Ventura pension vote blocked, summit this fall?

Backers of a Ventura County pension reform initiative, which was removed from the November ballot by a judge last week, are not appealing the ruling. But they may meet with other reformers after the elections this fall to discuss a statewide pension reform initiative.

The Ventura reformers, including Supervisor Peter Foy, are talking about meeting with the leaders of pension reform measures in San Diego and San Jose approved by voters two years ago — former San Diego city councilman Carl DeMaio and San Jose Mayor Chuck Reed.

“I think we are going to get some large donors if we can all agree on something that’s workable,” said David Grau, chairman of the Ventura County Taxpayers Association and a leader of the county initiative drive.

The local pension reformers from all three areas share one common goal: cut growing pension costs that eat up funds needed for basic government services. But the methods they chose to cut pension costs are very different.

The Ventura County initiative, similar to the San Diego initiative, would have given new hires a 401(k)-style investment plan instead of a pension (the San Diego initiative exempted police) and called for a five-year freeze on pay used to calculate pensions.

The San Jose measure, while protecting pension amounts already earned, gives current workers and new hires a choice for pensions earned in the future: pay much more to earn the old pension amounts or receive a lower pension.

Instead of eventually eliminating pensions like the Ventura County plan, the statewide initiative Reed dropped last January, complaining of a misleading ballot summary, is intended to strengthen pension funding and could even increase-short term costs.

In addition to the pension choice, a little-publicized provision in the Reed initiative would require governments to propose, but not enact, annual plans for fully funding pensions and retiree health care in an unusually short 15 years.

Grau said the Ventura group had not yet talked to Reed, who has said he will continue pushing his initiative for 2016. DeMaio is interested in a statewide pension initiative, Grau said, but he is running for Congress and may not want to meet until after the November election.

Reformers think a cost-cutting pension reform Gov. Brown pushed through the Legislature two years ago falls short of what is needed. New hires get lower pensions and, among other things, some employees will pay a little more for their pensions.

The Legislature rejected one of the governor’s key proposals: a “hybrid” plan for new hires that combines a smaller pension with a 401(k)-style individual investment plan, similar to the retirement plan adopted for federal employees in 1986.

Could local pension reformers find common ground on some version of a hybrid plan? An incentive for the local reformers would be the possible support of a re-elected Brown, who has a big lead in the polls, if he were to renew his interest in pension reform.

From left: Carl Demaio, Peter Foy, Chuck Reed

From left: Carl Demaio, Peter Foy, Chuck Reed

If voters had approved the Ventura County initiative, some expected a domino-like spread of similar ballot measures to the 19 other counties with retirement systems operating under a 1937 act.

But Ventura Superior Court Judge Kent Kellegrew ruled there is nothing in the 1937 act that allows “an individual county to ‘opt out’ or terminate its participation” through a countywide initiative or a vote of the county supervisors.

The judge agreed with a union lawsuit backed by a legal opinion from the Ventura County counsel, endorsed by a 4-to-1 vote of county supervisors, Foy opposing. The change apparently can be made only by the Legislature or a statewide ballot measure.

Grau said the initiative backers were surprised by the judge’s swift decision. They had a legal opinion saying the initiative was legal and an actuarial report saying there would be no transition costs, backed by a separate actuarial report done for the county.

Among several things influencing the decision of initiative backers not to appeal, Grau said, was being told they could be liable for the opposition’s legal costs if they lost a quick appeal.

The judge said in his ruling that “allowing this measure to be considered on the November ballot would only result in a waste of public resources.” If voters approved, he said, the measure could not be implemented.

A vote for the initiative might have been used as an argument for legislation allowing Ventura County to make the change. But the initiative backers do not plan to seek legislation, assuming like many that union opposition makes that a non-starter.

Former Gov. Arnold Schwarzenegger found that union political clout goes beyond Democrats. After a record 100-day budget holdout in 2010, he got legislation requiring most state workers to pay more for their pensions.

In his weekly radio address, Schwarzenegger said minority Republicans refused to support the required two-thirds vote for the bill. He said Republicans “sold out” to the prison guard union for campaign contributions, naming several legislators.

Schwarzenegger said the Republican blockade was lifted by getting the signature of Secretary of State Debra Bowen at 3 a.m. at her home, clearing the way for a special legislative session and passage of the bill by Democrats on a majority vote.

One of the statewide initiative issues facing local pension reformers, in addition to finding a consensus plan and funding, is the view that the courts have said the pensions of current workers are a “vested right” that cannot be cut, unless offset by a new benefit.

The watchdog Little Hoover Commission and others think the key to quickly making major cuts in pension costs, and easing the strain on government budgets, is cutting the pensions current workers earn in the future.

