Pension reform: Will Brown make GOP an offer?

Senate Republicans willing to cast key votes to put a tax measure on the ballot, if there also are measures for pension reform and a spending limit, seem to be waiting for Gov. Brown to make an offer.

A pension reform proposal released by the Republicans last week appears to be a list of basic concepts that are more like a starting point for negotiations than a ballot-ready plan. For example, whether the reforms cover CalSTRS is undecided.

Much of the 20-point Republican proposal is similar to a 12-point pension reform issued in March by Brown — notably a pension benefit cap and a “hybrid” plan for new hires combining a lower pension with a 401(k)-style individual investment plan.

The governor’s news release said the 12 points had been discussed with Republicans, but talks broke down over other issues. “Brown intends to introduce these pension reforms with or without Republican support,” said the March news release.

Now might be a good time for the governor to introduce those pension reforms.

Last week “What now?” was the big question after Brown vetoed a Democratic-drawn budget. He said borrowing and suspect maneuvers would continue a long-running deficit and add to $35 billion in budgetary debt built up during the last decade.

Brown wants to close the remaining $9.6 billion deficit (after $11 billion in cuts and other action) by extending temporary tax increases before they expire July 1 and then, as promised in his campaign, place the taxes on the ballot for voter approval.

But he needs at least four Republicans, two in each legislative house, for the two-thirds vote required to extend the taxes and place them on the ballot in a special election later this year.

“We need four Republican votes, and in the next several days I’m going to do everything I can,” Brown said at a news conference after the budget veto. “I’ll move heaven and earth to get those votes.”

The four GOP senators, who also issued spending limit and regulatory proposals last week, are said to be willing to vote to place taxes on the ballot if their conditions are met, but not to extend the taxes before they expire July 1.

The conventional wisdom is that voters are more likely to approve an extension of taxes already in place, rather than what would be viewed as a “tax increase” if the sales and vehicle license fee taxes expire July 1.

Another question is how voters would react to a balanced package with tax revenue and spending cuts and controls, billed as a way for the state to end a decade of deficits and debt and begin to work its way out of the red and back to solvency.

But Democratic legislators, generally opposed to a pension overhaul and spending limit, reportedly are leaning toward papering over the budget gap until a stand-alone tax increase initiative can be placed on the November ballot next year.

It’s not clear whether Brown’s insistence on a gimmick-free budget, backed up by the swift budget veto last week, would be enough to get Democrats to vote to place pension reform and a spending limit on the ballot to avoid more deep budget cuts.

A major Democratic ally, public employee unions, usually says that any major pension reform should be done through collective bargaining, not imposed by law. Bargaining results have been mixed.

The standard bargaining reform raises the employee’s payment into the pension fund, allowing employers to reduce their costs by a similar amount, and gives new hires a lower pension, producing long-term employer savings.

New state worker contracts, for example, raised most employee contributions from 5 to 8 percent of pay to a new range of 8 to 11 percent. Employer contributions are about 17 to 28 percent of pay.

The new contracts have cut the state payment to the California Public Employees Retirement System to $3.5 billion in the fiscal year beginning July 1, down from what was once expected to be $3.9 billion in the current year.

Before the new contracts, CalPERS expected the employer contribution for most state workers, now 17 percent of pay, to increase to about 25 percent in a few years and stay there for a decade.

Most of the increase was due to huge investment losses in the recession and stock market crash. Since the last of the new contracts were approved last month, there has been no updated estimate of future state CalPERS costs.

“Public pensions equal just three percent of California’s budget and overhauling its public pension system will not make a dent in current shortfalls, nor will it spare other programs such as schools and parks,” a labor coalition news release said last week.

As previously reported, under a revised state budget proposed by Brown last month spending on state worker retirement is about 6 percent of the $88.8 billion deficit-ridden general fund:

CalPERS $3.6 billion (general fund $2.1 billion), California State Teachers Retirement System $1.3 billion (all gf), retiree health $1.6 billion (gf $1.5 billion), Social Security $632 million (gf $297 million) and Medicare $218 million (gf $102 million).

When critics talk about the need for cost-cutting pension reforms, they often point to the “unfunded liability,” the projected cost of retirement benefits promised current workers in the future for which no money has been set aside.

The revised budget lists $181 billion in “unfunded liabilities” for the state retirement system: retiree health $59.9 billion, state workers $48.6 billion, teachers $56 billion, UC employees $12.9 billion and judges $3.6 billion.

The debt estimates assume that pension fund investments earn an average of 7.5 to 7.75 percent in the decades ahead. If as critics advocate a lower forecast based on risk-free bond rates is used, the state pension debt is more than $500 billion.

Pension debate at the Capitol tends to focus on the two big state systems, CalPERS and CalSTRS. But most of the urgent pension problem is in local government, where employee costs are a much larger part of the budget.

