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Overhaul for California’s Underfunded Pensions?
Alison Vekshin of Bloomberg reports, Brown to Propose Overhaul for California’s Underfunded Pensions:
California
Governor Jerry Brown said he will propose changes to the most-populous
U.S. state’s underfunded public-employee retirement plans.
Brown did not say specifically what facets of the two biggest pension systems he would like to alter.
His administration will release ideas in coming weeks, Brown said
today in a speech to the League of California Cities, a conference in
Sacramento for mayors, city council members and administrators.
“It’s going to be a continuing process as we understand exactly
what the stock market provides and what the stock market doesn’t
provide,” said Brown, who was Oakland’s mayor from 1999 until 2007.
Public pensions across the U.S. face a gap of as much as $3
trillion between their recession-battered assets and promised retiree
benefits, according to a June study by researchers at George Mason
University’s Mercatus Center in Arlington, Virginia.
That puts pressure
on states, cities and counties struggling with a drop in tax
collections.
The
California Public Employees Retirement System, which covers state and
local government workers, has no more than 70 percent of the assets it
needs to pay for benefits over several decades, according to fund
staff. The California State Teachers Retirement System as of June 30
could pay 78 percent of promised benefits, with an unfunded liability
of $40.5 billion.
Brown’s proposals will be scrutinized, said Pat Macht, a spokeswoman for Calpers.
“Everyone who cares about pensions will be interested in the details,” she said in an interview.
Meeting Obligations
Fred
Glass, a spokesman for the California Federation of Teachers in
Alameda, said in a telephone interview that members expect their due.
“I’m assuming they are going to live up to the obligations that
government has made over the years,” he said. “Public employees,
including educators, typically earn less than their private-sector
counterparts. The way they get close in compensation is by having
strong pensions.”
Brown, a 72-year-old
Democrat who took office this month, has proposed an $84.6 billion
general-fund budget that calls for $12.5 billion in spending cuts,
mostly to welfare programs and public universities, and $12 billion of
additional revenue raised in part by asking voters to extend for five
years higher income and sales taxes and vehicle-registration fees set
to expire this year.
With an economy bigger
than Russia’s, California has the deepest deficit of all U.S. states.
The state has coped with $100 billion of budget gaps in the past three
years amid the global recession.
I doubt he'll go as far as Utah,
but once Governor Brown reveals the details, you can be sure the
proposed overhaul of California's public pensions will be met with
protests from unions. In a separate article, aiCIO reports, CalPERS Rebounds to Pre-Crisis Levels Following Lehman's Downfall:
The
California Public Employees’ Retirement System (CalPERS), the largest
US public pension, has rebounded from loses following the Lehman crash
as taxpayers face increased costs.
Yet,
the pension fund still has only roughly 70% of the money needed to
cover benefits and as a result, CalPERS needs to demand more from
taxpayers to cover those costs. “Taxpayers pay about 23 cents out of
every dollar for the CalPERS’ retirement cost,” Joe Dear, the fund's
chief investment officer, told Bloomberg.
“That cost is going to go up
slightly in light of the crisis, but that’s not an unreasonable amount
and these pension liabilities stand like the state’s debt obligations,
as an unavoidable commitment.”
Joe
Dear, the chief investment officer of CalPERS, which lost 23.4% in the
fiscal year that ended June 30, 2009, told the news service that
there's no way to avoid liabilities which already exist. While the fund
was fully funded at the start of the recession in 2007, it's now down
to around 65%, Bloomberg reported.
The shortfall is not limited to CalPERS, as public pensions nationwide face massive shortfalls
in the money needed to cover benefits promised to government workers.
Lawmakers recently approved legislation that forces municipalities to
pay more into pension funds over the next three decades in an effort to
increase the funding level for pension schemes for local firefighters
and police officers. Chicago officials worry that the new legislation
will lead to increased costs and result in an up to 60% increase in
property taxes. According to Bloomberg, Quinn said last week that he
needs to analyze the bill, calling it an "important area of reform"
imperative at the local level.