As the Legislature worked on Brown’s pension reform two years ago, the mayors of eight of the state’s 11 largest cities sent legislative leaders a letter urging that cities be given “clear authority to modify future pension accruals,” a plea that was rejected.

Last December the provision in the San Jose measure giving current workers the pension choice, pay more or receive less, was ruled a violation of vested rights and overturned by a superior court judge, despite a city charter specifically allowing pension changes and repeals.

While awaiting an appeal, San Jose also awaits an IRS decision on whether choosing a lower benefit prevents tax-deferred status for plans. Orange County, which negotiated a similar pension option with employees, has been waiting for an IRS decision on the issue since 2009.

The San Diego and Ventura County measures avoid vested-rights challenges by switching new hires, but not current workers, to 401(k)-style plans. The plans are now widely used in the private sector, shifting investment risk from the employer to the employee.

Similar to previous polls, a statewide survey issued by the nonpartisan Public Policy Institute of California last January found that switching new government hires to 401(k)-style plans is supported by 73 percent of likely voters.

Critics say a 401(k)-style plan would harm recruitment and retention of employees (the reason San Diego exempted police) and often is uncertain and inadequate, particularly if investments are hit by a stock market crash shortly before retirement.

But even limiting pension cuts to new hires is not a legal sure thing. The San Diego and San Jose measures are being challenged by the state Public Employment Relations Board because they were not bargained with labor unions.

A cost-cutting Los Angeles pension reform was overturned two weeks ago by a Los Angeles labor board. A hearing officer concluded that at the moment of hire, new employees become members of the bargaining unit and therefore get the same benefits.

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 11 Aug 14

71 Responses to “Ventura pension vote blocked, summit this fall?”

  1. SeeSaw Says:

    How can you refer to the California Policy Center as, “nonpartisan”, and keep a straight face!

  2. John Moore Says:

    It is true that CERL, the state law on 37 ACT county pension systems does not allow a county to terminate its pension plan w/o union consent. It is important to understand that the PERL code that applies to CaLPERS governmental agencies does allow agencies to terminate CaLPERS w/o union consent. So the Ventura decision does not, will not, apply to CaLPERS agencies.

    The Ventura case once again reveals that unless an agency(city or county) has a legislative body that is composed of a solid majority of true pension reformers, the standing legislative body will destroy every attempt at pension reform. Ventura Co. should concentrate on electing a solid majority of pension reformers to the Board. The new Board should then declare a financial emergency and a 20% salary reduction for all employees until the emergency(unfunded pension deficits) is over. In my view Kern v. City of Long Beach clearly authorizes that action, except that city and county attys’ simply don’t inform legislative bodies or the public about the second rule of Kern, which is what the Ca. Supreme court said about cures for city pension plans that are becoming financially insecure and threaten the continuing ability to meet its obligations. Significant pension reform was authorized by Kern. Also, the rule that you must replace pension take a ways with something of equal value clearly does not apply to agencies when its pension system is going underwater. Per Kern, that rule clearly only applies to agencies when its pension plan is not in financial distress. Unfortunately many Tsunami commentators mis-state the rules of Kern and Allen.

    It was unfortunate that the Ventura Initiative violated the “one subject” rule; otherwise, there are good reasons for upholding(and appealing) the part of the Initiative that put “new hires” in a DC pension plan. Ventura was not attempting to terminate its entire plan; it was trying to protect it. But with the violation of the “one subject” rule, an appeal would be complicated.

  3. SDouglas47 Says:

    “I think we are going to get some large donors if we can all agree on something that’s workable,” 

    Good luck with that.

    In the first place, as far as I can see, none of these groups are talking about pension reform. They are talking pension reduction. The tacit assumption is that public employees are now overpaid. We can’t even all agree on that.

  4. Pete Says:

    Hey Ed,

    You forgot to mention not one, but TWO, iniitiatives from the City of Pacific Grove that sought to repeal pensions for current employees. Both tossed for being patently illegal.

    BTW–John Moore–are you the same John Moore who is running for City of Pacific Grove Mayor and has a “financial emergency and 20% employee salary cutback” as the key platform? LOL. Are you the same John Moore who has written on other websites in favor of the failed Pacific Grove initiatives? Again, LOL.

  5. John Moore Says:

    Pete: You missed my point. I don’t believe that the pension crisis will or can be solved by Initiatives. I never have.

    I do believe that a majority of legislators of a city council or Bd of Supervisors, in an honest attempt to save its city or county, can utilize its emergency powers to beat the Unions, the Manager and Agency lawyers at a negotiation game of chicken: If a reduction of 20% across the board does not work(lead to financial balance and adequate services), try a reduction of 30%, then 40%. If many of the employees flee, great; hire part time or “new hires” under PEPRA. Continue until the financial crisis is resolved

    Forget your hate speeches. The fact is that 3%@50 and even 2%@50 mathematically leads to financial destruction of all municipal entities. If you don’t believe me, believe Warren Buffett. It will be interesting to see whether judge Klein in the Stockton case will approve a City plan which leaves “doomed to fail” pensions intact?