The mayor of the largest CalPERS city, Bob Foster of Long Beach, said in March that pension contributions for police and firefighters, now 28 percent of pay, are expected to be 45 cents in three years and “could easily get to the 60 or 65 or 70 cents level.”

The news release last week from the labor coalition, Californians for Retirement Security, said public employees in nearly 180 cities, counties and special districts have agreed to pay more toward their pensions.

The Little Hoover Commission reported in February that nearly 200 cities, counties and districts raised pension benefits after the stock market crash hit pension funds, calling into “question the willingness and ability” of local officials to cut costs.

What’s happening in most local governments may be unreported or no change. CalPERS serves 1,543 government agencies. Among the more than 80 other public retirement systems in California are those run by the five largest cities and 21 counties.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at http://calpensions.com/ Posted 20 Jun 11

39 Responses to “Pension reform: Will Brown make GOP an offer?”

  1. Rex The Wonder Dog! Says:

    “Public pensions equal just three percent of California’s budget and overhauling its public pension system will not make a dent in current shortfalls, nor will it spare other programs such as schools and parks,” a labor coalition news release said last week.

    ============
    Totally, 100% FALSE, but it is one of the usual “talking points” the public employee frauds spin, such as the average Calpers pension is just $24K, when it is actually $68 for f/t career employees, or that GED cops and FF’s dies 3 days after they reitre when they live until age 81-86, or that they gave up making big bucks in the private sector to take a gov job when a GED educated cop or FF comp over $250K with OT while a GED in the real world comps $10K-$15K….public employee frauds more spin than my washing machine.

  2. Reilleyfam Says:

    Rex, you are a liar, a hater and I truly hope bad things happen to you. You are a dog, but no wonder dog.

  3. FLAK88 Says:

    Rex needs to see the film ‘INSIDE JOB’. Perhaps he can then re-channel his energies toward where the REAL FRAUD is !

  4. Cesar Says:

    Rex, you do make me wonder! Have you heard the rumors that the Republican-Rich (middle class destroyers) have started to pay commenters to post drivel on news/social media blogs? Knowing how they work, I would not be surprised if they outsourced this work out of the country. Rex, you make me wonder if you might be in Mumbai… killing two birds with one stone. Making rupees by posting your lies and at the same time helping to bring America’s middle class standard of living down to that of your Indian homeland. I wonder about you, Dog.

    And your claims? Ridiculous! It is the rare cop or firefighter that makes $250K. And salaries, both public and private, vary wildly. I’m not going to speculate on your education or what you have done with it, but there are many GED’s and even high school dropouts that make good money. You have any idea how much my plumber charges?! My real estate agent is a bona fide millionaire and only has a GED. Google high school and/or GED dropouts. You’ll find many more millionaires and billionaires than you will cops or firefighters that make over $250K/year. And you think that on average they live to be 81-86 years old? I doubt that would be true in India, I know it’s not true in America.

  5. SeeSaw Says:

    The Republicans need to end their attempt at political blackmail, and give JB the necessary votes, so that the issue of tax extensions can be concluded, one way, or another. Pension reform is a separate issue, and should not be considered on the same ballot, with the issue of tax extensions.

  6. SeeSaw Says:

    Rex has already seen, “Inside Job”, so why he is so stubborn about who to blame, regarding this world-wide economic collapse, I don’t know.

    Rex, you know how you are spinning, when you say the average CalPERS pension for full-time, career employees is $68,000. That figure is derived from a cherry-picked group of recent retirees, all with 30 year careers. There were thousands more retirees in the same year, with much lower calculations. The average length of career for CalPERS service retirees, is 20 years, and the average CalPERS retirement amount is less than $36,000.

  7. anon Says:

    Nothing wrong with Rex’s numbers.

  8. roger Says:

    Yep, Cops & FF are the PROBLEM!!! And they keep wanting more ;all in the interest of the biggest lie -public safety.

  9. spension Says:

    So sad to hear the Cal Legislature bosses dis Chiang… he seems like a standup guy. But it gave me perspective on how innumerate our politicians are.

    401(k)’s etc are substantially more expensive for a given benefit than are defined benefit systems. Simple: everyone in a 401(k) must save enough to provide for themselves to age 95 or so. But in a defined benefit system, you need only plan for the average lifespan to 85 or so.

    Proposing 401(k)’s is simply innumerate. Sad that the private sector has duped everyone into believing 401(k)’s are a good deal, they are not… except, of course, for the investment bankers who get to churn millions of private accounts rather than a few big, placid accounts invested in index funds.

    But limiting public pensions to <2X the median state income is simply a good idea. Really impossible to ask average people to support wealthy retirements.

  10. IT Pro Says:

    Guys, Rex is and always has been a troll… here and other blogs. Don’t feed the trolls!

  11. music Says:

    Innovative entrepreneurs’ genius (99% perspiration and 1% inspiration) merits a chance at terrific financial yields, which free market proponents insist fuels competition necessary for capitalism. Adam Smith also said that the free flow of information (transparency in markets) is necessary for capitalism to work.

