No ceasefire in CalPERS war with San Bernardino

CalPERS made two court filings last month after the San Bernardino city council approved a confidential draft of a plan to exit bankruptcy, as if stepping up opposition in reaction to something in the plan.

But a spokeswoman for the big pension fund said the filings are unrelated to the city’s plan or “term sheet.” As directed by a federal bankruptcy judge, the plan is a starting point for closed-door mediation and has not been revealed to the public.

The two CalPERS court filings continue an all-out legal battle triggered when San Bernardino did the unprecedented: skipped employer pension contributions last fiscal year, running up a tab of about $17 million, before resuming payments in July.

The giant California Public Employees Retirement System wants its more than 3,000 local government employers to know that withholding pension contributions is a no-go zone, not an option if they struggle financially.

San Bernardino, in danger of not making payroll, made an emergency bankruptcy filing in August last year, staying debt collection. The city stopped about $30 million in various payments, roughly half owed to CalPERS.

In response, CalPERS became the lone opponent of San Bernardino’s eligibility for bankruptcy, unsuccessfully attempted to sue the city in state court, and accused the city of creating a crisis and withholding key financial information.

“I don’t believe anyone in this courtroom seriously thought the city was not insolvent,” U.S. Bankruptcy Judge Meredith Jury said while ruling San Bernardino eligible for bankruptcy last August.

Two weeks after the San Bernardino city council approved the term sheet last month CalPERS asked to appeal the eligibility ruling: “Never has a bankruptcy court set such a low bar for a municipal debtor to enter the doors of a bankruptcy court.”

And a week after that, CalPERS filed a brief in support of an appeal by the state Department of Finance and state Controller of the judge’s ruling on $15 million in city tax revenue.

The judge blocked a state attempt to withhold $15 million in sales and property taxes. San Bernardino had not returned a similar amount of unspent housing funds after the state shut down local redevelopment agencies.

“I’m just amazed at their decision to fight the city on land and sea and air, at every level,” Mayor Patrick Morris told the San Bernardino Sun after CalPERS filed the brief in support of the state appeal.

Without the $15 million, he said, “We can’t pay our employees. It sinks the ship — we can’t pay CalPERS. It’s legal idiocy.”

Judge Jury expressed similar puzzlement in August about CalPERS opposition to bankruptcy eligibility, saying the apparent alternative is dissolving the city. “How does that help CalPERS if the employees aren’t paid?” she said.

Voters recalled 26-year San Bernardino City Attorney James Penman           (Rick Sforza/San Bernardino Sun)

Voters recalled 26-year San Bernardino City Attorney James Penman (Rick Sforza/San Bernardino Sun)

As deep-pocketed CalPERS tries to drive home the point that there is a stiff price to pay for skipping pension contributions, no legal tactic left untested, voters delivered another kind of message to politicians last week.

After 26 years as San Bernardino city attorney, James Penman was recalled by 60 percent of the vote along with Councilwoman Wendy McCammack. Another recall target, Councilman John Valdivia, survived the challenge.

Penman twice ran against Morris for mayor and lost. The clash between factions led by Morris and Penman, said by his critics to be too close to labor, is often cited when the San Bernardino political culture is called “dysfunctional” or “toxic.”

Morris, who did not run for re-election, is one of the three Democratic mayors who joined San Jose Mayor Chuck Reed’s drive for a pension reform initiative opposed by a labor coalition. Penman was replaced by Gary Saenz.

McCammack was recalled by 58 percent of the vote (1,256) in her council ward. But she was the leader among 10 candidates for mayor (24 percent or 3,043 votes) and will be in a Feb. 5 runoff with Carey Davis, endorsed by Morris and the Sun.

Two weeks before the election, Councilman Robert Jenkins was charged with harassing an ex-boyfriend and Councilman Chas Kelley was charged with perjury about campaign funds. Kelley resigned. Jenkins was defeated last week by Benito Barrios.

What impact the outcome of the election might have on the course of the bankruptcy remains to be seen. One of the recent issues debated by the council is whether costs could be cut by contracting with another government agency for fire services.

Councilman Fred Shorett, now facing a runoff against Anthony Jones, made several unsuccessful attempts, backed by Morris, to get the city council to ask the city manager to solicit bids for city fire services.

At a council meeting Oct. 7, Penman said an earlier request found that providing police services through the San Bernardino County Sheriff’s department would cost more and put fewer officers on the street.

“This was especially true because the conversion factor from our pension system, the CalPERS system, to the county system for the sheriff would result in an adjustment we were going to have to pay of several million dollars,” Penman said. “The same would be true if we were to contract with San Bernardino County Fire.”

In a sketchy plan last fall for operating in bankruptcy, San Bernardino proposed a “fresh start” that would “reamortize CalPERS liability over 30 years,” perhaps in a way that would “realize value of $1.3 million per year starting fiscal year 2014.”