  6. SDouglas47 Says:

    ” The fact is that 3%@50 and even 2%@50 mathematically leads to financial destruction of all municipal entities.”

    Did Warren Buffet actually say that, or are you paraphrasing?

  7. Pete Says:

    It’s “hate speech” to point out how flawed your prior “legal analysis” was? Quoting your own platform is now hate speech!!?? That you have now doubled down on that platform by calling for a “40%” cut in pay? Geesh.

    Is it “hate speech” to say that your financial acumen lacks merit, or is the sampe fact one disagrees with you “hate speech”?

  8. John Moore Says:

    Do the math. Both Ventura Co and Sonoma Co have unfunded deficits exceeding a billion dollars. The deficits grow at the investment rate of 7.5% per year. In just ten years, the deficits grow to 2 billion per year. Annual rates will double and not dent that growth. Please do the math.

  9. Pete Says:

    Oh, my goodness, John Moore, you really can’t be serious–or is it more accurate to say, can’t be taken seriously.. The unfunded deficits in Ventura and Sonoma County “grow at the investment rate of 7.%% per year”? Um, no.

    The unfunded liabilities in a pension plan “grow” only to the extent 1) that the pension fund does not meet its assumed rate of return each year, or other demographic changes occur which result in a deficit (usually small); or 2) prior investment losses have not been accounted for by the smoothing process, which recognizes said losses over five years. Similarly, if the fund has acheived investment gains above their assumed rate, those will also be smoothed in over the five year period.

    Since Ventura and Sonoma County have had positive returns above their assumed rate for 4 of the last 5 years, as of today (because this year’s return will not be known for another 10 months) their unfunded laibility and contribution rates are going to GO DOWN as the investement gains are smoothed in.

    In Sonoma County, as documented in their 2013 Actuarial report, they have $206 million in investment gains through 2012 which they have yet to recognize. When theydo that will lower both the contribution rate and the unfunded liability going forward. Add in their investment gain from 2013 which exceed the assumed rate and the decrease in the unfunded liaility and contribution rate will accelerate lower.

    In Ventura, per their 2013 actuarial report, they had $6 million in investment losses not accounted for as of yet. However, given their 2013 investment returns that exceeded the assumed rate of return, and both their unfunded liability and contribution rates will be decreasing going forward.

    So there you go, John Moore. Both the facts and the math!!!

  10. Pete Says:

    Sorry, but your comment that the “unfunded deficits” grow at a rate of 7.%% per year is simply wrong.

    The unfunded liability grows only when 1 of 2 things occur: 1) the plan does not meet its actuarial projections–either assumed rate of return or demographic assumptions, or 2) the plan’s previous losses have not yet been recognized by the plan per their “smoothing” policy.

    In this case, Sonoma County has investment gains of $206 million that have not been recognized due to their smoothig policy, per their 2013 actuarial report. When recognized, the unfunded liability will DECREASE, as will the contribution rate. In fact, that decrease will accelerate when the market gains above the assumed rate are recongnized in the coming year.

    In Ventura, there is a small investment loss of $6 million yet to be recognized. However, given their gains above the assumed rate in 2013, their unfunded liability and contribution rates will be decreasing in the future.

    Facts and math, John

  11. SDouglas47 Says:

    Facts and math

    Thanks, Pete. I didn’t know what Mr. Moore was talking about with the”deficit growing at 7.5% per year.”, but it didn’t pass the smell test. I don’t know what math he wants us to do. Is an “unfunded deficit” the same thing as an unfunded liability? Sounds like obfuscation to me.

    I looked through some of his old posts and saw this: “In 2002, both Pacific Grove and Bakersfield adopted 3%@50 for Police and Fire. It was a 50% pension increase negotiated by the fire and police unions.”

    Whenever I see that statement (which is often) I judge the writer either unwise or untruthful. It is a 50% increase, of course, but ONLY for those who actually retire AT FIFTY, which, in my experience, is unusual.

  12. John Dickerson Says:

    RE – the ”deficit growing at 7.5% per year.”

    Leaving aside the mathematical impact of smoothing, IF a Pension Fund is underfunded AND exactly earns its target rate AND all other actuarial assumptions stay the same AND they are met (AND probably a number of other “ANDS”), THEN the unfunded obligation will grow at the target rate of return. In that case the target rate functions like an interest rate.

    Period. That is the math.

    (How are “normal people” supposed to get their heads around this stuff?)