    What provides this transparency? The Securities and Exchange Commission, funded by the taxpayers, does. Taxes, as we see in most first world countries, have always been a symptom of smoothly functioning societies and economies. I do not begrudge an inventive genius their just rewards for the money earned by their patents. If their contribution results in an improved standard of living for the rest of us, why not give them what they want?

    In what kind of society do such innovative geniuses as Thomas Edison or Bill Gates flourish? Afghanistan and Somalia? Third world countries like Afghanistan and Somalia do not collect taxes from their citizens. Capitalism can’t get a foothold there because corruption is rampant. What keeps corruption at bay here? Judges and regulatory agencies, paid for by taxes, curtail corruption. Perhaps people in third world countries will organize themselves to put an end to their oppressors, if they could ever think of anything beyond surviving day to day. They have no sustainable (tax-funded) infrastructure to help them do this, however. There is no police protection for the universities’ or other’s research and development facilities, for instance.

    How does a sane person measure happiness? There is a fairly stable level of monetary compensation beyond which happiness isn’t much affected. Subsidies to the largest corporations and the very rich are much higher now than during the 1950′s and ’60′s, an era of more progressive taxation. Yet back then, our economy and infrastructure were the envy of the world. Our overall standard of living was certainly higher. Do the large corporations and very rich need to continue receiving taxpayer subsidies and paying taxes at the low rates they now enjoy? Do they need to possess trillions of dollars in profits in order to be satisfied? Of course not.

    People like Tough Love don’t appreciate the perspiration involved in maintaining civil society and infrastructure. If a society without parks, recreation, police, teachers, schools, health clinics, libraries, fire departments, justice systems, taxation, and transportation departments, to name a few, is what you want, perhaps Afghanistan is the place for you. Try teaching in any classroom in the U.S. for a month and you will get an idea of how hard this work is. The private sector has never proven to do a better job at this than the public sector. I challenge anyone in the private sector to come into a classroom for a month (not just an afternoon, a day, or even a week) and try conducting a language arts program for English-speaking students or students whose parents only speak other languages besides English. Compare the level of perspiration involved in that setting with any of the research and development work leading to the development of patents in the industrialized world and you will be surprised at how similar they are. There is also a degree of inspiration which must be present, or you don’t see results in your students. Abraham Maslow’s psychological of the hierarchy of human needs (Harvard, I think) is worth consulting in this regard.

    Or perhaps people like Tough Love want us to become Somalia, etc. At least we know them for who they are. Perhaps they are not quite human.

  12. music Says:

    “Tough Love” was a contributor to an earlier article. “Tough Love” has extremely rich/corporatist views and thought using percentages and numbers over and over in various ways would cause those familiar with the actual numbers to doubt themselves.

    The very rich corporations have a collective net worth in the trillions. Anyone remotely cognizant of business/accounting principles knows that “net worth” equals “bottom line” equals negotiating power in the capitalist paradigm.

    Compare two trillion with the net worth of the most powerful nations in the world and it appears corporations and the very rich hold more sway over the rest of us than they ever admit. Compare two trillion with the net worth of the entire public sector population, present assets and future pension payouts included, to get an idea of how massive an inequity this is.

    Public employees are slaves, ultimately, which is where the corporatists and very rich wish to keep them.

  13. SeeSaw Says:

    Music, I don’t know who you are or where you came from. I suspect you are a research scientist or professor in a college. Please don’t go away. Better yet, please start inhabiting some of the comment forums on these various other publications. It is not common for us to read more sense, than nonsense.

  14. Keen Observer Says:

    Tough Love and Rex = Koch Brothers.

  15. spension Says:

    Oh goodness, music. Public Employees are not slaves. No shackles, whips, requirement to have sex with the master.

    I don’t think the average US standard of living was higher in the 1950’s and 1960’s.

    But I agree that corporations and their greed have gone over the top. But in some cases public employees have caught the greed bug from the private sector. 3% at 50 retirement is definitely greedy, pension spiking is greedy, abuse of disability is greedy.

  16. SeeSaw Says:

    Three percent at 50 is only in the arena of public safety. There are thousands upon thousands of miscellaneous workers who are not part of the 3% at 50. It turned out to be a problem and mistake–those responsible did not dream they were going to be hit by the economic tsunami in 2008. The employees can only accept what their managers put before them. To call them greedy is slanderous, because it is a false accusation!

  17. spension Says:

    Employees have free will. No-one held a gun to their head and made them take 3% at 50. If free sex trips to Thailand were part of a contract package (all legal), that doesn’t mean you have to take them. Individuals should have ethics independent of what a contract negotiator tells them; if individuals do not have such ethics, we are doomed as a society.

    For sure, Wall Street miserably fails that test. But some public employees have too… the 3% at 50, the phony disability, and the spiking with raises in the last year or two or 3 are all unethical.

