under the state Constitution to “protect the competency of the assets” under their absolute control, CalPERS is roughly $153 billion short of fully funding the retirement promises earned to date.

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Future Firefighters Beware!

California’s recent fires reminded citizens that robust fire and police staffing levels are critical for public safety, including the safety of the brave Californians willing to serve in those roles. Fortunately for our society, a good number of young people growing up today hope to become firefighters and police officers. But less fortunately for those young people and our society, some California officials are eroding the ability of future governments to hire enough police and fire personnel while also maintaining public spending on other services.

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You Have More Power Than Facebook

Do you believe everything you read? Of course not. While it’s true that corporations, unions, Russians and plutocrats spend money on elections and employ misleading posts on Facebook and other social media sites when doing so, far more impactful is that individuals don’t spend enough in direct support of good politicians.

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A Tale Of Two Public Pension Plans

Two public pension plans started off in the same spot before the Global Financial Crisis and went through the same investment markets since then but ended up in very different spots.

The plans — let’s call them “O“ and “C” for now — reported nearly equivalent “funding ratios” (the ratio of pension assets set aside to meet pension liabilities; the higher, the better) before the crisis, both lost big in the crisis, and both participated in the subsequent stock market boom. But their funding ratios diverged, with B’s plummeting 16 percent and O’s improving 10 percent as of their most recent published annual reports. The difference arises largely from two factors...

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Dark Money Didn’t Cause This CA Problem

Little about political contributions in California is hidden. Information is easily accessible at Cal-Access, a website run by California’s Secretary of State. For example, look here to see contributions to a special interest and then here for unfortunate consequences from political activity by that interest. There’s nothing dark about that money. Still, uninformed or lazy commentators all too often blame the state’s political problems on dark money. But that’s not true.

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Ugly Political Hypocrisy In California

The recent release of Ken Burns’s Vietnam documentary transported me back to the politics of my youth and the ugly hypocrisy of Lyndon Johnson, whose story contains a critical lesson for California today.

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Pensions pack punch for school district budgets, superintendent says

FAIRFIELD — Pension costs could run school districts out of business, a superintendent said Thursday at the State of Education in Solano County forum.

Schools may first reach a point where they do less for students because of contributions to the Public Employees Retirement System and the California State Teachers Retirement System, said Brian Dolan, superintendent of the Dixon School District.

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Pension Reform: The Fiscal Crisis No One Wants to Talk About

America is facing a fiscal crisis and no one is talking about it. Pension reform has snuck under the public’s radar, even though it poses the single greatest threat to municipal and state governments. Pensions are a system by which government employees—teachers, firefighters, prison guards, etc.—receive regular payments after retirement, having contributed to an investment fund throughout their working life. With more and more pension debt accumulating every year, governments are contractually obligated to pay retirees before they fund critical services like higher education and infrastructure.

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While LA Sleeps

California’s wine country fires delivered a vivid demonstration of the critical importance of governments being able to assemble armies of public safety workers when needed. Citizens expect their governments to provide public safety — but they also expect parks, animal shelters, transportation, road, sidewalk and tree maintenance, housing for the homeless, libraries and much more. What citizens don’t know is that some of their elected officials are systematically reducing the ability of their governments to both field adequate numbers of public safety personnel and fund other services.That’s because those officials refuse to acknowledge or address the explosive growth in pension and other retirement costs crushing their budgets.

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CA Can’t Blame Trump For This Problem

One of the consequences of Donald Trump as president is that he distracts attention from California’s own failures to govern successfully. Nowhere is that distraction more costly than in public education.

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Now That Drug Cost Increases Must Be Explained in California . . .

Governor Jerry Brown just signed a bill requiring pharmaceutical companies in California to issue notifications at least 60 days in advance of a price increase that would be at least 16 percent over a two-year period and explain the reasons behind the increase. According to the San Francisco Chronicle, supporters of the legislation say it will discourage significant price increases.

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The Economist: American public pensions suffer from a gaping hole

SCHOOLS in Pennsylvania ought to be celebrating. The state gave them a $125m budget increase for 2017-18—enough for plenty of extra books and equipment. But John Callahan of the Pennsylvania School Boards Association says all the increase and more will be eaten up by pension costs, which will rise by $164m this year. The same happened in each of the previous five years; cumulatively the shortfall adds up to $586m. The pupil-teacher ratio is higher than in 2010. Nearly 85% of the state’s school boards said pensions were their biggest source of budget pressure.

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A Message To California Republicans

California has undergone a dramatic transformation over the last fifty years but not so the California Republican Party. Today, only 25.9% of Californians are registered as Republicans, down more than eight points of registration in ten years. At this pace, Republicans will soon be the third most popular party registration in California, behind Democratic and No Party Preference. Not a single statewide elected official is Republican and the party is a super-minority in both houses of the legislature. With an unpopular Republican as president and the number of new registrants willing to identify as Republican at record lows, in the absence of change the California Republican Party has lower to go.

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Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030

California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic.  As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety.

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Next Steps On Healthcare In California

California Speaker of the State Assembly Anthony Rendon established a Select Committee on Health Care Delivery Systems and Universal Coverage charged with determining (1) the method by which universal coverage in California could be financed and provided, discussed in an earlier post, and (2) how care should be delivered, which is the subject of this post.

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For Whom CalPERS’s Funded Status Tolls

A recent news article incorrectly describes the funded status of the California Public Employees Retirement System (CalPERS) as follows:

“Today, CalPERS . . . has about 68 percent of the assets it would need to pay all of the benefits it owes immediately.”

That is not correct. CalPERS does not have 68 percent of the assets it would need to pay all of the benefits it owes immediately. For that purpose it has only 38 percent.

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CA Should Raise Teacher Pay By Reducing Unfunded Retirement Liabilities

Fast-rising spending on pensions and other retirement costs is crushing teacher staffing and pay in California. As an example, retirement spending at San Francisco Unified School District grew 3x faster than district revenues over the last five years, absorbing $35 million that could have gone to current teachers. Worse, that happened despite record stock market gains and school revenues. Absent reform, teacher staffing and pay will decline further.

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