    But – given how complex all this is, all those Ifs will never happen. Even so – it’s entirely “fair” to consider the target rate as an effective interest rate applied to unfunded pensions. After all – the Retirement Board is setting all those assumptions – that’s their pension funding plan. Even though we can be certain actual results will vary from their plan – it IS their plan.

    Perhaps it’s more mathematically correct to say that – in the context of the adopted pension funding plan – the target rate is planned to be applied as an effective interest rate to the unfunded obligation.

    Another support for the notion it’s an effective interest rate – hundreds of billions of Pension Obligation Bonds (POB) have been sold across the country. The general “sales pitch” by the financial firms that help governments create and sell POBs is that the governments will lower their interest costs by selling the bonds because the rates applied to the bonds will be lower than the effective interest rate imposed by the target rate of return.

    The sauce that’s good enough for that goose (that POBs will cut a government’s interest costs) is good enough for this gander (an argument between pro and anti-pension reformers).

  13. Pete Says:

    Nope.

    Let’s examine this statement:

    “Leaving aside the mathematical impact of smoothing, IF a Pension Fund is underfunded AND exactly earns its target rate AND all other actuarial assumptions stay the same AND they are met (AND probably a number of other “ANDS”), THEN the unfunded obligation will grow at the target rate of return. In that case the target rate functions like an interest rate.

    Period. That is the math.”

    Um, not. If a pension fund earns its target rate and the assumptions don’t change, the unfunded liability will not grow at all. The unfunded liability, as stated above, only grows when the actuarial assumptions (investment/demographic) are not met.

    Even better, if the pension fund earns its target rate and the assumptions don’t change then the unfunded liability will be eliminated in its entirety, not increase. How? Well, all pension funds have an amortization policy, a period of time where they collect conrtibutions which will elimnate the unfunded liability. For example, if a fund has a 20 year amortization policy, then in 20 years the unfunded liability will be eliminated. Those payments consist of the dollar amount needed split into increments per year –“the priniciple” plus a payment based on the assumed rate of return– “interest.” It is these annual payments–the “normal cost” plus the “unfunded accrued actuarial liability” interest payment which plan sponsors pay this year—designed to pay the ongoing cost and pay off the unfunded liability.

    Facts and math, yet again.

  14. Pete Says:

    Correction of a typo:

    It is these annual payments–the “normal cost” plus the “unfunded accrued actuarial liability” interest payment which plan sponsors pay EACH year—designed to pay the ongoing cost and pay off the unfunded liability.

  15. SDouglas47 Says:

    There are two different debates going on here. No wonder there will never be agreement.

    As I understand, the main argument for Defined Contributions, as Ventura and others are proposing, is that Defined Benefit plans are “unsustainable”. In other words, they are, or soon will be, unaffordable.

    BUT:

    “But almost any actuary will tell you that defined-contribution plans are inherently less efficient than defined-benefit plans. Indeed, some will say that the worst defined-benefit plan is more efficient than the best defined-contribution plan.”

    MICHAEL H. GRANOF governing.com sept 26, 2013
    (He is FAR from alone in this opinion.)

    So, what Ventura County, and others, are really talking about is reducing the total compensation of its employees, which presumes that employees are overpaid now.

    You are not talking about pension reform, you are talking about cutting pay.

  16. Berryessa Chillin' Says:

    SDouglas47:

    While I would agree with the quote about the relative efficiency of DC vs DB pensions, the problem with DB pensions isn’t their efficiency but rather the extreme amount of risk taxpayers and governments assume with DB pensions. Unfortunately, SB400 and its progeny have demonstrated that the politicians of this state, along with the governing boards of CalPERS and CalSTERS, cannot be trusted with the fiduciary responsibilities necessary to properly run very large DB pensions. Unfortunately our politicians are too corrupt and too incompetent to be trusted with a DB system. We now know that a single ill-advised vote, SB400, along with the idiotic CA judicial precedent regarding pensions, can sentence a once-great state of 40 million to decades of fiscal hardship.

  17. SDouglas47 Says:

    Politicians are fallible, and I think we all have learned a lot in the last ten years, but I think “corrupt and too incompetent” may be going overboard.

    SB400 may not be quite the demon it is made out to be. For one thing, anyone (and there are many) who characterize it as a “fifty percent increase in pensions is either unwise or untruthful. Its effects are not as great as most people think. And they have largely been reversed, at least for new employees. We are learning.

    Most of the “decades of fiscal hardship” are caused by three factors.

    Investment losses. The greatest drop since the great depression. A huge advantage of the DB system is the ability to ride out ups and downs in business cycle. This bust was a one off, but CalPERS can recover.