    That those responsible were ignorant of 1929 and (more pertinent) 1933 is their fault. Gee, in 1933 the banks in US took a holiday… close relatives of mine lost a lot of their savings from simple bank default.

    The responsible pension managers today have been so ignorant that they did not deserve their high salaries, that is for sure.

    In practice, the definition of 100% funded for a pension plan should be: suppose today is September 3, 1929 (the peak of that era). Suppose future contributions (employer and employee) are held to the average of the past 30 years, and can’t rise due to political infeasibility of raising public contributions in a downturn. If the pension fund gets through, I’d call that 100% funded. And benefits should be lowered until one passes that `stress test’.

    Maybe Japan of the last 20 years should be used too.

    What 100% funded has actually been defined as by pension managers was and is a big mistake.

  18. SeeSaw Says:

    A pension formula enhancement was not looked upon as something greedy, improper, or impossible, in 1999. Sex trips to anywhere were never part of my public sector world, nor of the world of anyone else I worked with. You obviously have us mixed up with those Wall Street insiders hi-lited in, “Inside Job”. I remember your statement, on a former post, that public retirees should be willing to give up some of their pensions for the good of the State. You just keep on reinforcing how naive you are–I will just chuckle more at your stupid suggestions and accusations.

  19. SeeSaw Says:

    A couple of my banks went down during the past three years, and thanks to the FDIC, my spouse and I are whole. I suppose you think that just because your relatives, and mine, lost so much in the Great Depression, we should feel guilty, and surrender some of our good fortune, to clear our consciences. I did not receive a 3% at 50 pension formula–I was miscellaneous–but, I did get 3% at 60. I had no spiked or disability pension. I have a very clear conscience and there is nothing about my respective pension, for me to feel guilty about. The new hires who come to my former place of employment now, and in the future, will not receive what I received–my former employer has gone back to the original 2% at 60. Most public entities have been making concessions and changes to their pension plans. I’m sure you hate to hear that, because it leaves you with less to criticize.

  20. spension Says:

    The pension formula enhancement was viewed in 1999 as greedy by a number of commenters… they were just ignored. Taking 3% at 50 is greedy and unethical, in my opinion. I have never said sex trips were part of the public sector world; however, if they were, taking them would have been unethical.

    I’m glad to be naive… I suggest first giving retirees with >2X the state median wage or retirement before 65 with more than 2%/year a choice… voluntarily give up some of their pension… if they don’t, then the only remaining choice is to default on portions of it, which I would do with terms that were somewhat worse than the voluntary choice. I’d pay the balance in promissory notes redeemable when the state of California had a surplus, to respect the letter of the contract.

    Great that you didn’t spike or go for phony disability (there certainly is real disability). But if you are defending public employees that do spike, that do take phony disability, or if you are defending the folks in Bell, Vernon, Salinas, etc who are getting >$200K/year pensions, I simply disagree with you. Pensions like that are not good fortune, they are greed, just like on Wall Street.

  21. SeeSaw Says:

    I support pension calculations on base pay only–no spiking. That was how my own pension was calculated. I also support the Collective Bargaining process–any pension reforms should come out of that process.

  22. spension Says:

    In general collective bargaining is OK, but the problem comes when collective bargaining results in an agreement that, say, 2 + 2 = 7. If both parties agree on that wrong addition, there still must be a check and/or balance in the system that enforces the rectitude of arithmetic.

    The pension increases that happened in 1999 etc were based on flawed arithmetic and misunderstanding of the high level of volatility of securities markets… another example of `this time is different’ thinking.

  23. music Says:

    Most public and private sector jobs nowadays leave little time to see the bigger picture or for civic participation. People work more hours per week than ever before and are too stressed to get a clear picture of how things stand. If they can’t find a job that allows them to survive, they patch together two or three jobs that can. Is this their own fault? Are we blaming the victims here? In this sense most public and private sector employees are “slaves.”

    In the 1950’s and ’60’s we had smaller houses, not as many cars or gadgets, but we had more time and weren’t, for instance, nearly as obese as we are now. Subsequent technological advances should have translated into work weeks with either the same or fewer working hours to maintain this work/life balance. Instead, we are all so sleep-deprived we can barely discern the numbers relevant to solving our society’s budgetary problems and are susceptible to whatever our media presents as fact.

    During the last decades most private sector employees had much higher salaries than public sector employees, and “conventional wisdom” always attributed this to the greater intelligence, industry, talent, etc. of the private sector employee. Now that private sector employees are doing poorly by comparison, it becomes “conventional wisdom” to attribute this to the “greed” of public sector employees. The ease with which a group scapegoats is a measure of that group’s ethical standard. It’s yet another way the Machiavellian corporatists “divide and conquer” the rest of us.

    Why were the critics of the “3% at 50″ or pension spiking ignored? Could it have been because by comparison public employees at the time were still so incredibly underpaid compared to the majority in the private sector, especially considering the higher level of qualifications most public sector employees have? Is “Spension” engaging in “situational ethics?” How many private sector jobs involve putting your life on the line, as so many public sector jobs do?

