Showing posts with label pensions. Show all posts
Showing posts with label pensions. Show all posts
Wednesday, September 18, 2019
Wednesday, May 15, 2019
FORBES: Financial Advisers Can Help State and Local Government Workers Understand Their Imperiled Pensions
FORBES: Financial Advisers Can Help State and Local Government Workers Understand Their Imperiled Pensions
A network of financial advisers capable of responding to growing concerns of workers participating in our nation’s largely underfunded public pensions is needed—immediately.
With nearly 80 million Baby Boomers retired, or on the verge of retiring, news that the overwhelming majority of this population is unprepared financially for retirement is finally getting the attention it has long deserved.
“We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.
That dire prediction is already coming true. Our national demographics, coupled with indisputable glaringly insufficient retirement savings and human physiology, suggest that a catastrophic outcome for at least a significant percentage of our elderly population is inevitable. With the average 401(k) balance for 65 year olds estimated at $25,000 by independent experts – $100,000 if you believe the retirement planning industry - the decades many elders will spend in forced or elected “retirement” will be grim.”
It is well known that the percentage of full-time private sector workers who have a pension has declined dramatically in recent decades. In the public sector, pensions are still the norm, so most state and local government employees have been promised a stated amount of retirement income for life.
Note I said, “promised.”
Whether state and local workers will ever get the full retirement benefits they have been promised is, with each passing year, becoming more and more uncertain. A great many of the states and local pensions are massively underfunded.
States facing the biggest pension crisis include Connecticut, Arkansas, Mississippi, Kentucky, Hawaii, Alaska, Oregon, Illinois, California and Colorado.
On April 12th I was invited by PeakProsperity to do an hour-long podcast focused upon the subject of underfunded public pensions.
Tens of thousands listened to the podcast, making it clearer than ever to me that people are starving for experts to explain in plain language how pensions work, or don’t work—fail.
On May 20th, I will be participating in another lengthy interview on Jefferson Public Radio, the NPR affiliate for Southern Oregon and Northern California, focusing on Oregon's pension. The folks at PeakProsperity and I are planning additional podcasts focusing on the worst funded states.
In addition to seeking clear explanations about how these pensions work and what taxpayers and participants should expect in the event of a bankruptcy, people keep asking me what they can do.
My message is clear: you are not helpless. There are steps you can and should take today.
Very simply, there are three main contributors to any pension’s health. First, how much money goes into the pot (contributions); second, how the money in the pot is managed over workers' lifetimes, say, 30 years (investments) and third, how much flows out of the pot (benefits). If any of these three elements is out-of-whack, trouble ensues.
The issue of contributions to government pensions by taxpayers typically is hotly debated because taxpayers are already stressed about their own woefully inadequate retirement savings. Equally, taxpayers often cite too-rich state worker retirement benefits as a concern. These taxpayer responses have been attributed to so-called private sector “pension envy.”
Mismanagement of pension investments is the one key element to pension health that no one talks about—ever. However, in my decades of experience forensically investigating public pensions, I have repeatedly discovered that the greatest cause of pension underfunding is mismanagement of investments—not contributions or benefits.
Most investigations I have undertaken have concluded that if the pension had been properly managed, most or all of the underfunding would have never happened.
Part of the reason investments at even the largest public pensions, such asCalPERS, are such a mess is that the boards of these funds lack even basic knowledge of investing pension assets. Public pension boards consist of laymen—school teachers, cops, firefighters, and sanitation workers. Generally, in my experience, it is foolhardy for workers to put their trust in these boards. Even if the boards wanted to do the right thing-- which (for political and other reasons) they often don't-- they wouldn't know how to.
Likewise, most participants in public pensions lack the financial expertise required to divine whether the investment program securing their retirements makes sense.
Now for the good news.
Virtually all public pensions today have websites that disclose the key information regarding the investments, as is generally required under state Freedom of Information Acts. All pension stakeholders should visit these websites and learn as much from them as you can.