    Tax revenues. If eighty percent of your budget in the BEST of times is used for wages and benefits, and revenues fall by thirty percent, as the man said, do the math.

    Safety personnel, fire, police, etc. For whatever reason, between about 2002-2008, many of these got increases of thirty percent or more ABOVE inflation. If a high percentage of a cities employees are police and fire, and they get a thirty percent raise, again, do the math. The question is, are police overpaid now, or were they underpaid before?

    Maybe that’s just what police cost, and we were getting a real bargain before.

  18. SeeSaw Says:

    The CalPERS average rate of return over the past 20 years is 8.5%. I was given that figure just today, by a member of the CalPERS Board of Administration.

  19. Captain Says:

    The CALPERS rate of return over the past 20 years has nothing to do with our current, CORRUPT, CalPERS UNFUNDED LIABILITY.

    The CORRUPT CalPERS Board of Administration, whose decisions have bankrupted their own pension plan absent the additional BILLIONS in taxpayer funding, should be sent to prison.

  20. SeeSaw Says:

    Sent to prison under what charges? Where is your evidence?

    By the time you are in your grave, retired public workers will be sustaining themselves with the CalPERS pensions that were earned by them for providing services to the likes of you! The BOA did not cause the 1987 recession resulting in the largest financial calamity we have seen in our lifetimes.

    Get over yourself!

  21. Captain Says:

    The problem with CalPERS and their CORRUPT BOARD of ADMINISTRATION can be traced back to the late 90’s. They have stolen money from taxpayers in many different forms/ways.

    CalPERS needs to be broken into smaller peices with a much different management structure, starting with getting rid of the underqualified tools that have been been elected by the unions.

  22. SeeSaw Says:

    The corruption was with certain individuals, I’m sure you are aware. They did not steal from the taxpayers–they accepted bribes from a placement agent, formerly from the CalPERS Board, in the private sector. He was never elected by the unions or any other employees. He was originally appointed as an L.A. Vice Mayor by Richard Riordin; then Pete Wilson appointed him to the State Personnal Board, which thereafter sent him to the CalPERS Board as its representative. He was a Republican product from beginning to end–I bet you don’t what that to get out do you!

  23. Captain Says:

    SeeSaw Says: “The CalPERS average rate of return over the past 20 years is 8.5%. I was given that figure just today, by a member of the CalPERS Board of Administration.”

    So what? What does that number really mean? Are you saying we should believe anything coming from you or some ANONYMOUS CalPERS Board of Administration person? What’s the name of the CalPERS Board of Administration member you’re referring to? I’m sure they wouldn’t mind being quoted given their/your apparent conviction.

    Whom from the CalPERS Board of Administration is telling you this figure, and in what context? I would like to know.

  24. Cyrano Says:

    “I bet you don’t know what that to get out do you..”
    Thank- you. My book club will enjoy that use of English. The gift that keep on giving brings a smile. That gift is priceless. WHAT THAT?

  25. SDouglas47 Says:

    ….”want”….

    We all “want” calpensions to put in an edit function because we can’t always rely on spell check, and auto correct sometimes plays very cruel tricks on us.

    What does your book club think about “quoting” someone and inserting extra words? You “know”?

  26. Tough Love Says:

    John Moore, I see that you gave up tying to correct Pete’s misunderstanding of the Math (SDouglas47 is hopeless). It is indeed hard to teach someone with a closed mind. Also, you are too close to this and assume they understand more than they do.

    Let me give it a whirl (examples tend to help) …..

    Let’s say we have a Plan with BOY Plan liabilities of $10,000, but with only $6,000 of Plan assets. Then the finding ratio is $6,000/$10,000 = 60%, and the Unfunded Plan Liability is $10,000-$6,000 = $4,000.

    Let’s assume that the Plan’s Assumed (or “Target”) return on assets is 7.5% and will be met, and for simplicity, let’s assume all other Plan assumptions are met and that this is a young Plan with no current payouts (to retirees, or return of contributions to terminators). For simplicity, let’s also ignore the impact of current year pension accruals and also assume no asset smoothing implications. So essentially, we are just tracking over one year the financials of the past service accruals of current actives.

    What Pete seems to misunderstand, is that the underlying pension math requires that the Plan must earn 7.5% of the $10,000 plan “liability” for the unfunded liability not to grow, not just 7.5% of the $6,000 of Plan “assets”.

    So let’s look at what happens if Plan assets indeed earn the “Target” 7.5%….

    Since the full $10,000 Plan “liability” must grow at 7.5% (per standard pension math), the EOY Plan “liability” is $10,000 x 1.075 = $10.750, and EOY Plan assets are $6,000 x 1.075 = $6.450.

