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Edward Ring

Examining the CalSTRS Shareholder Bailout

“CalSTRS has a $70-plus-billion unfunded liability – even with assumed investment earnings that Brown deems ‘highly unlikely’ – and says it needs about $5 billion more a year to regain solvency.”

– Dan Walters column, “Brown budget reflects state’s massive debt,” May 25, 2014, Sacramento Bee

Those “investment earnings” that Walters quotes Brown as finding “highly unlikely,” refer to the long-term annual return on investment projection of 7.5% used by CalPERS (ref.FYE 6-30-2013 CalSTRS Annual Report, page 29).

So what happens if investment earnings generated by CalSTRS are destined to, as even California’s union-friendly Governor Brown attests, achieve more “likely,” lower returns? In November 2013, using data from CalSTRS FYE 6-30-2012 Annual Report, the California Policy Center released a study “Are Annual Contributions IntoRead More

Edward Ring

Public Pension Solvency Requires Asset Bubbles

The title of this post expresses what is probably the greatest example of a monstrous hypocrisy – that public employee unions, and the pension funds they control, are supposedly helping the American economy, and protecting the American people from “the bankers.” Overpriced “bubble” assets caused by banks offering low interest rates hurt ordinary working people in two ways – they cannot afford to buy homes, and they are denied any sort of viable low risk investment opportunity. But without an endlessly appreciating asset bubble,every public employee pension fund in the United States would go broke.

The inspiration for this post is a guest column published on April 27th in the Huffington Post entitled “The Real Retirement Crisis,” authored byRandi Weingarten, the president of the American Federation of Teachers. The totality of Weingarten’s column, a depressing plethora of misleading statistics and questionable assertions, compels a response:

Weingarten writes:“America has a retirement crisis, but it’s not what some people want you toRead More

Edward Ring

Government Unions Attack Free-Market Nonprofits via Pension Funds

“The AFT [American Federation of Teachers] will be looking more closely at those who are supporting the dismantling of defined benefit plans at the state and municipal level.”Ranking Asset Managers, A Retirement Security Report on Money Managers for Pension Fund Trustees, March 5, 2014

As reported in aWashington Examiner editorialon April 4th, the American Federation of Teachers – that’s “teachers union” in plain English – has circulated a pamphlet that:

“Calls on pension fund trustees to drop any investment managers that are tainted by connection to free-market nonprofits. They also want those same trustees to force any potential new managers to have to disclose any donations they may have made to the groups on AFT’s blacklist.”

That the AFT can circulate a document like this without generating an uproar in the media reflects a monstrous and tragic double-standard. Money supporting… Read More

Edward Ring

Retirement Security in America – A Tale of Two Contracts

Two people walked into a bank, somewhere in California. Both individuals needed to prepare financially for their retirement. Both of them earned about $80,000 per year.

The first individual, Mr. Jones, was presented by the banker with a contract called “Social Security.” The contract read as follows:For as long as you work, you will give us 12.4% of your gross earnings, and we will invest the money. When you retire, we will pay you an annuity for as long as you live. Your annuity will be based on a guaranteed rate of interest – depending on how long you live – of about 1.5% per year, compounded! When you die, you will have nothing left of your investment to pass on to your heirs.

The second individual, Mr. Smith, was presented with a very different contract, called “Collective Bargaining Agreement.” It read:For as long as you work, you will give us 5.0% of your gross earnings, and we will invest the money. When you retire, we will pay you an annuity for as long as you live.Your annuity will be based on a guaranteed rate of interest of exactly 7.5% per year, compounded. When you die, you too will have nothing left of your investmentRead More

Edward Ring

Public Sector Pension Plans Do Not Pass the Smell Test

“Pew’s relationship with the Arnold Foundation does not pass the smell test,” said Meredith Williams, Denver-based executive director of the National Council on Teacher Retirement.– ”Pension Funds Press Pew to Cut Arnold Foundation,” Philanthropy Today, March 4, 2014

If you’re looking for an example of how, increasingly, political debate in America is framed as a battle between tainted – and very powerful – special interests who harbor nefarious personal agendas, instead of a rational exchange of competing facts and logic aimed at finding optimal solutions, look no further.

Apparently, across the United States, any reputable nonprofit, from Pew and PBS to your underfunded start-up, now has to refuse gifts from major donors unless they happen to be (1) funded by public sector unions, or (2) originate from the pockets of left-wing billionaires. Everything else is tainted. Everything else fails the “smell test.”

Apart from the absurdity of tagging individuals and organizations with terms… Read More

Kevin Dayton

It’s Winnable! Conditions Are Ripe for a Republican to Get Elected in 2014 as California State Treasurer

News media and California Republican Party activists are focused on which Republicans are running for Governor, and rightfully so.

But there is anotherelected statewide office that invites a campaign based on intellectual and popular arguments in support of fiscal responsibility.

That obscure but influential office is California State Treasurer.

And that office is quite winnable for a libertarian populist-styleRepublican who can credibly argue to The People against crony capitalism and build a majority coalition of support from voters on the Left and Right.

Why isn’t a smart, dynamic Republican with this kind of thinking jumping into this race? What an opportunity! Below are five winning issues for a Republican candidate for California State Treasurer.

1. Educate Voters about Bonds and Bond Measures

Bonds are free money that comes from President Obama or somewhere, right?

Californians don’t know that state and local “bond measures” on the ballot authorize governments to borrow money from Wall Street and pay it back – with interest. The so-called “One Percent”… Read More

Edward Ring

How Unions and Bankers Work Together to Protect Unsustainable Defined Benefits

One of the biggest unreported, blockbuster stories in modern America is the alliance between public sector unions and the speculative banking industry. It is a story saturated in greed, drowning in delusion, smothered and marginalized by an avalanche of propaganda – paid for by taxpayers who fund both the public sector unions and the public employee pension funds.

The problem with public sector defined benefit pensions can be boiled down to two cold factors: They are too generous, and they rely on rate-of-return assumptions that are too optimistic. The first is the result of greed, the second of delusion. To indulge these vices requires corruption, and it is a rot that joins public sector unions with the most questionable elements of that Wall Street machine they so readily demonize.

If you honestly review the numbers, the greed is obvious. The average pension for a public servant who has worked 30 years or more in public service is more thanfour timeswhat the average social security benefit is for someone who has worked 40 years or more in the private sector. To cite… Read More

Edward Ring

CalSTRS Contributions Inadequate; Unions Call Reformers “Right-Wing Ideologues”

During the most recent year for which there is publicly available data, the fiscal-year-ended 6-30-2012, the California State Teachers Retirement System contributed a $1.1 billion paymenttowards paying off an unfunded liability of $71.0 billion. This fact, and much more, came out in a California Public Policy Center study released last week “Are Annual Contributions Into CalSTRS Adequate?

Now let’s suppose you have borrowed $71,000, and you are paying a 7.5% interest rate on this borrowed money. Do you think you would ever have this debt paid off, if you only paid $1,100 per year? How would that work? Isn’t 7.5% interest on $71,000 equal to $5,300? Wouldn’t a mere $1,100 payment put you further in the hole by $4,200? Wouldn’t you owe $75,200 by the end of the year, more than the $71,000 debt you started with?

Multiply by a billion and you’ve got CalSTRS.

And this same disastrous, wishful thinking is playing out in nearly every “professionally managed” public sector pension fund in California. Every year, the combined unfunded liability… Read More

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