    “Spension” fails to see the bigger picture and probably doesn’t mind using I.O.U.’s to pay public sector employees, just like the third world does on a regular basis. When salaries of CEO’s in banks and corporations are routinely in the millions or tens of millions of dollars, corporations and the very rich continue to receive subsidies, lower tax liabilities, and hide their wealth, and the bulk of our national/global wealth continues to reside in the hands of way less than 1% of the total population, is it “ethical” to dwell on “spiking” and “3% of 50,” etc.? Think of how much more highly stratified our society and world has become over the last forty years and it is no wonder these “unethical” provisions became bargaining points in the first place! These comprise such an incredibly small percent of the total pie they are not worth considering. Instead of dwelling on how public employees are compensated, direct your energy toward something worthwhile, like reducing the massive inequities between those who hold the vast majority of wealth and the rest of us hard-working folks.

    Explain why it is a good thing that fewer than 1% of the people own 90% of our global assets. How does this reality advance any society in a positive way?

  24. spension Says:

    music… two wrongs don’t make a right. The true and scandalous greed in the private sector does not in any way justify public pension spiking and 3% at 50.

    Plenty of non-safety employees get killed in the line of duty. Friend of mine, a bouncer at a nightclub downtown where I live, got stabbed a few nights ago. No 3% at 50 for him… fisherman and lumberjacks don’t get big pensions but have higher death-on-the-job than public safety officers…

    I’m in favor of DB pensions and sensible levels of pensions for all employees. I do recall that in buyouts and takeovers of the 1980’s corporate pension funds were seized for executive bonuses. 401(k)s are much more expensive for the same benefit than DB… the private sector has propagandized falsehoods there.

    But the public sector has erred… the principal source of the error was ignorant financial projections by those at the top… but the rank-and-file forgot the simple rule: if it looks too good to be true, it is too good to be true. 3% at 50 is simply way, way to generous. 2% at 65 is fine.

    BTW, as far as I know, military pensions are paid on a pay-as-you-go basis, so are 3X as costly per $1 of benefit than DB systems. I think about $50 billion/year is spent on military pensions, which should cost the taxpayer only $17 billion/year if a pension fund had been accumulated over time. I’m not in any way against millitary pensions, by why do we have to pay 3X the cost for them?

  25. music Says:

    “Two wrongs don’t make a right.” Of course there is no argument with all five of Spension’s last points. There was never a debate over these particulars.

    Public debate should focus instead on the huge tax advantages held by the very wealthy and large corporations at the expense of small businessmen, working classes, and middle classes. There is no reason highly profitable corporations and the very wealthy should enjoy lower tax rates than those paid by small businessmen, pensioners, and members of the working lower and middle classes.
    All of our budgetary problems could be solved if we faced these realities honestly.

    Perhaps Spension and others could answer questions about huge differences in wealth which exist in today’s world and how these inequities help the vast majority of us who struggle just to survive. Perhaps Spension and others could illuminate how such inequities are good for the very wealthy as well. In the long term, how would the very wealthy preserve their wealth if the societal infrastructure which initially made their wealth possible becomes compromised over time? If it is so critical for the very wealthy to maintain their wealth, as some claim, how does penalizing those who draw pensions help toward this end (notwithstanding ethical pension reform measures)?

    This is in response to articles about pension reform. Such reforms pale in comparison to reforms needed in, for instance, the “financial services industries,” “free speech” rights granted corporations, progressive taxation, closing of tax loopholes, restoration of the “fairness doctrine” in broadcasting, to name a few.

    It is interesting how events over the last few years have shifted debate toward pensioners’ benefits rather than in the direction to which blame should be assigned. Again, it appears scapegoating pensioners has become the fashion.

  26. spension Says:

    All the inequities in wealth distribution in the world do not absolve us of a duty to be fair and reasonable with public pensions.

    The world has many, many woes; probably my assets or musics assets, spent appropriately in the developing world, could save 10,000 lives and save the life of a future Einstein. From that perspective, discussion of financial services industry fraud, fairness doctrine, etc, seems pretty irrelevant. There are always more worthy causes than those we focus on.

    But a practical issue you have brought up… I wonder why all the public pension funds are not more successful in lobbying for serious investment bank reform, elimination of the public safety net for investment banks and the insurance industry, etc. Now there is a pretty obvious mechanism for fixing our system that does not seem to be in play.

  27. music Says:

    “The world has many, many woes; probably my assets or musics assets, spent appropriately in the developing world, could save 10,000 lives and save the life of a future Einstein. From that perspective, discussion of financial services industry fraud, fairness doctrine, etc, seems pretty irrelevant….I wonder why all the public pension funds are not more successful in lobbying for serious investment bank reform, elimination of the public safety net for investment banks and the insurance industry, etc.”

    Opining that a point “seems pretty irrelevant” without addressing issues with facts seems very opinionated.