In addition, there are tens of thousands of financial advisers nationally who could assist state and local workers evaluate the strengths and weaknesses of public pension investment programs. (Obviously, some advisers are more skilled than others.) My advice to every financial adviser is to spend some time studying your state and local pension’s website and comment about your findings. It’s a great way of responding to the needs of potential clients who are government workers and your efforts will help address a growing national concern.
I encourage all financial advisers and public pension stakeholders to work with me to create a national network to scrutinize and improve public pension investing before it's too late.
Thursday, April 11, 2019
Keeping Two Sets of Books
Keeping Two Sets of Books
Jon Coupal Sep 22, 2013
It’s been said that after Al Capone was sentenced to prison for tax evasion in 1931 his chief financial and legal advisor Jake “Greasy Thumb” Guzik told other mobsters how to avoid Big Al’s fate. They must keep two sets of books. One set that could be made public would show “honest income” from a legitimate business and would be maintained to satisfy the IRS and other government types. The other? Well that would show the real income.
This story comes to mind now that new strict Government Accounting Standards Board requirements have forced the revelation that the unfunded liability being carried by the California State Teachers Retirement Fund is more than double what was previously disclosed. The GASB rules compel state and local governments to stop hiding their pension costs in their financials and to report more realistic rates of return on investments.
What had been presented to the public as a $71 billion liability has been newly calculated to show that the teachers retirement fund’s net pension liability is $166.9 billion. No one is suggesting CalSTRS is involved in criminal activity but like numerous other agencies it has engaged in an effort to downplay the extent of its debt. The impact of the implementation of the GASB requirements is similar to the IRS finding a mobster’s second set of books the one that reveals actual income only in the case of these government agencies what is being exposed is actual debt.
This is important for several reasons. First it has been revealed by respected reporter Ed Mendel in Calpensions that if CalSTRS “Net Pension” liability is distributed among school districts the share of debt for a typical smaller district might jump from $21 million to $49 million and for a larger district it could go from about $280 million to $728 million. To investors this increased liability implies risk and would make it more expensive to sell school bonds. Ultimately this higher cost is borne by property tax payers.
Second CalSTRS has already been projected to run out of money in 30 years. While the retirement fund may go broke the obligation to retirees will continue and taxpayers will be on the hook for the full amount.
Expect much more bad news like this in the coming year as other government entities are forced to come clean. Cities expect to be shown in serious financial trouble include San Francisco San Jose Los Angeles Azusa and Inglewood and cities already declared bankrupt like Stockton and San Bernardino will be exposed as being even deeper in the hole.
When the full amount of the unfunded liability — a debt that taxpayers will be forced to cover — is revealed by the new more honest accounting standards expect voters to demand the heads of the politicians and government officials who created this crisis by approving unsustainably high pensions for government workers. Unfortunately many of those responsible for these past decisions are themselves now enjoying these rich benefits themselves in luxurious retirement settings.
Such is politics in the People’s Republic of California.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
Thursday, December 6, 2018
Is Harrisburg's Nightmare America's Future?
The city of Harrisburg is Ground Zero for America's municipal debt crisis. Pennsylvania's capital city has liabilities estimated at $610 million, which is nearly ten times its annual budget. The city is so deep in the red that last year it attempted to file for bankruptcy. Reckless spending did more than ruin Harrisburg's balance sheet; it crowded out private industry and distracted from the city's core functions. Today, Harrisburg is a dangerous, poverty-stricken city, with failing schools and a shrinking population. Harrisburg's fiscal nightmare may be a harbinger of things to come for American cities. In the mid-90s, local governments embarked on a spending binge, bringing total municipal debt in the United States to more than $2.8 trillion. Along with Harrisburg, Jefferson County, Alabama, Vallejo, California, and Central Falls, Rhode Island have filed for bankruptcy in the past few years. Several more cities are on the brink of default, largely thanks to taxpayer-financed stadiums, museums, housing, commercial complexes, other misconceived economic development projects, and runaway public sector salaries, pensions, and benefit packages. Is your hometown the next Harrisburg?