"Illinois
is much like other states not keeping up with its annual payments to
their fund," Pew spokesman Stephen Fehr told aiCIO in November.
"They've been increasing benefits to public employees without thinking
how they are going to pay for them in the future," he said. "It's not
just the recession that caused this problem -- Illinois didn't manage
their pension bill in good times and bad, and its not a problem that
will get better anytime soon," noting that the pension deficit around
the nation has led to severe underfunding in other state programs to
make up for mismanagement.
The
effects of public pension shortfalls will be felt as states cut back
other programs to make up for mismanagement. Will pension deficits
shrink in the coming years? That depends. Ideally, stock markets will
continue rising along with interests rates so assets grow at the same
time that liabilities fall. But that's no quick fix and hardly
guaranteed, which is why California and other states are taking measures
now to overhaul public pensions.
My
biggest concern is that the shift into defined-contribution plans in
both the private and public sector will end up costing states more down
the road in terms of welfare costs. Somebody told me today that "I'm
writing like a leftist" because I openly prefer professionally managed
defined-benefit plans over defined-contribution plans.
This
is total nonsense. My views are based on facts, not ideology. The fact is that
defined-contribution plans have severely underperformed defined-benefit
plans. They're aren't managed nearly as well (no alignment of
interests), and they don't invest in public and private asset classes
around the world. Worse still, the fees are much higher and they're more
volatile because their performance is based mostly on beta, with hardly
any alpha.
I end this comment by
asking a simple question: why shouldn't workers enjoy the same pension
benefits that their elective representatives have? If private companies
and governments were smart, they'd be thinking hard about bolstering
defined-benefit plans, not promoting defined-contribution plans because
they cost less in the short-run (long-run is a different story). It's
amazing how shortsighted we've become on one of the most important
public policy issues of our times.
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"Public workers make less than their peers..." Please define peers, b/c teacher in the private sector may way less than public teachers at least 30% on salary alone. Then we can look at the cops, comparable job is security guard, about 30-40% less (an don't even try the dangerous work argument, police don't even break the top 10).
So, I will be happy to pay these folks like their peers - LESS. And if they think they can earn more in private industry, let them! I will honestly guess only about 10-15% of public workers can improve on their wages in the real world.
Any words out of a Californian Democratic Politican or any Public Pension Fund should be given the same value as Barney Frank's remarks saying Freddie & Fannie were in good condition. They simply lie. The State & Cities pension funds are in long trem distress and their predictions are based on a rosy ROI(return of zInvestment) that only Bernie Madhoff could supply!
Who will pay for these people when the real producers -- the taxpayers -- decide that it's just not worth it anymore for them to work and produce in this country? I'm already at the point where I just want to farm my own land, give up on consumerism, trade for anything else I need and screw these people. I suppose I will still have to pay some property tax, but that's about it. Let the parasites go eat themselves.
The time is coming where there will be no free lunch anymore. Sorry people. Government employees who think they will be getting fat pensions while most of the people that are supposed to provide for them are starving are living in fantasy land. Yeah, EVERYONE got lied to and robbed. Join the club.
Until we get rid of the Fed and get monetary reform in this country, everyone is screwed.
Exactly right. Monetary reform is the one and only solution to the numerous crisis that plague this and other countries.
Until we do away with this corrupt system nobody wins... except of course the banking elites
About to eat some fresh eggs from my hens. Pull out brother, the livin' is good!
The University of Californa keeps raising tuition for students by 14% per year or more for ten years. Professor's salaries during all this period have been going up at 3% per year. Where is the money going? Into administration. Thousands of administrators. California spends $15K per student for education. Can you imagine what $450K/yr for a class of thirty students would get you? Free computers, PhDs for teachers, lavish facilities. Instead, students get the worst of everything. $10K of that money goes to admin. Firefighters in the state earn upwards of $150K and many earn $250K with retirements exceeding that. The point? Salaries in the state have been skewed to unbelievable extremes by an out of control state government.