    The funded ratio indeed remains at $6,450/$10,750 = 60%, but the Unfunded Plan Liability has indeed GROWN since it is mathematically, EOY Plan Liability – EOY Plan assets = $10,750 – $6,450 = $4,300 (UP from the $4,000 BOY figure)

    So Pete, clearly your above assertion …. “If a pension fund earns its target rate and the assumptions don’t change, the unfunded liability will not grow at all.” …. is wrong.

    In fact, for the dollar amount of unfunded liability NOT to grow, the return on actual Plan “assets” is given by the formula (“Target Return”)/(Funded Ratio), which in this case is 0.075/0.6 = 0.125 or 12.5%, and demonstrating that….

    EOY Plan Liability remains at $10,000 x 1.075 = $10.750. EOY Plan assets become $6,000 x 1.125 = $6,750. The funded Ratio increases to 62.79%, and the Unfunded Plan Liability is $10,750-$6.750 = $4,000 …. the SAME as at the BOY.

    Bottom line …. when a Plan has a funding ratio less than 100%, for the dollar amount Plan’s unfunded Liability NOT to grow, the investment earnings on actual Plan assets must be greater than the Plan’s Target Ratio and that required return rate is given by the formula (“Target Return”)/(Funded Ratio).

    It is EXACTLY because of the above math …. that the base against the earnings rate is applied (i.e., Plan “liabilities”, not Plan “assets”) for the Unfunded Plan Liability NOT to worsen, that the Plan Liabilities are so VERY important, and why there is such a HUGE debate as to what interest rate is appropriate to use in it’s calculation (via discounting expected future Plan payouts).

    For what it’s worth, Moody’s new procedures (used in their creditworthiness analysis) discounts such expected cash payouts at about 5% vs the 7%-8% most Public Sector Plans currently use, and almost all financial economists believe that the Moody’s rate is the appropriate one. What this means is that the financial picture of almost all Public Sector Plans is MUCH worse than that reflected by the Plans’ “official” numbers … with (per Moody’s) Funding Ratios that are likely 25%-33% BELOW the official ratios.

    More than a few Public Sector Plans have already entered the “death spiral” from which they have very little chance of recovery w/o very material benefit level reductions for CURRENT workers (and likely for those already retired as well).

  27. SeeSaw Says:

    Captain, the Board Member is Michael Bilbrey–oh yes, he is a bonafide CalPERS Board member, so you can hold your usual snark. I was at a meeting where he was speaking in person. I have met him before, too; he is politically clean, to a fault–will not even accept the meal that comes with the meeting. The facts and figures that he relayed are public record, that I already knew. He did not create those numbers off the top of his head. CalPERS investments are for the long term, and when an average twenty-year rate of return surpasses the rate-target set by the Plan’s actuaries, that is excellent. So CalPERS’s performance has been excellent and if not for the recent great recessions, it would probably be 100% funded. By the way, I do not deal with anonymous people.,

  28. Tough Love Says:

    So SeeSaw, you thing CalPERS current underfunding is due to the great recession, and NOT due to the HUGE “retroactive” pension increases implemented via SB400 (and it’s Local Plan equivalents) ?

    Really ?

  29. SeeSaw Says:

    Yes. I do. Many public entities, including my former employer began rolling back those SB400 formulas in 2005 and were already reformed when the State passed PEPRA in 2012. No employee coming along will ever see those formulas again. If not for the great recession we would not even be having these conversations.

  30. Tough Love Says:

    No SeeSaw, VERY VERY few entities rolled back anything, and the 2012 PEPRA ONLY applies to NEW workers. Those who received the retroactive increases KEPT THEM and CONTINUE to get them now and will CONTINUE to get them until they retire.

    Lees distortion and FAR more full-disclosed of relevant details would be nice to see from you …. at least one in a while.

  31. SeeSaw Says:

    I mean no distortion. The only way to do pension reform is with new hires because the workers that benefited from the pension upgrades will keep what was bestowed whether you like it or not. As time goes by, they will retire and in the future no workers will have the former formulas. I was “bestowed” with a 3% at 60 formula in 2001 up from 2% at 60, but I was already over 60 and on my way to getting 2.418% at retirement. So what! My pension is still a lot less than many retirees who had lesser formulas. In fact you get way too dramatic about those “huge retroactive pension enhancements”. The State never adopted a 3% formula for miscellaneous workers and many municipalities and counties never adopted that formula. Its interesting the way people like you living in the far east think you know everything that is going on in the west and you think its your business–its not. Why don’t you live your life up there and let us live ours here! I’m proud to say I don’t care what is going on in NJ! Let the New Jersians handle their own affairs!

  32. Tough Love Says:

    Quoting SeeSaw … “So what! My pension is still a lot less than many retirees who had lesser formulas. ”

    Another good example of “distortion” and the omission of relevant details.