Thursday, November 22, 2018
Marinwood is paying down pension debt despite inevitable pension insolvency
Marinwood is paying down pension debt in addition to making the minimum contributions under pension rules. Our pension obligations will inevitably overtake our revenues without fundamental change to pension rules. Despite this the CSD continues to "work the plan"
Friday, November 2, 2018
More than 100 local governments seek tax hikes to meet rising pension bills
More than 100 local governments seek tax hikes to meet rising pension bills
Nine months after a League of California Cities reportwarned that pension costs were increasingly unsustainable, more than 100 local governments in the Golden State are asking voters for tax hikes on Nov. 6 – which Bond Buyer says is nearly double the record of 56 set in November 2016.
The Nov. 6 measures are on top of 36 city and county taxes that went before voters in the June 2018 primary.
Historically, local hikes in sales and hotel taxes are approved at least 60 percent of the time in California. They’re generally linked to a specific local need – not growing labor costs. With CalPERS’ bills to local governments on track to double from 2015 to 2025, such claims would seem dubious this election year.
Nevertheless – aware that voters likely would be cool to the idea of raising taxes to pay for pensions far more generous than those in the private sector – even now, many local elected leaders depict the hikes as necessary to pay for public safety or for fixing potholes and longer library hours.
Local officials assert hikes are about adding services
In the lead-up to the June primary, virtually the entire city leadership ranks in Chula Vista campaigned for a half-cent sales tax hike on the grounds that it was crucial to adding dozens of badly needed police officers and firefighters.
The tactic worked as Chula Vistans backed the increase. But city leaders’ claims of a coming public-safety hiring spree were impossible to square with the numbers from the city’s budget office. In April, it warned of “bleak” times ahead for San Diego County’s second-largest city, including an annual structural deficit that could reach $26.6 million by 2023 – with surging pension bills mostly to blame.
In Santa Ana, where voters are being asked to raise sales taxes by 1.5 percentage points on Nov. 6, the campaign for the tax hike rarely mentions pension costs.
But once again, a city bureaucrat framed the tax hike in more candid fashion.
“We’re not immune to the labor cost increases that are occurring throughout the state of California and throughout the country. We need to be able to provide additional services to the community. The question before the voters is what level of services do they want from their government?” Jorge Garcia, a top aide in the Santa Ana city manager’s office, told Bond Buyer.
Santa Ana’s pension bill is expected to go from $45.1 million in 2017-2018 to $81.2 million by 2022-2023 – an 80 percent increase.
‘The cause of this point-blank is CalPERS’
But some politicians have no patience with misleading narratives. “The cause of this point-blank is CalPERS and our pension fund,” Lodi Councilwoman JoAnne Mounce said in June when the Lodi City Council decided to put a half-cent sales tax on the Nov. 6 ballot.
As the League of California Cities reported in January, “With local pension costs outstripping revenue growth, many cites face difficult choices that will be compounded in the next recession. Under current law, cities have two choices – attempt to increase revenue or reduce services.”
The severity of the pension crisis is illustrated by the fact that it is sharply worsening in a period in which there is often seemingly good news on the fiscal front.
State revenue is expected to go up in 2018-19 for a 10th straight year.
County assessors report a 6.5 percent increase in property taxes this year. That’s triple the rate of inflation and comes even with Proposition 13 preventing increases of more than 2 percent on homes, businesses and other properties that didn’t change hands.
In July, CalPERS announced a second straight year of above-average earnings on its investment portfolio, which rose in value to $357 billion.
This prompted a news release from a top state union leader disputing talk of CalPERS’ poor health.