BTW, nice picture of Governor "Moonbeam".
What kind of shape is Oakland in?
1% of the country owns 50% of the income, 80% of the wealth and 100% of the power.
That's who you'll have to negotiate with if you want real change.
You hit it right on the head. They just want people to be misdirected and fight over scraps.
What happens when they realize they are out of luck and no accounting gimics will stop default on certain if not all obligations? They legalize, right?
People, don't let the vampire squid divided you. It depends on the profession. I left my state (government position) to work in the private sector and tripled my salary and retirement benefits. Be very careful what you wish for. If you really think having a poorly educated, low paid government worker is better and will lead to less corruption, then you need to move to any African nation to see what that looks like.
If you want to get an interesting glimpse into how gubment money is 'allocated', check out your local public school system. We focus much attention on the teachers themselves, without realizing that they aren't partaking of the billions spent annually on public 'edumacayshun'. In many cases, they are asked to go without a pay raise for years, while simultaneously taking on larger student loads (classroom sizes up to 35 kids), etc. It's not unusual for a public school to literally hold PTA fundraisers to help buy school supplies and books!! How can this be when we spend something on the order of $30-50k annually on each public school student?
As with so many other gubment-run entities, it's not at the individual worker level that we should focus, but on the administrative executive level. For example, my local county school system administrator earns more money in base salary alone ($294k).....than the governor of the entire state. Did I mention he also gets an additional $12,000 yearly auto allowance? What sort of car could you own for $12k per year? What does a car allowance have to do with education? Did I also mention that this person has not one, not two...but FIVE deputy administrators? Yes, and each one makes between $180-220k in base salary alone. Oh yes, they get f**king car allowances too! ($7,000-9,000 per year)!
But clearly the solution to the problem is to cut teachers salary, freeze their pay, increase their classroom size, encumber them with administrative duties far beyond their scope, and finally...f**k with their pensions. Meanwhile, the top-heavy administrative echelons continue living an incomrehensibly high standard of living.
Don't get me wrong folks, I am no defender of the public screwel system. I would abolish the entire DOE and let each state figure out how what system they wanted to use (private, homeschool, etc). I guess my only point is that we tend to look at the individual employees as a cause of this insane pension fiasco, when in reality the REAL mismanagement and fraud is occuring at levels much higher. I would also point out that by no means do I mean to include all employees across all public sector operations. I too have heard the stories of NYC metro guys retiring with insane pensions, as well as cops in certain areas of the country.
Perhaps the solution should be the elimination of all employer/gubment pension systems, and just let individual people decide how best to save for retirement. Or is that insane extremist thought there?
I agree, I keep hearing people attack public servants at street level and completely forget that the "administrative costs" are far greater than the worker putting in the sewer. Wake up morons, you really want to be attacking the guy who is actually providing the service? How is that going to work out for you when the sewer line backs up or when you actually need a policeman or a fireman?
DO NOT let the vampire squid divide us, that is exactly what he wants.
The irony: ostensibly anti-Statists arguing in favor of THE STATE taking away pensions that State promised to pay in exchange for services rendered over 30 years. Why can't you see that yours is the purely STATIST position, as you would empower the State to take no only the government employee's pension, but also your IRA, 401K, or other private retirement plan (and bank savings, and gold, and silver, and guns. . .)?
Is the non-State solution to increase taxes on private sector workers to make up the difference? Then label me a statist in your book.
By this (il)logic, there is no non-State solution. The issue is the STATE taking away more money from people who do not participate in CALPERS etc. to make up for political promises that should not have been made. Participants in the fund did not contribute enough in the past, (they counted on gaming the market with HFT) that amount must be increased dramatically. Fund the gap 100% with employee contributions and keep dishing out the benifits.
[edit] Here have a link.
http://universityofcalifornia.edu/sites/ucrpfuture/news-updates/uc-regen...