Among the unanswered questions now: Did the city make a more detailed or different proposal for cutting pension debt in the confidential term sheet last month? Will the election result in a new city direction on pension debt?

As was pointed out in the Stockton bankruptcy, CalPERS is only the manager of the city pension funds, a “conduit” or “pass-through” agency. The pension debt is owed to employees and retirees, who presumably would take the hit if the debt is reduced.

The latest valuation of the San Bernardino pension funds, as of June 30, 2011, shows employer contribution rates for this fiscal year that are not unusually high: safety (police and fire) 31.5 percent of pay and miscellaneous 18.2 percent of pay.

The funding levels are near the CalPERS norm. Using market value assets, the safety plan is 74 percent funded with a debt or “unfunded liability” of $152.6 million. Using actuarial value assets, safety is 83 percent funded with a debt of $99.7 million.

In the view of some, what makes San Bernardino unusual, though CalPERS apparently disagrees, is the ability to pay.

A George Mason University case study of the bankruptcy said San Bernardino is the “poorest city of it size in the state,” with nearly a third of the 210,000 residents below the national poverty line.

But the city charter automatically links pay for police and firefighters in San Bernardino, which has a median household income of $35,111, to 10 other cities that have an average median household income of $62,118.

In the last three decades, said the study, San Bernardino was bypassed by the I-15 Interstate and three major employers closed: Kaiser Steel, Santa Fe Rail Yard and Norton Air Force Base.

Three remaining large employers do not pay property taxes: CSU San Bernardino, San Bernardino Community College and San Bernardino County. State actions have shifted redevelopment funds and vehicle license fees.

“As an unfortunate consequence of politics and historical trends, the city found itself committed to salaries and pensions that were neither proportionate nor sustainable,” said the George Mason study by Frank Shafroth and Mike Lawson.

San Bernardino change during three decades (George Mason graph)

San Bernardino change during three decades (George Mason graph)

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 12 Nov 13

49 Responses to “No ceasefire in CalPERS war with San Bernardino”

  1. larrylittlefield Says:

    I understand CALPERS actions. If San Benardino does not pay, why should anyone? But San Bernardio cannot pay.

    Here is the problem. Most Americans have been getting worse and worse off. That has been the trend for some time. Only those at the top, who cut deals to increase each other’s pay on corporate boards of directors, and unionized public employees, who cut deals with the politicans they control, have become worse off.

    You have the executive/financial class, in control of the federal government, the political/union class, in control of state and local governments, and the serfs.

    The political/union class does not wish to admit, even to itself, that it is getting ahead by forcing ordinary people, generally those less well off, to accept less in public services and pay more for it. But Calpers has been put in the situation of showing the reality of the situation.

  2. Tough Love Says:

    Quoting …”Judge Jury expressed similar puzzlement in August about CalPERS opposition to bankruptcy eligibility, saying the apparent alternative is dissolving the city. “How does that help CalPERS if the employees aren’t paid?” she said.”

    Judge Jury seems to be missing the point. CalPERS cares little about the City (or it’s workers). It simply does not want a precedent set that Bankrupt Cities can erase a debt owed to CalPERS or reduce the (unaffordable) pensions promised the CIty’s workers.

  3. Ed Towner Says:

    SB and all cities that have reaped the cal pers benefits will have to honor their obligations–maybe a better re-amort. or a better smoothing but they will sort it out in time…good for calpers for sticking with it!

  4. spension Says:

    Of course CalPERS wants the contracts made with it honored…. see Article I, section 10, clause 1 of the US constitution, the Contract Clause.

    Private corporations also spend vast sums in legal costs to defend the details of contracts they have entered into.

    Contracts are important in the US.

    Tough Love and others like to point out that the contracts were made by corrupt officials whose elections were made possible by union influence.

    Duh!

    Private corporate contracts are made by another class of corrupt officials.

    None of that makes the contracts outside the influence of the Contract Clause… there is no Constitutional test concerning the moral fiber of those who enter into Contracts.

    But as private businesses can go bankrupt to evade their unsustainable agreements, so can US States go into Sovereign Default. It has happened 10 or so times in US history. That is just about the only way out of the unsustainable pension contracts in California.

  5. Tough Love Says:

    Spension. Let’s pick up the conversation after the Federal Bankruptcy Court decides the fate of the pensions of Detroit’s retires and actives. If, as I suspect, those pensions will be materially cut, the Public Sector Unions would be well advised to materially ramp up the givebacks or the bankruptcy court will take care of matters for them.

    When there is no money, the contracts (whether legit or the result of collusion … as is the case in most Public Sector Pension & benefit deals) mean little.

    At least you seem to AGREE:
    (1) the contracts were made by corrupt officials, and
    (2) the corrupt officials elections were made possible by union influence.

