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Headline: Why The Dot-Com Bubble Is Key To Understanding California’s Growing Public Employee Pension Debt
Publication: Capital Public Radio
Article Date: Sep 19, 2016

California faces a mounting public employee pension debt.  To figure out how the State of California got in this situation, it’s helpful to rewind the clock to the late 1990s, back to the days of the dot-com bubble. That’s when the state and local governments chose to make pension benefits a lot more generous.  It’s a decision that turned out to have lasting implications. Read article…

Headline: Public Pensions Are Good for Workers, Taxpayers, and the Economy
Publication: Huffington Post
Article Date: Sep 23, 2016

Opponents of defined benefit pensions often point to the low annual investment returns of recent years as a major reason to gut these plans. But what they are forgetting is that pensions are long-term investments that have positive long-term effects on the economy. Read article…

Headline: A Sour Surprise for Public Pensions: Two Sets of Books
Publication: The New York Times
Article Date: Sep 17, 2016

Using a small Riverside County pest control district with only six employees as an example, this article explains the controversial difference between “Actuarial Value” and “Market Value” when calculating the future liability of benefits owed by public pension funds. The actuarial approach includes the assumed rates of investment return by the pension systems over many years; if the returns fail to materialize, the retirement funds will fall short of meeting their obligations. The market approach is more conservative, assuming a much smaller rate of return to guarantee the fund will cover promised future benefits. Bottom line: most pension systems have traditionally reported the unfunded liability using the actuarial value; now the market value comparison is being made and the unfunded numbers under this method can be headline-grabbing (double, triple or more of the perceived shortfall). Read article…

Headline: CalPERS’ Bad Faith Didn’t Stop in 1999
Publication: The San Diego Union-Tribune
Article Date: Sep 20, 2016

This editorial follows up a recent feature outlining the history of Senate Bill 400, which boosted state workers’ pensions substantially in 2000. The California Public Employees Retirement System (CalPERS) is roundly castigated by most budget analysts and media sources for selling the huge benefit increase to the Legislature by claiming it would be fully covered by positive investment returns in a bold and bullish stock market. Here the editorial board labels passage of SB400 a “public policy crime”, and goes on to cite actions by CalPERS in subsequent years that indicate the giant pension fund continues to act in bad faith where taxpayers are concerned.

Article Commentary by Chris Heiserman, RESDC Editorial Committee Chair
It’s pretty clear that the fiscal implications of the big bump in pension benefits in 2000 went largely unnoticed initially. Rosy predictions about investment returns led CalPERS and other retirement plans to underestimate or skip annual contributions to their funds. When the market tumbled and the ranks of retirees grew, dark financial clouds loomed on the longer term horizon. CalPERS should be criticized for its misleading public relations ploys (“average annual retiree benefit is just $31,500”); however, the Union-Tribune shouldn’t get a pass when it characterizes data and information from obviously biased anti-public pension sources as “accurate coverage of pension woes.” CalPERS deliberately averages all retiree pay to report a low number; the data source the U-T uses for comparison averages the combination of pay and other benefits for “full career” retirees (30+ years), thus producing the highest possible number.

Read article…