UC employees are going to start paying 3.5 percent of salary towards their pension. 3.5%?! that's it?! it goes up to 5% in 2012, oh the agony. I'm all 1099 and I save upwards of 15% to fund my own retirement. Now states want to raise taxes on me and my kind so some state 'employees' don't have to pay another .5% of their salaries for their own retirement?
Is it not obvious that if you grant the State this club, the State will have a nuclear solution when they come looking for that retirement plan into which you are paying your 15%? Help your government fleece some of your brothers in the middle class, and your government will be sure to fleece you, as well.
withdraws from retirement accounts are already pilfered by the state. The state has been using the club since my first paycheck. It's called taxation, in this case to pay for the federal workers' unrealistic compensation packages promised by politicians who wanted union votes.
Not taxing me more to cover a state pension gap is not fleecing my "brothers". My brothers need to save for their own retirement. Fleecing someone only happens to pay for other peoples' pensions. Not sure you understand logic at all.
What is so difficult to understand? The government is enabled by the cowards among us to steal pension funds obligated to the retired employee. The government, emboldened by this publicly-sanctioned theft, decides it might just as well steal all the money from all the people--IRAs, 401Ks, bank accounts, physical gold. . . Heck, where would it stop? Do you believe you would be secure in your home or on your farm? The government would simply seize those, as well. Once you start down the path of allowing the government to steal from some of the people, the government will steal from all of the people, you included.
In short, YOU want the GOVERNMENT to TAKE from other people that which is not the government's to take. That makes you a Statist. Period.
Here is some news on Greek Bonds:
Greek Bondholders Unlikely to Get Paid Back in Full, Goldman's Wilson Sayshttp://www.bloomberg.com/news/2011-01-20/greek-bondholders-unlikely-to-g...
hey i used to be a public servant, and take exception to the term worker.
That reminds me of my youth. Way back in those dark ages I worked the swing shift for the U.S. Postal Service sorting mail at a 'terminal annex'. Pretty good money and we got to read all the new magazines when our supervisors smoked out on the loading dock!
Ha! Good one...thanks for the laugh.
http://www.hulu.com/watch/144719/saturday-night-live-public-employee-of-the-year
It probably wouldn't be acceptable but AFSCME should be consigned to oblivion and every public service employee made subject to the same vagaries of time and circumstance that everyone else is.
This notion of carving out groups like AFSCME and teachers' unions to 'gerrymander' their votes is if nothing else, unconstitutional, completely at odds with the kind of lives those who pay their salaries and benefits leads.
And while we're at it any elected member of government and their appointees should be made to live the same insecure life that their voter does.
The quaint idea of "public service" is an oxymoron. Most of these people are only working for government for themselves.
If I had known how lucrative government employment would turn out to be, with my larcenous heart I would have found my way into it.
"Somebody told me today that "I'm writing like a leftist" because I openly prefer professionally managed defined-benefit plans over defined-contribution plans."
No...I said a socialist statist.
There is no level of taxation at which you and others like you would be uncomfortable with foisting on the public in order to keep government workers pensions solvent.
Have you ever said anything about politicians and their hacks purposely underfunding government workers pension plans? You blame the markets on a constant basis but politicians bear no culpability in the shortfalls? Many were underfunded by politicians were they not?
It is a well known fact if place a chunk of money in front of a pol they will begin saliviating like a rabid dog...so clearly the thing to do is place more money in front of them?
Now you defend companies like Black Rock (your definition of "professionally managed" no doubt) who skim off the top for doing essentially accounting work on "investments" that bear zero market risk...excellent.
"We're saying to the people of Illinois, `For eight years we've overspent, now we're going to make it your problem,'" said Rep. Roger Eddy. "We're making up for our mistakes on your back."
"Based on this particular legislation the only businesses that will benefit are the moving companies that will be helping many of my members move out of this particular state," said Gregory Baise, head of the Illinois Manufacturers' Association."