    Let’s be clear, that “influence” is BUYING their votes with campaign contributions and election support, or threats to their election or re-election if they don’t toe the Union line.

    That certainly sounds like sufficient justification for Private Sector Taxpayers to renege on the grossly excessive,unnecessary, and unjust pension & benefit promises made.

  6. spension Says:

    Show me those parts of the US Constitution that allow the Federal Government to overrule State Sovereignty on contracts, Tough Love. Or, show me that portion of the US Constitution that justifies Private Sector Taxpayers reneging on a contract consistent with the contract clause of Article I, section 10, clause 1 due to gross excess of the contract.

    Gosh if gross excess were grounds for terminating a contract, just about every CEO in the US would lose their compensation and post-employment compensation.

  7. Ed Towner Says:

    Well said Spension– while I doubt we will soon get to SD you are correct about the Constitutional progeny of the C Clause…

  8. Tough Love Says:

    Quoting Spension …”Show me those parts of the US Constitution that allow the Federal Government to overrule State Sovereignty on contracts, Tough Love. ”

    You haven’t been paying attention to the California Bankruptcy cases. As the Federal Bankruptcy Court Judge said …The whole purpose of bankruptcy is to void contracts.

    And when I say “renege” on these pension deals, I don’t mean outright refusing to pay your individual property or income taxes. What I mean is to gather the steam and volume necessary to pressure current elected officials or to elect new officials that will change the laws and Constitution to materially reduce the promised pensions …certainly for FUTURE service, and if at all possible to reverse the absurd (and extremely unjustified) RETROACTIVE increases that started with CA’s SB400.

    The RETROACTIVE pension increases were clearly nothing but an unjustifiable THEFT of Taxpayer wealth.

  9. SeeSaw Says:

    TL, according to the words of then AG Brown in his Amicus Brief, filed with the Court, at the time of the lawsuit between the County of Orange and the OC Sheriff Deputies, retroactive pension enhancements were standard procedure by the State Legislature, during the entire history of CalPERS. And, SB400 was legally passed by the CA Legislature. It was unknown by everyone but the crooks on Wall Street that the entire economy was going to collapse in 2008. Maybe those are the guys you should turn your ire toward.

    Retroactive increase were outlawed in the State’s 2013 Pension Reform Act. You are never going to invalidate pensions that were passed legally.

  10. spension Says:

    Well, bankruptcy doesn’t apply to Sovereign States, it is Sovereign Default that applies to Sovereign States, and California is a Sovereign State.

    The web of commitments that link cities and counties to California is the sort of thing that will keep lawyers in gucci shoes for decades, obviously.

    And enforcement of the US Constitution is merely a function of who many lawyers (sometimes rich, sometimes good) get in the act. Sometimes `States Rights’ is the battle cry, sometimes just the opposite. Depends on the politics of the battle crier, and whether they think federal intervention helps their side.

  11. Tough Love Says:

    Quoting SeeSaw …”retroactive pension enhancements were standard procedure by the State Legislature, during the entire history of CalPERS”

    SeeSaw, It was also “standard procedure” for the Incas to make human sacrifices to their Gods.

    Did that make it right?

  12. Ed Towner Says:

    In my entire life– I have rarely heard a more completely rehashed argument than the one above about the USSC CC, BK and SD……The reforms will cure the future— Commerce is underpinned by the Com Clauses of both Constitutions and overall—except for the errant decision here or there— these obligations will be at least substantially met.— party on lads and lasses….

  13. Captain Says:

    “In a sketchy plan last fall for operating in bankruptcy, San Bernardino proposed a “fresh start” that would “reamortize CalPERS liability over 30 years,” perhaps in a way that would “realize value of $1.3 million per year starting fiscal year 2014.””

    It was CalPERS that proposed the Sketchy “Fresh Start” which would cost San Bernardino 10’s of millions in additional interest charges. Nothing like sticking the proverbial can inside a cannon and launching it as far down the road as possible.

    It’s this type on nonsense that ensures cities will always be behind the eight-ball.

  14. Captain Says:

    “spension Says: Well, bankruptcy doesn’t apply to Sovereign States, it is Sovereign Default that applies to Sovereign States, and California is a Sovereign State.”

    Spension, it isn’t the state that’s in bankruptcy – it is several cities. The state seems content on using accounting gimmicks, pulling back funding to their subordinates, and ignoring the increasing liability of CalSTRS in order to pretend there’s a balanced budget. It is the Counties, Cities, and Special Districts (school districts for sure) that are heading toward bankruptcy. There is no sovereign default for these entities.

    Why do you keep up with this same argument? Quit using the state government finances to make your argument when the real problem is at the County, City, and Special District level.