    The only way to prevent our state and nation’s default is by raising taxes on the very rich and corporations. Then we can properly fund pensions and essential public services. This is a higher priority than pension reform. No one can deny that the lobbyists who are paid for and work on behalf of the very rich and corporatists exert far more political pressure on our government than the lobbying strength of “pension funds [sic]” (those owning pension funds).

    The very rich’s lobbyists are more numerous and able to exert such a corrupting influence on our government that pensioners’ lobbyists don’t stand a chance. The numbers back this up.

    Please address this point with numbers and facts, and be honest.

    We can’t use our national resources to help the developing world until we get our own house in order, and raising taxes on the very rich and corporations is the only way to do this. Pension reform of course is important, but not nearly as important as avoiding wholesale default.

  28. spension Says:

    Music, you opine about the influence of the very rich and the corporations without numbers or facts. I guess you hold others to a higher standard than you strive for yourself.

    “Pensioners’ lobbyists [sic]” (you mean lobbyists retained by the officers of the pension fund, which is the property of not just pensioners but also vested workers, and sometimes of a union) have been quite influential, for example, concerning divestment from South Africa 20 or so years ago.

    But you are being unproductive with your arguments. It is obvious that all the pension systems (including public and private) will benefit from proper accountability being restored to Wall Street. They obviously should be lobbying for that, and if they aren’t it makes me wonder why not.

  29. music Says:

    I asked for your numbers and facts first, Spensions. Prove me wrong with your numbers and facts. Otherwise, your views are worthless and hold no water.

    Keep the discussion to the facts, please.

  30. spension Says:

    You made non-factual assertions and asked that I try to prove you wrong with a much higher standard of proof than you base your assertions on… that is sophistry.

    However, it costs $336/year to sponsor a child in the developing world, with, say Save the Children. A typical public pension is $40K a year, say, $32K after taxes… enough to sponsor 95 children in the developing world.

    So, if saving human life is one’s goal, you can do better by a factor of 100 or so by re-routing public pensions to the developing world.

    Some facts and numbers for you.

  31. music Says:

    According to the Central Intelligence Agency, the top 400 wealthiest individuals living in the U.S. collectively earn about $120,000,000,000 annually. It would be great if anyone could please disprove this fact. That works out to about $3,000,000 dollars each year (EACH YEAR) for each one (EACH ONE) of those four hundred individuals. Many create charities (perhaps Save the Children falls into this category — check it out before donating) which are mostly merely self-serving. Year after year, this wealth accumulates. They hide their wealth in small European countries, like Switzerland, or in the Caribbean. They pass it on to their heirs, who continue to accumulate vast amounts of wealth over time. These 400 individuals represent 0.02% of the total U.S. population. These numbers don’t take into account the richest 10% and the degree to which they, too, accumulate wealth through dividends (which are taxed at a very low rate). Our tax system is progressive up to a point, to that of the wealthiest 0.02%, and then this progressiveness stops and even reverses. They use their wealth to sway public opinion toward the righteousness of their position, which the media, due to the elimination of the earlier-mentioned “Fairness Doctrine” by President Reagan in 1986, is unable to counter with equal and opposing viewpoints, which would balance the debate, as in earlier times of more equitable wealth distribution.

    Can anyone honestly say these 400 individuals’ lives are materially or spiritually enhanced by their excessive wealth? How would the restoration of earlier progressive tax rates harm them? They have always lived more than well enough, unless in truth they are governed by a mentality of “one-upsmanship” or other nonsense (casino, anyone?). We live in a much more highly advanced world, technologically speaking, than in the past and can easily provide above and beyond everyone’s basic needs, if we only had the political will. Who among us is “proud to be an American” under current conditions?

    The total number of dollars represented by the very rich’s collective net worth is difficult to come by, since they have the resources to hide this information (corruption, again), but if one adds successive years of accumulated wealth (I can spell it out if you like), the sum is much greater than the total pension liabilities of all U.S. public employee pensions, which is $2,590,279,747 (total actuarial assets) minus $3,354,478,012 (total actuarial liabilities), which equals -$764,198,265 (total unfunded liabilities), according to the Public Fund Survey.

    Unfunded pension liabilities total about 760 billion dollars, while corporate profits (which is the amount of money OVER AND ABOVE standard operating expenses, employee compensation, the amount they spend providing jobs, etc.) in the last year alone (as reported by the Associated Press about six months ago) total about two trillion (2,000 billion) dollars. Add to these profits the hundreds of billions and probably trillions of dollars of wealth held by the very small percentage of the U.S. population described above, who could only have accumulated their wealth through a relatively smoothly functioning infrastructure (paid for by taxes), and you have an amount of money that could completely obliterate any existing present or future unfunded public pension liabilities. It is only fair they give back to the infrastructure which made their wealth possible so that others can have similar opportunities.