“While it’s important not to focus on one-year returns, these returns continue the long-term trend of CalPERS performing above or near its long-term discount rates and once again defying the sky-is-falling predictions of system critics,” wrote Dave Low, executive director of the California School Employees Association.
But despite the good returns, as of July, CalPERS only had 71 percent of funds needed to pay for its long-term financial liabilities, the Sacramento Bee reported. That’s far below the 80 percent funding level that is considered the absolute minimum for a healthy pension system.
Some California Employees earn more than 1 million dollars annually. HERE
Thursday, October 18, 2018
Locals seek new levies despite $4B property tax surge
Locals seek new levies despite $4B property tax surge
By Dan Walters | Oct. 17, 2018 | COMMENTARY, DAN WALTERS
Local government officials throughout the state got some very good financial news when county tax assessors toted up changes in taxable property values for their 2018-19 budgets.
The state’s uber-strong real estate market generated a 6.51 percent increase in those values, adding another $374 billion to the property tax rolls and pushing the total to $6.1 trillion.
That increase, three times the rate of inflation, translates into $4-plus billion more in revenue for cities, counties and other local governments. While schools also receive property taxes, they don’t directly benefit from the increase because of how state aid is structured.
The big winners are cities because, unlike counties and schools, they are almost totally dependent on local taxes and fees to finance their budgets. San Francisco, which is both a city and a county, reported the state’s strongest assessed valuation gain, 10.35 percent.
The very strong growth in property tax revenue, however, raises a pithy question: Why then are so many local governments, cities especially, complaining that they can’t balance their budgets unless local voters raise taxes?
There are 254 local tax increases on the November ballot – sales taxes, parcel taxes, utility taxes and hotel/motel taxes, mostly – according to the California Taxpayers Association, 65 percent more than there were four years ago.
The reason is that even with strong property tax gains, local governments’ pension costs are growing faster than revenues, thus putting the squeeze on their budgets.
Cities have been hit the hardest by increases in mandatory payments to the California Public Employees Retirement System (CalPERS) as it tries to shrink its large “unfunded liability.” City officials have repeatedly complained about the specter of insolvency if pension payments continue to grow and the League of California Cities has labeled the situation “unsustainable.”
With very rare exceptions, however, officials who place the tax increases on the ballot will not publicly say the extra revenue is needed to offset rising pension costs. Officials believe that telling the truth would make voters less likely to vote for the new taxes. It could also make employee unions less likely to provide money for tax campaigns.
Rather, on the advice of high-priced consultants, they say the money is needed for popular police and fire services and parks.
Unfortunately, most local news media are carelessly complicit in this conspiracy of silence, tending to accept the official reasons at face value, rather than analyze them critically. That’s true even though data about what revenue the new taxes would generate and projections of pension costs are readily available.
Over the weekend, for instance, the Sacramento Bee published a long articleabout proposed tax increases in Central Valley cities, quoting officials about what they hoped to do with the extra revenue, including Sacramento Mayor Darrell Steinberg, who called his one-cent sales tax hike a “game changer.”
However, the article only tersely mentioned pensions as something brought up by unnamed “critics,” even though the city’s own budget complains about pension costs and data indicate that the new taxes would largely go to pensions.
The Santa Cruz Sentinel, in a similar piece about new hotel/motel tax proposals in its region, took the opposite – and more responsible – tack by delving into how pensions are straining local budgets and driving tax hikes.
The Sentinel’s article, unfortunately, is a very rare exception. Otherwise, local officials and local media seem to believe that ignorance will be blissful.
Thursday, September 27, 2018
The Cold Reality of Pension Debt and Taxes comes to Marin.
Unless Marin and California voters elect state lawmakers who are willing to cut benefits for teachers and other public employees, state coffers will be swamped by pension and health care obligations in the next downturn, a speaker said this week.