  15. Tough Love Says:

    Captain, Personally, I believe spension is a charlatan and while occasionally calling for modest pension reform, ALWAYS makes such reform contingent upon “Sovereign Default”.

    I believe he/she does this because the support for reform is not genuine (and very likely, spension or a family member rides the Public Sector gravy train and isn’t supportive of reduced pensions & benefits) and knows that tying reform to Sovereign Default is a non-starter.

    Essentially, he/she’s is just another “distractor” to the Root Cause of the problem ….WAY too generous pensions & benefit promises to CURRENT workers ….and the need to materially reduce these promises as soon as possible. And to complete the picture, “funding” FOLLOWS” generosity” and “funding” has never been the root cause of the problem.

  16. spension Says:

    Wow Tough Love, I guess you where a tin hat (properly grounded) and check for Commies and Al Qaeda under your bed and in your closets every night.

    If CalPERS is involved, that involves the State of California, eh? Right? If you want to avoid the discussion of Sovereign Default, just leave CalPERS and CalSTRS out of the discussion.

    As I said (and TL & C overlooked) “The web of commitments that link cities and counties to California is the sort of thing that will keep lawyers in gucci shoes for decades, obviously.”.

    As I have repeated ad infinitum, I”m in DC plans. No public sector gravy for me. And that is why I know quite well how expensive and awful the vast majority of DC plans are… if the State went to DC plans, politicians could charge 10% or 50% per year in fees any time they want. If you doubt this, you have ignored how DC plans work…. exorbitant increases in DC Plan fees have happened for existing plans and are entirely legal. DC plans are quite simply, a scam that enriches investment banks, the DC plan organizer, and mindless shills who post to these boards.

    But TL, you don’t post anything about where your money comes from… in all likelihood you are paid shill, raking it in for your low-brow comments here.

    I’ve said repeatedly that DB plan pensions rose way too high (for the funding level) in California… but the low-brow say `kill DB pensions’, ignoring that fact that all kinds of public (and private) DB pensions have done just fine in our great country. DB plans are way more economical than DC plans. The DB problem in California (and Illinois, some other places too) was a result of numerical ignorance.

    A contract is a contract. I you want to lower already-awarded pensions you want to break that contract. To the extent that involves the State of California, as far as I know, Sovereign Default is the only way. Stamping your feet and insulting girls like me, holding your breath, and threatening to not eat your vegetables won’t break a contract.

    And just as Union Pacific Railroad in California assiduously defends its right-of-ways obtained over 100 years ago via contracts, you can be sure CalPERS and CalSTRS will fight just as assiduously to defend their contracts. Is that surprising? In the US we often (but not always) take contracts and legal commitments seriously. Well, the Sioux still want the Black Hills, so sometimes the contracts (or treaties) count for squat.

    But CalPERS and CalSTRS will hire lawyers as capable as Union Pacific, you can bet on it. If you really want to win you support Sovereign Default… TL and C have never presented *ANY OTHER VIABLE ALTERNATIVE*. Just flatis and malodorous putrefaction. Maybe you can hold your breath until you get your way, in 2050 or so.

  17. Tough Love Says:

    Spension, It’s not worth responding to your same BS over and over again,

    I await the Bankruptcy Court’s affirmation that pensions … of those already retired, as well as the accrued pensions of actives … can be cut. We’ll just do it city by city, and leave the States (that technically cannot file for Bankruptcy protection) to dwindle their remaining resources and slide into irrelevancy.

    The floodgates of reform will open wide once Detroit is decided.

  18. spension Says:

    By which you mean, you never respond to well reasoned arguments, ever, Tough Love.

  19. Tough Love Says:

    If you think MY arguments are not well thought out, consider he scenario common almost everywhere where the Public Sector entity is NOT yet at bankruptcy’s door……….

    In almost all such cases its not hard to demonstrate that Public Sector “Total Compensation” (cash pay plus pensions plus benefits) in the vast majority of jobs is materially greater than those of Private Sector workers in comparable occupations. There is no justifiable reason for Taxpayers being saddled with the incremental taxes necessary to pay for this over-compensation. And since the city or town isn’t (yet) a candidate for bankruptcy, there is nothing that can be done ….with the possible exception of trying to negotiate pension/benefit reductions with the Union ……which has as much chance of success as toilet-training a bear.

    YOU evidently find this structure fair … or at least feel that nothing can be done because “Sovereign Default” (your favorite distracting technique) is not yet an option.

    I don’t.

  20. Bille Says:

    Lol…”deep pocketed CalPERS”? What? DOH! Article after article here loudly proclaims the financial collapse of CalPERS and CalSTRS. It’s coming soon!! The end is near! Repent now ye pensioners! But wait, alas now the “deep pocketed CalPERS” is the evil landlord asking for rent or else. OH MY. How terrible that government is acting like…well…a business. I thought Halloween was over. Apparently the Nightmare Before Christmas has just begun. And it begins with a “deep pocketed CalPERS”, not a going broke next week, next month, next year or even in 30 or 40 years CalPERS.