    With the money left over, we could not only save the life of every single impoverished third world citizen, but enhance their lives by providing for their rights to safety, health services, education, and all of the rest of the wonderful rights we enjoy here. This in no way denies the imperative for ethical pension reform at all levels. But it should be put into its rightful perspective.

    Have the two wars’ expenditures been taken into account? This debt is in the trillions of dollars. Taxing the very wealthy and large corporations fairly could eliminate this debt, too. We wouldn’t have to keep raising the debt ceiling or placing the creditworthiness of our country in constant jeopardy if taxes were raised on corporations and the very wealthy.

    Why should public pension fund officers be charged with the duty to lobby for better regulation of Wall Street? Wasn’t that supposed to have been the jobs of the S.E.C., Standard and Poor’s, Moody’s, and other ratings agencies during the dot com and housing debacles of the last decade? Or were they all paid off by the rich to confuse the rest of us?

    Spension says, “However, it costs $336/year to sponsor a child in the developing world, with, say Save the Children. A typical public pension is $40K a year, say, $32K after taxes… enough to sponsor 95 children in the developing world.”

    Shouldn’t we address the inequities which lead to this condition in the first place rather than connect the payout of a $40K pension of someone who worked all their lives providing a necessary public service to the plight of millions of starving third world children? Why this particular juxtaposition? Wouldn’t it be an affront to a person’s dignity for another to suggest they should give away their pension benefits when the very rich and corporations enjoy such high levels of wealth? Don’t they need this 40K per year to survive in a basic sort of way? Perhaps these public sector workers don’t matter to you.

    This information is publicly available, and if you disagree with these numbers, you are disagreeing with numbers compiled by legitimate agencies whose credibility rates a great deal higher than yours.

    Is this sophistry? It seems more like common sense.

  32. music Says:

    Correction: Each one of those 400 wealthiest U.S. citizens earns about $300,000,000 per year, not $3,000,000 per year as earlier stated. That’s a lot of zeros.

  33. spension Says:

    It is an IRS report….

    http://www.irs.gov/pub/irs-soi/07intop400.pdf

    I agree that US income tax rates for the highest brackets should be raised.

    That will do nothing to influence California pension problems… it is California income taxes that are pertinent for California pension issues.

    And California public pension managers messed up, and overpromised benefits. Imagine the following conversation

    California to rich people: I need to raise your tax rates.

    Rich people: Why?

    California: I messed up the arithmetic and raised pension benefits higher than the pension fund can cover.

    Rich people: So your not taxing me more to get great education, infrastructure, safer food, better parks, cleaner energy or anything like that?

    California: Nope, I just couldn’t do arithmetic and now I’m legally obligated to cover my mistakes.

    Rich people: And you want me to pay for that?

    California: yup, you have more than enough money.

    Rich People: Well, thanks for your opinion, but I think I’ll hire the best lobbyists to convince the voters that you are wrong. I’d rather put my money there. By the way, you know you could save the lives of 3 children in the developing world for $1000/year, will you do that?

    California Pensioner: no, I need every penny I’ve got, can’t spare any for children in the developing world.

    Rich People: Well, compared to people in the developing world, you make 100 times as much per year, just from your pension. Maybe they think you’ve got plenty of money.

    California Pensioner: I don’t care, I need every penny. You’re so rich, why don’t you contribute some.

    Rich People: Actually, I give $1,000,000 a year to Save the Children.

    California Pensioner: that is merely self serving, you could give a lot more.

    Rich People: I see. Good luck with all that.

  34. music Says:

    Juxtapose the rich people’s obscene wealth with the poverty of children in the developing world and see how that changes the dialogue.

    Rich People: I have so much money I can subvert the democratic process by influencing lobbyists, but you poorer, self-sacrificing pensioners should save the lives of children in the developing world.

    Is this really how the very wealthy think?

    One million dollars (tax-deductible, by the way) is 0.003 % of a rich person’s total earnings, while one thousand dollars (also tax-deductible) is 1.0 % of the average yearly earnings of a two-income couple. Who do you think is more generous and deserving of our admiration and support?

    Please cite your sources for charitable giving on the parts of pensioners. I for one have given to various charities for decades (I am not a pensioner, but I am not, nor have I ever been or hope to be a member of the very wealthy.). Pensioners’ apparent lack of charitable giving is why you don’t they deserve their pensions, despite their paying in to them for decades while toiling away to serve thankless citizens like yourself, who are somehow convinced the very wealthy are overwhelmingly generous and benevolent. It’s those evil pensioners who have stolen from our budget, as you see it. I am personally very detached from your opinions, but anyone with even a grain of empathy would understand how you have insulted the 20 million or so public sector employees, who are hard working human beings engaged in meaningful work. Perhaps you haven’t a concept of what meaningful work is. Children in the developing world, by the way, deserve a chance at meaningful work at some point in their lives.

    So the gross inequities in wealth still leave you convinced the very wealthy are the only ones who give to children in the developing world.