Based on your love of asking questions, do you think Illinois raising income taxes 66% will help or hurt their government employee "pension fund"?
http://www.huffingtonpost.com/2011/01/12/illinois-income-tax-increase_n_807801.html
your last sentence and question is way too hard for the poster to answer...way to easy to complain...far to hard to work for an answer
As a response, I ask this question: why shouldn't everyone be forced to accept benefits that can be paid for completely from contributions by members of said benefit plan?
Are you ready to start doing something about it? Kprice1670@gmail.com.
I don't think it matters. Long run, our elected officials don't care, they just care about present issues they can address so that they can keep their jobs.
“Public employees, including educators, typically earn less than their private-sector counterparts. The way they get close in compensation is by having strong pensions.”
I think they actually believe this s**t.
Private schools in the US are primarily religious institutions which notoriously underpay their teachers. Cops and firemen risk their lives for you--too bad more don't die? There are abuses--especially counting the last years overtime in pension computations--but it's not that big a deal. Makes good press, but the last number I saw for NYC pension average was $36k--not at all outlandish in the most expensive city.
The real taxpayers have made real sacrifices these last 3 years.
Let's see how flexible these government employees are.
This is how there in Europe they would state their clame:
Throw up blockages and shut down all government service so they can keep the working man in a gridlock.
And because of the lack of services and the blockages, the government would be forced to give in and spend more taxpayers money on the government employees.
To make this happen, taxes would need to be raised for the common working man.
Here that system works very well. Government workers now make 2 times as much as people who work in the private sector. They have about a dozen times more privileges. They only work 7 hours max a day.
Every department has a surplus of employees so they can make sure none of them has or will have any "stress" in their work environment.
Another nice one: On 1 jan. 2011, people here got a 2.47% raise thanks to the index. For government employees it was 5%. Try to keep in mind that they make twice the salary then in the private sector so they get like 4 times AS MUCH AS PEOPLE IN THE PRIVATE SECTOR!
I HATE ANY GOVERNEMT WORKER!! EVERY SINGLE ONE OF THEM!!
THEY SHOULD MAKE A LOT LESS MONEY THEN US!!
ANY SINGLE ONE OF THEM SHOULD THAT "wants their dues" SHOULD BE KICKED IN THE NUTS!!
Government people WORK A LOT LESS then people in the Private sector.
AND SHOULD GET A LOT LESS IN RETURN!!
GREAT!! IT'S 10 o'clock in the morning AND I'M ALL WORKED UP ALREADY!!
!!!!!!!!! FREEKING BASTARDS !!!!!!!!
Depends on the field of study. I left my state position in 2001 for a position in the private sector and tripled my salary AND retirement. Be careful what you wish for.
Average Federal employee makes $ 123,000 per year with benefits
Average private sector employee makes $ 65,000 per year with benefits
Consider this further ... the only thing that a Federal employee can do is spend other people's money and the better they are at spending the higher they rise. All feedback loops in government reinforce spending.
well well.....my goverment employee wife earns $60,000 a year....oh my are we being fucked since the private sector avg. pay is almost 10% more....now you morons want to screw us out of retirement?????? she has put in 7.5% of her pay towards retirement with her employer putting in more than the 7.5% for close to 30 years.....hell yes we want our money. i don't know where you buffoons get your info....it is the sharks at the top like moon beam jerry who is doing all the taking. that ass will be cleaning up when he retires. as for averages...well lets see...the average is 123,000 a year.....that would be aprox. $246,000 a year for the sharks at the top...think moon beam jerry and that leaves aprox. $61,500 for the average working gov. employee. now my wife is right in there on her pay...but but but wait it took her damm near thirty years to get there...yep way over payed more than 15% paid into retirement with no soc. sec.. i sure feel like we are fucking the avg. citizen! one final note...she has taken a 5% paycut for two years now....hummm
Try learning how to write in sentences and paragraphs. Your ability to reason and present cogent arguments might improve. ;)
grammar....did you say grammar???? lmfao...what deep thoughts you bring to the table
ps: five ministers quit the irish goverment in two days.....bailing ship before the upcoming irish vote