    ROTFLMAO…”deep pocketed”…the end is NOT near is it or is it or is it? I await next weeks article to find out the end is near again or again or is it again? I just can’t be sure anymore or can I or can I or can I?

  21. Bille Says:

    Ps. Spensions, you hit the nail on the head both with DC plans and Toughlove.

  22. spension Says:

    Tough Love, talk about flatis… the report in the Fix Pensions First website concluded (as all serious experts have concluded) that overall, California public sector pay is about the same as private sector pay… http://www.fixpensionsfirst.com . The low end of the pay scale gets paid better in the public sector, but the high end of the pay scale gets paid less in the public sector. Compare Governor Brown’s salary to any CEO that runs an operation as big as the State of California if you doubt the latter.

    Public sector post-retirement benefits do on average exceed private sector post-retirement benefits. And the reason is mismanagement of the benefits/contributions ratio by actuaries in the face of the usual American greed-is-good pressure from everyone who wants more, more, more… whether labor unions or private sector executives.

    Tough Love, you never want to find a practical solution, which is Sovereign Default; you just want to wail and moan.

    Wailing and moaning must be what whoever pays you to post here wants. And you never, never identify the source of your funds, although you impugn the source of mine. Everyone reading this sees your hypocrisy and knows in all probability you are just a shill for people who have no interest in problem-solving and only want to destroy.

  23. Captain Says:

    Spension, AGAIN, it isn’t the state that’s in bankruptcy – it is several cities. The state seems content on using accounting gimmicks, pulling back funding to their subordinates, and ignoring the increasing liability of CalSTRS in order to pretend there’s a balanced budget. It is the Counties, Cities, and Special Districts (school districts for sure) that are heading toward bankruptcy. There is no sovereign default for these entities.

    Why do you keep up with this same argument? Quit using the state government finances to make your argument when the real problem is at the County, City, and Special District level. Can you please explain how you think sovereign default will help these entities?

  24. SeeSaw Says:

    The subject of funding CalSTRS is getting tiresome–nothing can move off the dime until the Legislature decides to fund it. So fund it! The other thing getting tiresome is the continuous blaming of public sector pensions for everything that is wrong with this country’s financial structure. Get some perspective, people!

  25. spension Says:

    As I said twice (and TL & C overlooked) “The web of commitments that link cities and counties to California is the sort of thing that will keep lawyers in gucci shoes for decades, obviously.”.

    Seems to me that the portion of County, City, & Special District pensions that resides in CalPERS will be argued by attorneys to be a state responsibility. I really don’t know how the severing of State & Local will be done. There might be a fair case that Counties are really part of the State, but Cities & Special Districts are not. But boy will the attorneys get fat & rich over that issue.

  26. Tough Love Says:

    Prey for a decision in Detroit’s Bankruptcy case that put’s the insatiably greedy Public Sector Unions on notice … that your ALREADY ACCRUED pensions CAN and WILL be materially reduced in a bankruptcy.

    Perhaps THEN the Unions will offer more than 5 cents of each $1 in giveback really needed.
    ————————————————————-
    And P.S. to spension. I am nobody’s shill and nobody pays me to post anything.. I’m speak my mind (from considerable knowledge and work experience on pension funding and design). And since it seems so important to you….. I work in the Private financial services sector.

    My best guess is that you object to my strong advocacy for REAL pension reform (without being tied to “Sovereign Default”) because somewhere/somehow…. you or a family member is or was riding the Public Sector gravy train and youhave a financial interest in stopping/delaying real pension reform.

  27. Captain Says:

    “SeeSaw Says: The subject of funding CalSTRS is getting tiresome–nothing can move off the dime until the Legislature decides to fund it. So fund it!”

    – And, seesaw, just where do you think the funding is going to come from?

    Just “Fund it”? Are you even remotely aware of the precarious nature of financials at every level of CA government – including the taxpayers? Are you aware that the recent tax hikes are only temporary, which means even if CA could fund the additional dollars CalSTRS needs today, and they can’t, four years down the road much of the money disappears? If we were to just “fund it” (CalSTRS) how could we possibly also pay for the 25-50 percent increase in the CalPERS contribution rate?

    Maybe this is the beginning of the cannabilization of California Public Employee pension funds? In other words, maybe CalPERS and CalSTRS are fighting over the limited/shrinking supply they need to fuel/fix their rapidly growing addiction to taxpayer money.

  28. Captain Says:

    “spension Says : Seems to me that the portion of County, City, & Special District pensions that resides in CalPERS will be argued by attorneys to be a state responsibility. I really don’t know how the severing of State & Local will be done. There might be a fair case that Counties are really part of the State, but Cities & Special Districts are not. But boy will the attorneys get fat & rich over that issue.”

