Earlier this week, noted pension reformer John Moore published “The Mechanics of Pension Reform,” listing specific principles of pension reform. Moore’s article focuses on state policy; he intends to focus on local pension reform policies in a later article. The list he has produced for state legislators is quite detailed; here’s is a partial summary of highlights:

1 – Change control of public employee pension boards to politically neutral private institutions. Currently, government union operatives exert nearly absolute control over California’s 81 state and local government employee pension systems.

2 – Limit the total annual pension contribution by any government entity to a fixed percentage of pension eligible salary.

3 – Differentiate between annual salary and pension eligible salary to lower overall contributions. Stop counting annual wage increases as pension eligible.

4 – Eliminate collective bargaining for government workers.

5 – Prohibit legislative bodies from granting vested contract rights to pensions.

6 – Require agency in-house… Read More

“It’s [private equity investments] generating real returns for our members, which is exactly what it’s supposed to do,” said Joe DeAnda, a CalPERS spokesman. “It’s real value that we don’t feel there’s another way to achieve.” – “Are private equity investments worth the risk?,” Los Angeles Times, November 14, 2015

The alliance between government unions and America’s overbuilt financial sector is one of the most unreported stories of our time. It is a story saturated in greed, drowning in delusion, smothered and marginalized by an avalanche of taxpayer funded propaganda. If this story were known and appreciated by the people most victimized by its effects, it would fundamentally shift the political landscape of the nation. The most obvious example of this alliance are the government worker pension systems, Wall Street’s biggest players, controlled by union operatives.

The problem with public sector defined benefit pensions can be boiled down to two cold facts:… Read More

California’s largest state/local government employee pension system, CalPERS, has posted a page on their website called “Myths vs. Facts.” Included among their many rather debatable “facts” is the following assertion, “Pension costs represent about 3.4 percent of total state spending.”

This depends, of course, on what year you’re considering, and what you consider to be direct cost overhead for the state as opposed to pass-throughs from the state to cities and counties. But CalPERS overlooks the fact that most of California’s government workers who collect pensions do not work for the state, they work for cities and counties and school districts. As can be seen on the “view CalPERS employers” page on Transparent California, there are 3,329 distinct employer retirement pension plans administered by CalPERS, and the vast majority of these are not state agencies paid from the state budget, but local agencies.

In a study earlier this year, “… Read More

Last month an article entitled “Pensions as Economic Stimulus” was posted toFox & Hounds Daily. The author,Charles Beckwith, is a former CalPERS senior financial manager. Beckwith’s article, while thoughtful, invites a response. Because California’s pension systems may stimulate the economy in some ways, but equally significant ways, they are killing the economy.

Beckwith’s primary argument is this: California’s pension systems pay out over $3.0 billion per month to retired state and local government workers, who go out and spend this money, “at auto repair shops, home improvement centers, tuition for grandchildren, hair salons, rent, and at a thousand other small and large businesses.”

The problem with this reasoning rests on a fundamental assumption Beckwith makes, which is that all the money taken from taxpayers to fund these pension investments would not have created a similar economic stimulus if they had been free to spend it themselves. Mr. Beckwithgoes on to extol the virtues of professional financial managers placing pension fund… Read More

“The six-year bull market is admittedly long in the tooth.” CalSTRS Chief Investment Officer Chris Ailman,Sacramento Bee, July 17, 2015

If what Mr. Ailman really means is equity investments may not be turning in double digit returns any more, that makes the recent performance of CalSTRS and CalPERS all the more troubling. Because according to their most recent financial statements,CalSTRS only earned 4.8% last year, andCalPERS only earned 2.4%. That leaves CalSTRS 68.5% funded, and CalPERS 77% funded.

Are we at the top of a bull market? Take a look at this chart:

S&P 500, Last Twenty Years Through June 21, 2015

… Read More

“Calpers argued that the California constitution’s guarantee of contracts shielded pensions from cuts in bankruptcy. The fund also asserted sovereign immunity and police powers as an ‘arm of the state,’ including a lien on municipal assets.” – Wall Street Journal Editorial, “Calpers Gets Schooled,” February 8, 2015

If you want powerful evidence ofcrony capitalismat its worst, look no further. In the Stockton bankruptcy trial, the pension fund serving that city’s employees threatened to seize municipal assets to pay pension fund contributions. They’ve made similar threats to other cities that protest against the escalating contribution rates. And they’ve made the cost to exit pension plans confiscatory. It is hard to imagine a bigger or more blatant example of collusion between business interests and government employees at the expense of ordinary private citizens.

In the Stockton bankruptcy case, judgeChristopher Klein’s ruling left… Read More

CalPERS financial struggles are draining state taxpayers. The ever-increasing contribution rates it demands from state and local governments have already bankrupted several cities. Even for more financially stable agencies, increased CalPERS contributions have crowded out other spending priorities or tax relief.

While discussions about unfunded liabilities and projected rates of return are necessary and important, the average member of the public is too busy to dive into the details.

That’s why the recent release ofCalPERS’ 2013 base payouts, including retiree names, onTransparentCalifornia.comis so important.

For the first time, average Californians can quickly and easily seehow much CalPERS paid out to retirees in 2013. The names and payouts are availablehere.

Even a casual glance at the data, shows the root cause of CalPERS’ financial struggles: It’s paying tens of thousands… Read More

Fungible – definition – “able to replace or be replaced by another identical item; mutually interchangeable.”

On November 4th, Palo Alto voters will be asked to approve Measure B, with only a simple majority required for passage. According to a summarycompiled by theCalifornia Taxpayers Association, “2014 Local Elections,” Measure B “increases the city hotel/motel tax by 2% and extends the tax to apply to online bookings, to fund general city services.”

According to an article in the Silicon Valley Business Journal entitled “Palo Alto 2% hotel tax hike headed for November ballot,”“About $4.6 million would be generated annually through a combination of the potential tax increase and funds generated by several new hotels slated to open in the city.”

Analysis ofraw datadownloaded from the California State Controller’s website, and available for review… Read More