“For the first timein the pension fund’s history, we paid out more in retirementbenefits than we took in contributions.” – Anne Stausboll,Chief Executive Officer, CalPERS,2014-2015 Comprehensive Annual Financial Report

There are few examples of a seemingly innocuous statement with more significance than Stausboll’s admission, buried within her “CEO’s Letter of Transmittal,” summarizing the performance of CalPERS, the largest public employee retirement system in the United States. Because what’s happening at CalPERS – they now pay more in benefits than they collect in contributions – is happening everywhere.

For the first time in history, America’s public employee pension funds, managing well over $4.0 trillion in assets, are becoming net sellers, not buyers. And as any attentivestudent of economics will tell you, when there are more sellers than buyers, prices drop. Behind this mega economic trend is a mega demographic trend – across the developed world, certainly including the… 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