    Thank you for your honesty, spension. It sounds like we agree (with a few disclaimers on your part) that sovereign default for the state of California doesn’t apply to county’s, cities, or special districts, which is where the most eminent fiscal problems related to Pensions, OPEB’s, and generous contracts reside. Sovereign default is not the answer to the current problem regarding every entity other than the state.

    That leaves us with Bankruptcy, Higher Taxes, Reduced Services at Higher Costs, or Pension Reform as the alternatives. And CalPERS is using their deep pockets stuffed with taxpayer dollars to fight PENSION REFORM that the people providing the tax dollars want. Spension, what is your opinion of CalPERS?

  29. Ed Towner Says:

    Seems to me that spension is correct about everything she posts but we will not get to SD for MANY reasons— the reforms, shave offs, and misc. will get us past the bulge in the snake—-Cal Pers 280 Billion !!!!!!!!!!!!!!! Seems like they are pulling their oar pretty good as they have for 100 years….

  30. Tough Love Says:

    ED Towner, Trust is often a good thing, but not when it comes to expecting honest & completeness from CalPERS. Remember when they said that raising benefits RETROACTIVELY by 50% would cost nothing ?

    I hope you can swim and have a high-quality life vest. When CalPERS sinks, you’re going to need it.

  31. spension Says:

    Tough Love says `I work in the Private financial services sector.’

    well, thanks for the honesty.

    But surely you know that there is a vast, vested interest in the Private financial services sector for DC plans. The DC fees (for example, *marketing* and other expenses can be charged as fees to DC plan holders) are a huge source of income for the Private financial services sector.

    http://www.pbs.org/wgbh/pages/frontline/retirement/

    And there is of course a vast, vested Private financial services sector interest in getting public pension funds out of the management of the public.

    As I’ve said, no public-funded gravy for me. Tough Love, can’t really say you are untouched by financial interests of your own, interest which might well cause you to argue against public DB plans over interests of your own pocketbook.

  32. spension Says:

    Tough Love wrote.. “I hope you can swim and have a high-quality life vest. When CalPERS sinks, you’re going to need it.”

    CalPERS is a *State of California* obligation. Why do I go on about Sovereign Default? Because, Tough Love, you go on about *CALPERS*.

    Sure, lots of Cities & Special Districts have their own pension funds, sometimes add-ons to CalPERS. But as for the CalPERS obligations, the only way I see to reduce already vested obligations of CalPERS is, indeed, Sovereign Default.

  33. Tough Love Says:

    Spension, CalPERS being a “State of California” obligation really means that it’s a TAXPAYER obligation,doesn’t it.

    Well, considering that CA’s taxpayers are rapidly being educated on the enormity of the CalPERS/Union ripoff, I wouldn’t count on the Taxpayers putting up with this much longer.

  34. spension Says:

    Ripoffs that are protected by legal contracts are as American as apple pie; most great personal fortunes in the US are based on the concept, in fact. See see Article I, section 10, clause 1 of the US constitution, the Contract Clause.

    Of course, Tough Love, you support DC plans… you and your industry make $ of them. “It’s difficult to get a man to understand something if his salary depends upon his not understanding it.”

  35. Ed Towner Says:

    Love— I have to laugh– You think Cal Pers financial growth is going to sink me? Why? I am not dependant on it– although I wish I was…seems like although it has an impact on the California economy, it has a good history of growth (98 years or something?) and as each day its liabilities execute, it is able to pay out—no deltas– If I were you I wouldn’t be 100% doom and gloom on this. While it may need some more tweeks, not too sure a full blown “hissy fit” is in order. Or are you one of these lads who think that the help shouldn’t get what they were promised? I get that argument. I disagree with it of course because I was raised to honor obligation, but I understand it.

  36. Tough Love Says:

    EdTowner, Most like yourself like to quote only CalPERS assets (roughly $280 Billion)…..neglecting the fact the PRESENT VALUE of the liabilities for ALREADY ACCRUED Pensions for PAST service (meaning the $ amount that should be IN HAND TODAY) is almost twice those assets.

    Short of a miracle, yes the Plans will not be able to pay the promised pensions.

    Perhaps you should stop listening to the BS from CalPERS and your Union and listen to some INDEPENDENT financial expert opinions on the strength of the CalPERS-administered Plans.

    Keep laughing.

  37. Tough Love Says:

    spension, It’s real simple….contracts where the negotiating party (the elected officials) betrays the constituency they were elected to represent (the Taxpayers, NOT the workers), should NOT be honored.

    Personally, I don’t give a hoot if the Constitution or CA’s rather sick case law on the subject says otherwise.

    At some point (hopefully very soon), the Taxpayers, the ONLY source of hard cash to pay for these absurd promises, will refuse to pay any more.