    Don’t you mean … . “”So what! My pension is still a lot less than many PUBLIC SECTOR retirees who had lesser formulas. “”

    Without doubt YOUR pension is AT LEAST 2x greater in value than that of a similarly situated PRIVATE SECTOR worker …… and is so ONLY because the elected officials charged with signing off on such pensions are bought-off with campaign contributions and election support.

  33. SeeSaw Says:

    Oh, you are so silly! The DB pension systems existed 50 years before the public sector unions were even allowed in CA. How on earth did the Plans manage to continue to give the public-sector employees those DB pensions when the private sector was in the process of disbanding theirs for the “more affordable” DC plans!
    I can say thanks to “whoever” up above, that I have a pension that allows me to pay the bills to help me sustain my very modest lifestyle. And, I can also say “thanks” to myself, because I worked for it and earned every penny! Whether it is one, two, three, or ten times more than a private sector worker anywhere is irrelevant. Maybe you should voice more disdain about the pension of my former CM (non-union) which is seven times more than mine.
    I get through it, because nobody ever told me that life is fair!

  34. SDouglas47 Says:

    *copy/paste alert*

    Are Shell Oil employees pensions too high?

    Linda Cook was head of Shell’s gas and power division.

    $7.6m severance payment 

    pension pot worth almost $25m

    allowed Cook, after 29 years of service, to draw her pension from the age of 55, 
    ……………………………..

    Assume she worked very hard and had great responsibilities. Do you think she worked 18 times harder than the police chief of Westhampton Beach ?
    ………………
    But, the police chief pay came from MY TAX DOLLARS!

    Do you think a large part of Linda Cook’s pay didn’t come out of your pocket? Even if you never bought a drop of Shell gas in your life?

    I bet her pension is AT LEAST 2x greater in value than SeeSaw’s.

  35. Tough Love Says:

    Quoting SeeSaw, …”How on earth did the Plans manage to continue to give the public-sector employees those DB pensions when the private sector was in the process of disbanding theirs for the “more affordable” DC plans!”

    Because Gov’t entities treat the 3-rd party TAXPAYER as the sucker in the equation.

    No such 3-rd party payers exist in PRIVATE Sector Plans, where Corporate sponsors are spending THEIR OWN money.

  36. Tough Love Says:

    Responding to SDouglas47 ….

    (Copy paste alert) …

    You’re delusional and clueless.

    What I don’t know is if Public Sector workers START OUT this way or if if DEVELOPS OVER TIME.

    Perhaps it’s 20-30 years of listening to your Union’s BS … that you’re GREAT, you’re IMPORTANT, you’re BETTER, you’re “SPECIAL”, you’re ENTITLED …. and on and on and on.,

  37. SeeSaw Says:

    What factors in your life caused you to be the way you are, TL? Something had to have happened to cause you to be so classless.

  38. Tough Love Says:

    SeeSaw. What factors in your life caused you to believe that YOU are “entitled” to a pension AT LEAST 2 times greater in value upon retirement than that of the TYPICAL Private Sector worker doing the IDENTICAL work, making the IDENTICAL pay, having the IDENTICAL service years, and retiring at the IDENTICAL AGE ?

  39. SeeSaw Says:

    Anybody in the private sector who did my identical job, TL, would have been paid three thousand a month more than I was paid. That should make up for the lack of a DB pension. Furthermore, you are trying to mix apples and oranges–you can’t do that. I have never said I was entitled to anything–I have said that I worked for and earned what I got. Words like “Important”, “Better”, “Special”, “Entitled” are your words–not mine.

  40. Tough Love Says:

    SeeSaw, Many who claim they are underpaid, are unproductive and/or incompetent….. which is WHY they are paid less than others.

    Might you have been one ?

  41. SDouglas47 Says:

    ” You’re delusional and clueless.”

    Are you saying Linda Cook didn’t get a pension worth $25 million?

  42. Mike Says:

    Letting my friend in Nevada use my camping space in Nevada for two weeks. PRICE $zero dollars.
    Having same friend deliver supplies from Nevada to my California house, for remodeling project and pay his Nevada sales tax rate saving $900 vs. Cal sales tax. PRICELESS.

  43. Tough Love Says:

    No SDouglas47, You are “delusional and clueless” for thinking that excessive CORPORATE compensation, paid for by shareholders and VOLUNTARILY by customers (who can chose to shop elsewhere if they don’t like the company’s price structure which undoubtedly includes the cost of executive compensation) justifies forcing Taxpayers (who have NO choice in the providers of their PUBLIC Sector services … police, Fire, DPW, etc.) to ROUTINELY grossly overcompensate their Public workers because their Unions get away with BUYING the favorable votes (on pay, pensions, and benefits) of our elected officials with campaign contributions and election support.