“You just have to win” state elections, David Crane, president of Govern for California, told about 110 people crowded into Piatti’s Restaurant in Mill Valley on Monday at an event sponsored by the Coalition of Sensible Taxpayers Marin. “You have to wake up every morning and say, ‘What do I have to do to win?'”
Crane said state Assembly and Senate members must be elected who are “courageous” enough to make reductions in three areas: public pensions, retiree health care and Medicaid. Employee unions that don’t want the changes must be made to understand that the whole solvency of the state is at risk, he said.
“‘The big takeaway from David is that all the power resides in Sacramento, the Legislature — that’s the Assembly and Senate,” said Ken Broad, a financial analyst and community advocate. “Most people here are railing against Trump and are very focused on local grassroots issues — and yet, all the leverage is up in the Legislature.”
Broad is assisting Crane with Govern for California, a network of political philanthropists who say they give money to candidates who work for the benefit of citizens instead of special interests.
If lawmakers willing to make changes are not elected, “nothing will change, unfortunately. And he (David Crane) presented a strong case that it’s a cost tsunami.
“In the next downturn, revenues are going to shrivel — I think he (said) $60 billion will swamp the (state) Rainy Day Fund,” Broad added. “So, you ain’t seen nothing yet.”
Attendees, such as Susan Kirsch of Mill Valley and Michael Hartnett of Greenbrae asked Crane what residents can do locally. School board trustees do not have the power to negotiate a reduction in pension benefits, for example, Crane said, but they could reduce retiree health care benefits.
“Marin County has some of the highest parcel taxes in the state — I think a lot of it has to do with pensions,” Hartnett said. “How do you tell the school boards they can’t keep doing this?”
“You gotta win,” Crane responded, meaning that local residents should focus on getting their people elected to the school boards and making sure they do whatever they can to stabilize costs. Part of winning is knowing that it takes 41 Assembly votes and 21 state Senate votes to get a bill passed.
“There are three groups of people who understand this: health care companies and public employees; crony capitalists such as the state dental association; and regulated entities such as PG&E,” Crane said. “They know the names of every legislator — and you would too if your livelihood was at stake.” Read the full story HERE
Editor's Note: The Marin IJ embarrasses itself with this horribly biased title. The article itself is worth reading. There are many in Marin who are genuinely interested in fixing the problem.
Saturday, September 22, 2018
Friday, August 3, 2018
It’s time officials face the facts about public pensions
Marin Voice: It’s time officials face the facts about public pensions
Transparent California released alarming data showing the growth of “promised benefits” in the Marin County Employee Retirement Association (MCERA) compared with the growth of countywide personal income, median household income, inflation and population. The association’s members include the county, city of San Rafael, Novato Fire District and six smaller districts.
Robert Fellner’s report is: “Marin County promised pension benefits up nearly 1000%, dwarfing rate of economic growth.”
In a similar study of the California Public Employees’ Retirement System — the largest public pension fund in the United States — Fellner reported that CalPERS’ promised benefits grew by nearly 900 percent. County public agencies that aren’t MCERA members are CalPERS members.
Marin County, with a population of approximately 260,000, has outdone the nation’s public pension fund Goliath in making costly promises.
For MCERA, promised pension benefits from 1986 to 2016 are up 982 percent, while personal income is up 377 percent, median household income is up 167 percent, inflation is up 139 percent and Marin’s population is up only 17 percent.
Part of the problem is the refusal to face facts.
Example: At a Marin Coalition luncheon on Feb. 4, 2015, there was a discussion between Citizens for Sustainable Pension Plans and Rollie Katz, executive director of the Marin Association of Public Employees (MAPE).
One of Katz’s PowerPoint slides contained the following words, verbatim:
What negatively affects pensions?
• Pension enhancements of the late 1990s and early 2000 were ill-advised and added to the cost.
• Increased longevity adds to the cost.
• The primary culprit? The Great Recession.
The primary culprit is an unsustainable pension system, not Wall Street.
Enacted in January 2013, the Public Employee Pension Reform Act made modest reforms to the calculation of public pensions.