  38. spension Says:

    so you support an `ethics test’ for contracts?

    How would you apply that test to contracts made by, for example, Goldman-Sachs? Suppose they extol the virtues of purchasing an investment to personal investors, while institutionally selling the same same investment short?

    Huh, Tough Love, should any ethics test apply to private sector contracts? Or should private sector contracts be honored, no matter how unethical?

  39. Ed Towner Says:

    Lovey— That you don’t care about the law in this issue says all anyone needs to know about your face invalid positions.

    Sorry man 280 Billion…..you just have to live with it I guess.

  40. Tough Love Says:

    spension, The problem you describe (in your Goldman-Sachs example) is well known and VERY problematic. That’s why there is currently a push from the SEC for all “stock brokers” to be legally considered fiduciaries … as are “investment advisers” today.

    I wholeheartedly support such a change.

    Goldman Sach’s creation of a fund “long” on junk mortgage-backed securities specifically DESIGNED for John Paulson to “short” the investment, and with Paulson participating in the selection of the fund investments, was a travesty. Paulson should have been forced to give back all of his profits (plus a substantial penalty) and the Goldman Sachs staff active in setting this up should have been barred from further work in the investment sector and prosecuted.

    And the Gov’ts common practice of only pursuing CIVIL penalties is another travesty.
    ____________

    As to abrogating Public Sector pension,”contracts” you should keep in mind the uniqueness of such “PUBLIC” Sector contracting in which the negotiators sitting at that bargaining table are binding a 3-rd party (the Taxpayers) to pay for the result of those negotiations. This is so different than PRIVATE contract negotiations (whereupon the negotiators are putting THEIR OWN money on the table), that the highest standard of honest representation of your constituent’s interests is paramount.

    Clearly, elected officials agreeing to such unnecessarily generous deals while accepting campaign contributions and election support from the Unions sitting on the opposite side of that bargaining table has created an untenable conflict of interest and contracts that betray the interests of those they were elected to represent.

    I’m unconvinced of your position and remain supportive of reneging on these grossly excessive contracts.

  41. Ed Towner Says:

    TL—you said–

    I’m unconvinced of your position and remain supportive of reneging on these grossly excessive contracts.

    LOL— If you were a principle, statements like that would be Plaintiff’s #1 for you punatives—- but as we know, you don’t care about those pesky laws! LOL Oh my!

  42. Captain Says:

    “Ed Towner Says: Seems to me that spension is correct about everything she posts but we will not get to SD for MANY reasons— the reforms, shave offs, and misc. will get us past the bulge in the snake—-Cal Pers 280 Billion !!!!!!!!!!!!!!! Seems like they are pulling their oar pretty good as they have for 100 years….”

    You need to do your (own) homework.

  43. Tough Love Says:

    Responding to Ed Towner,,,,,,,,,

    No, I only object to “pesky little laws” which protect these grossly excessive pension contracts ………. negotiated in collusion between the Public Sector Unions and our self-interested, vote-selling, contribution-soliciting, Taxpayer-betraying elected officials…….from the very material reform they justly deserve.

    One day, perhaps in the not too distant future, you will likely receive a letter from CalPERS (or whatever agency pays your Public Sector pension) with the reduction being forced upon you (likely via a Bankruptcy proceeding). Will you be laughing or crying.or perhaps screaming?

    Oh ….and before that letter arrives any retiree healthcare subsidy you had been getting will have long since ended.

    P.S., Detroit’s Public Sector workers/retirees were also laughing at the Private Sector taxpaying “suckers”.. Something tells me that they are no longer laughing.

  44. spension Says:

    TL wrote “As to abrogating Public Sector pension,”contracts” you should keep in mind the uniqueness of such “PUBLIC” Sector contracting in which the negotiators sitting at that bargaining table are binding a 3-rd party (the Taxpayers) to pay for the result of those negotiations. This is so different than PRIVATE contract negotiations (whereupon the negotiators are putting THEIR OWN money on the table), that the highest standard of honest representation of your constituent’s interests is paramount.

    Clearly, elected officials agreeing to such unnecessarily generous deals while accepting campaign contributions and election support from the Unions sitting on the opposite side of that bargaining table has created an untenable conflict of interest and contracts that betray the interests of those they were elected to represent.”

    I see some of your points… a few counterpoints…

    1) Elected officials binding taxpayers to obligations is the entire basis of American government… actually, elected officials decide much more than $ issues, they decide whether or not to go to war and whether or not our soldiers die. And maybe those decisions are not pristine either… foreign governments exert influence, as do big defense contractors. Tough Love, what alternative system would you propose?

    2)Do private companies ever get taxpayer bailouts? I think so.

    3)That organized groups influence elected officials decisions has been true in all democracies as long as democracies have existed. Tough Love, how do we alter that?