    Your evidence is anecdotal at best and insulting at worst.

    We should raise taxes on the very rich in California as well as in the U.S. While I have never denied pension reform is necessary, it is critical to fully fund pensions to a reasonable level. Reasonable is the operative word. Spiking and the like is wrong and must stop.

    Please use financial common sense and don’t fall victim to Spension’s guilt-trip, which would financially bankrupt a giving soul, as most public employees are. Give charitably as long as it is sensible. If you cannot afford to give, don’t let people like Spension make you think you’re somehow at fault. Spension has issues which don’t need to become anyone else’s.

    Don’t be fooled by the dialogue posted above. If you are susceptible to it, just look at the numbers, which don’t lie. Pensioners have contributed much to our society and deserve to live in dignity in their old age.

  35. music Says:

    The IRS document you provided shows adjusted gross incomes. Did you know the wealthy often have zero or negative adjusted gross incomes due to the extensive deductions and loopholes they employ?

  36. spension Says:

    Music, you really enjoy personal attacks. Perhaps you should ponder whether personal attacks convince anyone of anything.

    Actually you were the one who questioned whether pensioners should use any of their income to support the developing world, and you accused the wealthy of donating merely out of self-serving interest.

    Attacking the wealthy in particular to somehow get them to make up for arithmetic ignorance of public pension managers is another strategy doomed to failure.

    Now 3% at 50 is not needed to have dignity in old age. 2% at 65 is fine. Defined benefit systems are more economical than defined contribution systems. Social security is a terrific and well managed defined benefit system that considerably helps maintain dignity in old age; quite progressive, at least up to the maximum taxable income. Music, a much more fruitful area for you to push would be raising of that maximum income (currently $106,800/year).

    The real betrayers of California pensioners were the public pension managers who allowed benefits to increase to a level that cannot be covered by their pension funds, resulting in public pensions systems in now considerable deficit. Not the fault of the pensioners, but the pension fund managers, who said things, like in 1999 when benefits were increased in California, that the increases would come at no cost to the taxpayer, which we know now to be inaccurate.

    I don’t know what the point of looking at Federal income tax statistics is… California income tax is what covers California pensions.

  37. music Says:

    I am sorry. I didn’t mean for you to take this personally. I just don’t know what else to think. I’ve laid out the numbers and they haven’t helped convince you that the real problem lies in gross inequities in wealth, at the state and federal levels.

    It seems you are angry at public pension managers. I am not angry at anyone. Pension fund managers were just doing what the ratings agencies told them to do. People like you would have attacked them for doing any differently.

    I completely agree that 3% at 50 isn’t necessary. Spiking isn’t either. I am glad we agree our present-day wealth inequalities aren’t necessary, and reducing these inequities would go a long way towards resolving our budget problems, including pension payouts. I advocate targeted reforms. Most pensioners however do not need to have their benefits reduced.

  38. spension Says:

    I don’t think of my self as angry at the public pension managers.

    They do get paid a lot, and I believe they formally have fiduciary responsibility… they are supposed to think for themselves. Now if they got careless and just followed flawed industry practice, it is not the fault of the industry, it is still the fault of those who have the fiduciary responsibility.

    Blame is not the same thing as anger, and yes, I do blame the pension managers for allowing benefits to raise to the level that now we have substantial public pension deficits. There were always internal and external public skeptics when the benefits were increased, for example in 1999. They were regarded as weirdos, like uncool kids in high school. And to the extent that public pension managers behaved like a high school clique and did not interrogate their numbers with geek-like intensity, I do blame them.

    Wealth inequities are and have always been a fact of life. Might as well rant and rave about the weather. But you’ll never address that issue by hammering the rich. Just like everyone, they want their taxes to go for truly good causes, not to cover anyone elses arithmetic mistakes.

  39. music Says:

    I totally agree with everything you’ve said. It’s disappointing pension managers “behaved like a high school clique” as so many others have done. It is great we recognize this.

    It’s true the rich want their taxes to go for good causes, in the vast majority of cases. Some (Warren Buffett, George Soros) have even advocated for making tax rates as progressive as they were in the 1950’s and 60’s, when the U.S. was the envy of the world in many ways. I agree with them.

    Our overall standard of living could be much higher than today due to automation and other technical advances which have eliminated so many of the mundane tasks of the past. Many jobs have been eliminated and new ones have yet to be created. But corporate owners charge about the same amount for services rendered as before and the rest of us are working harder than ever before. Wouldn’t it be nice if the intended consequences of those innovations and advances could have their effect? Rather than continue to make the wealthy even wealthier, couldn’t the rest of the world advance in a more positive direction? Pension reform would go a lot more smoothly. There isn’t a reasonable person who wouldn’t agree with the great majority of reforms proposed.

    If I philosophically view the world as impossible to change (raving about the weather), I will get the self-fulfilling prophecy I deserve. Instead, I propose we expect better of humanity and advocate toward this end.

    Thank you for this discussion.

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