These reforms were challenged by county unions that were the first statewide to sue. The plaintiffs are the Marin Association of Public Employees, the Marin County Management Employees Association, SEIU 1021 and the Marin County Firefighters Association.
The suits involve laws no longer allowing “standby” pay, administrative response pay, callback pay and cash payments for waiving health insurance. Previously, these extra payments could be included in the calculation of pensions.
When they lost, MAPE appealed the decision to the state appeals court. The decision was upheld. MAPE appealed to the state Supreme Court.
The appeals court’s summary ruling in MAPE v. MCERA holds the key to reform: “... while a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension. And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”
Our supervisors must come to terms with the problem and do all they can to rein in costs. To do otherwise could lead to fiscal disaster for both taxpayers and public retirees.
Dealing with it by reducing the number of current workers or salaries is a Band-Aid. A long-term plan must be adopted. All available legislative tools must be used. Negotiations must be transparent to taxpayers.
Above all, based on the hard facts backed by data, it would be prudent for local elected officials to vigorously support the reform legislation currently before the state Supreme Court. So far, they have been silent. SonomaCounty, on the other hand, filed an amicus brief in support of the reform.
Considering that Marin taxpayers are already burdened with excessive debt caused by excessive promises to public employees — resulting in staggering unfunded public retiree debt — it’s the very least our elected officials owe taxpayers.
Jody Morales of Lucas Valley is the founder of Citizens for Sustainable Pension Plans, a Marin-based group pressing for public pension reform.
Wednesday, July 18, 2018
Jerry Brown to Supreme Court: Hurry up and hear my pension law case
From: Sacramento Bee
Jerry Brown to Supreme Court: Hurry up and hear my pension law case
July 17, 2018 11:52 AM
Updated July 17, 2018 01:21 PM\
Before he leaves office, Gov. Jerry Brown wants the state Supreme Court to resolve a lawsuit that could empower his successor to reduce or alter pension benefits for California public employees.
Brown’s office this month asked California Chief Justice Tani Cantil-Sakauye to accelerate the state Supreme Court’s consideration of a lawsuit that challenges a marquee law he signed six years ago restricting pension benefits for public employees hired after 2013.
Technically, the lawsuit seeks to undo only a small part of Brown’s Public Employee Pension Reform Act. It aims to restore a benefit the law canceled that had allowed public employees to buy “air time” — extra years of service that were credited to their pensions.
But both sides acknowledge the stakes are much higher. A win for Brown would put a dent in the so-called California Rule, the precedent that forbids public agencies from reducing pension benefits for current employees and retirees unless they provide additional compensation to offset the loss of income.
Brown is eager to break that precedent, which generally prevents cities and other public agencies from making even minor adjustments to pension plans even as their spending on retirement plans climbs.
“Vital city services are at risk, including the ability to fund police and fire protection,” the League of California Cities wrote in a brief supporting Brown. “Some cities have become insolvent and other cities are on the brink.”
In October, Brown’s office took the unusual step of replacing Attorney General Xavier Becerra in defending the law against the challenge from the union that represents Cal Fire firefighters, Cal Fire Local 2881.
“This move was animated in large part by Gov. Brown’s deep concern for the fiscal integrity and solvency of public pension systems throughout the state,” Rei Onishi, an attorney in Brown’s legal affairs office, wrote to the chief justice on July 6.
“As the end of Gov. Brown’s term draws closer, we respectfully urge the court to calendar this matter for argument as soon as practicable,” the letter continues.
Cantil-Sakauye’s office has not responded to a request for comment, and Brown’s office declined to elaborate on the letter.
It’s unclear how Brown’s successor will handle the lawsuit if it carries over to next year. California’s two largest systems, CalPERS and CalSTRS, each have about 70 percent of the assets they’d need to pay all of the benefits they owe, and leaders of both organizations worry that a recession could set them back further.