    4)Do you just want to renege on public pension agreements, or do you want a systematic review of *ALL* government contracts including defense, wall street bailouts, car company bailouts, airline subsidies after 9/11, etc?

  45. Captain Says:

    Spension, CalPERS is a very corrupt organization being governed by the unions. The union governance has/is, and by all indications will continues to be (based on their own actions), a very large part of the problem. You can clamor on all you want about anything you want, but it doesn’t change the fact CalPERS is treating their customers like crap.

    I get that CalPers number one priority is to their members/beneficiaries, but I expect this rogue organization to at least have the member agencies/taxpayers on their client/customer list. As of today, CalPERS only concern seems to be protecting benefits while holding down costs in order to ensure there’s something left in the municipal budget to provide for additional raises – which increase pension costs – while hoping for a bail-out.

    And they’re hoping for a bailout while employer costs are about to exceed 3X the advertised CalPERS rate for these plans.

    Where does CalPERS management rank municipalities/taxpayers (customers) on their list of priorities? As far as I can tell it’s somewhere below “we’ll intimidate them”, “we’ll sue them”, “we’ll use are political influence to by-pass them”, “we’ll lie to them”, and “we will block all attempts to reform the pension system – even though we know the system is unsustainable”.

    Customer satisfaction rating = ZERO.

  46. Tough Love Says:

    spensions…….. with respect to your:

    #1….Yes, but those elected officials binding the Taxpayers are SUPPOSED TO have the Taxpayers best interests as their primary obligation ….. now tell me you think they did.

    And if they did not, then the Taxpayers rightfully should refuse to be bound to that deal.

    #2 Yes, of course. Anyone who chooses to press that issue is free to do so. I choose to press THIS one. A second “wrong” doesn’t cancel the first “wrong”.

    #3 A good “start” to addressing the pension issue would be to NOT provide any pensions to elected officials;

    #4 Come on…..people (me included) tend to focus on what they perceive as injustices. Many of the ones you cite are such, but there are only so many hours in the day, The pension issue pisses me off the most, perhaps because:
    (a) I understand the math PERFECTLY and therefore, the huge magnitude of the Taxpayer ripoff, and
    (b) the lies, distortions,and intentional material omissions of the Unions/workers (especially police officers sworn to protect us) is particularly irksome and deserving of a strong response.

  47. Captain Says:

    No ceasefire in CalPERS war with San Bernardino:

    “The two CalPERS court filings continue an all-out legal battle triggered when San Bernardino did the unprecedented: skipped employer pension contributions last fiscal year, running up a tab of about $17 million, before resuming payments in July.

    The giant California Public Employees Retirement System wants its more than 3,000 local government employers to know that withholding pension contributions is a no-go zone, not an option if they struggle financially.”

    – And that is how CalPERS treats its customers/member agencies/taxpayers while ignoring their own flawed assumptions, pathetic smoothing policies, and denial of their own complicity in this mess – complete with a staggering price tag that is driving their customers over a fiscal cliff! How are they still in business? They wouldn’t be if they were a private organization that failed this miserably.

    CalPERS can charge every member agency more money, as much more as it takes, for decades, seemingly without remorse, and obviously without any accontability. And then they can use those same funds to sue any customer that can’t afford to pay, or lobby against any group trying to help solve their problem of their own making. That is a ROGUE organization.

  48. Tough Love Says:

    Captain, As you’ve said ,..”That is a ROGUE organization.”

    and, as I’VE said, the Public Sector Unions that control CalPERS board are……..”a CANCER inflicted upon Society”.

  49. SDouglas47 Says:

    ToughLove:
    As Rush Limbaugh says:

    ‘Words mean things.’

    “raising benefits RETROACTIVELY by 50%”

    would leave some to agree that SB400 is indeed the root of all our problems.

    The ONLY people whose pensions were increased 50% were safety retirees, and then ONLY the ones who actually retired at age 50 with 30 years service.

    Fewer than one percent of retirees. Probably fewer than one percent of safety retirees.

    I know from personal experience that my pension was increased by about 3%, which was more than lost in failure of wages to keep up with CPI. Many of us would have been much better off if, instead of SB400, the legislature had tied salaries to CPI from 1999 forward. I personally would have a 5% to 7% higher pension.

    Which brings up a partial answer to reducing public sector costs. Stop giving COLAs. Today. It will control current costs. It will control future pension liabilities. Everyone will be happy.

    If the employers contribution to my pension is 18% of salary, that contribution will NEVER increase.

    As SeeSaw says, that’s what collective bargaining is for. Public employees can keep their DB pensions, and you can have your lower costs.

    Good luck trying to attract and retain qualified employees.

    To be clear, though, “raising benefits by 50%” is pure BS.

    Exaggerations like that throw your credibility out the window.

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