Democratic front-runner Lt. Gov. Gavin Newsom assured public employee unions in endorsement meetings earlier this year that he would honor the California Rule even if it courts overturn it, according to a summary released by California Professional Firefighters.
Newsom “strongly believes changes in pension systems should be done with input and buy-in from workers and those who represent them — not something that is done unilaterally,” his spokesman Nathan Click told Bloomberg in February.
Republican John Cox has called the state’s public pension debt “critical.”
“Mr. Cox is closely watching the California Supreme Court’s future action on the Cal Fire Local 2881 vs. CalPERS, therefore it’s premature to speculate on any clarifications the court may make. That said, John Cox’s starting point is that California must keep the existing promises we have made, and set our public employee retirement programs on a course for future safety and soundness,” his campaign manager, Tim Rosales, said in a written statement.
The lawsuit, Cal Fire Local 2881 v. CalPERS, is one of two significant cases challenging Brown’s pension law that the State Supreme Court is expected to hear. The court is also receiving briefs for a case filed by the Alameda County Deputy Sheriff’s Association that argues Brown’s law illegally rescinded benefits to current employees.
Appeals courts sided with Brown in the Cal Fire union lawsuit but favored union arguments in the Alameda County case.
Brown at a news conferences this year said he anticipates that courts will uphold his law, void the California Rule and enable future leaders to adjust pension benefits.
“When the next recession comes around, the governor will have the option of considering pension cutbacks for the first time in a long time,” he said at a January news conference.
Gary Messing, an attorney representing the Cal Fire union, said Brown’s spending plan this year will help labor organizations prevail at the Supreme Court. Brown put the state on course to accumulate $16 billion in reserves by next July but did not commit additional money to paying down pension debts.
“CalPERS is doing better. The governor has $16 billion in reserve but hasn’t spent a nickel of that shoring up the retirement system. There has to be a necessity to change a vested benefit. I don’t see a necessity argument going well for the governor.”
The League of California Cities in February released a report that argued pension costs were becoming “unsustainable” for some local governments. About 10 percent of city leaders who responded to a league survey reported that they expect pension costs will consume about 20 percent of their budgets by 2024.
Unions counter that each city should work to solve its budget challenges on its own without upending the California Rule.
Under an umbrella group called Californians for Retirement Security, unions filed a brief in the Cal Fire lawsuit that said 42 public agencies last year reached agreements with labor organizations that required employees to kick in more money for their pensions. The brief also noted that state government’s spending on pensions has held steady between 1.6 percent and 2.2 percent of the state general fund since 2008.
“We also want the issue resolved,” said Dave Low, chairman of Californians for Retirement Security. “The courts have consistently ruled that an employer cannot impair the vested benefits of employees, unless an equal, offsetting benefit is provided. We strongly believe the Supreme Court will abide by the law and their own precedent, and not be unduly influenced by the governor.”
This is such an important article.
It’s great that Gov. Brown is anxious for the State Supreme Court to hear the CalFire v CalPERS case as soon as possible. The comment by the front-runner for governor, Gavin Newsom, however, declaring in advance that - no matter what the decision is - he would continue to “honor” the California Rule, is nothing short of alarming.
Newsom offers no explanation of how this would be done, but – if the State Supreme Court finds for CalPERS – his efforts to thwart that decision would cause years of litigation and could ultimately set us on a course of total insolvency.
The current inability to reduce pension benefits for current employees and retirees - unless additional compensation is provided to offset those reductions - is what got us into this mess in the first place.
Most politicians recognize this fact, but some are so beholden to public unions for campaign financing that they refuse to acknowledge the fiscal threat caused by the so-called California Rule.
It is blatantly a choice between personal ambition and concern for the taxpayers of California.
So, as we wait for the State Supreme Court’s decision in this critical case, we are also left wondering if a positive decision will provide a solution for the future or be challenged by a new governor.
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