  44. SDouglas47 Says:

    Do you think a large part of Linda Cook’s pay didn’t come out of your pocket? Even if you never bought a drop of Shell gas in your life?

  45. SeeSaw Says:

    No TL. I was worth every penny. It was just that my public employer paid less for such positions than was paid outside for the same work in the private sector.

    I doubt you are much of a financial wizard, TL. Hater is the better description for you, whatever you do.

  46. SDouglas47 Says:

    Lockheed Martin, Northrop Grumman, Boeing, SAIC, Raytheon, General Dynamics, Hewlett Packard, Booz Allen Hamilton……….

    Eight companies, over sixty billion dollars in federal contracts.

    You can’t ” chose to shop elsewhere ”

    (Shell also has a $1.5 billion federal contract for aviation fuel. Their corporate compensation isn’t paid by shareholders. It is paid by you and me AND the fellow behind the tree…taxpayers. Not necessarily VOLUNTARILY.)

    And worse yet:

    ” Government contracts with megafirms like Boeing, General Dynamics, Lockheed Martin, and Raytheon require Uncle Sam to reimburse the companies when their workers’ pension funds take a hit in the market. Over the past five years, Lockheed has secured $3.1 billion in taxpayer dollars for pension reimbursements; that’s a significant chunk of the $21.8 billion in operating profits they reported over that period.”

    $3.1 billion??? That’s ” AT LEAST 2 times greater in value ” than SeeSaw’s pension. Hale, that’s even more than MY pension.
    ……..
    ” I know the math too well to stand aside, feeling an obligation to less informed Taxpayers.”

    ” Rise up and DEMAND change !”

    LOL

  47. Tough Love Says:

    SDouglas47,

    And as I have clearly shown via mathematical demonstration before, how does any this justify the VERY TYPICAL full career CA Police Officer receiving a pension funded only 10-20-% via THEIR OWN contributions, (INCLUDING all the investment return on those contributions and with the 80-90% balance coming form Taxpayers), EQUAL to that of the Private Sector executive making 4.62 times the Police Officer’s salary (over $500,000) ?

    Just more of your continued attempt to divert the readers attention from the Taxpayer-funding of grossly excessive (by any reasonable metric) Public Sector pensions and benefits. And while Safety-worker pensions/benefits are the highest and most costly, the same conclusion (only slightly less burdensome) applies to the pensions & benefits of ALL Public Sector workers.

    At some point, the Taxpayers will wise up and end this thievery, granting only by your Unions’ colluding with our elected officials.

  48. SDouglas47 Says:

    As I have clearly explained before, your mathematical demonstration is moot because your premise is faulty.

    How is it “diversion” when you use atypical examples of public sector pensions to support your argument that public sector pensions should be cut. And I point out that there are much HIGHER private sector pensions paid for by MY TAX DOLLARS?
    …………..

    “grossly excessive (by any reasonable metric) Public Sector pensions and benefits.”

    “of ALL Public Sector workers.”

    In YOUR opinion.

    There have been several studies by prominent economists showing that, when comparing EQUIVALENT public and private sector workers, their total compensation is *roughly equal*

    “Total compensation” INCLUDES the cost of pensions.

    “Total compensation” INCLUDES the cost of pensions.

    “Total compensation” INCLUDES the cost of pensions.

    I reiterate, “Total compensation” INCLUDES the cost of pensions.

    That means,

    1. your math is irrelevant.

    2. “4.62 times” is irrelevant.

    3. ” a pension AT LEAST 2 times greater in value upon retirement than that of the TYPICAL Private Sector worker”……is irrelevant.

    4. The cost of the pension is included in the “total compensation”.

    In the August 12 Union Watch article ” Los Angeles Police Average Total Compensation $157,151 Per Year”,

    They do not average $157,151 a year PLUS a “grossly excessive (by any reasonable metric)”, pension.

    “Total compensation” INCLUDES the cost of pensions.

    (And the $157,151 figure is almost certainly incorrect, also, but that’s another matter)
    ………………..

    THAT is why your math is moot. You are counting the value of the pension twice.

    That’s not the way it works. That’s not the way any of this works.

    ………………

    The ONE study by the conservative American Enterprise Institute counters that, on average, public sector workers earn LESS in cash wages, but when using the “proper” risk free rate, they earn more total compensation than their private sector peers ON AVERAGE.

    Even this study says that SOME public sector workers not only earn less in cash pay, they also earn less (in some cases MUCH less) than private sector counterparts in TOTAL COMPENSATION.

    There seems to be almost unanimous agreement that “ALL public sector workers” do NOT have:

    ” grossly excessive (by any reasonable metric) Public Sector pensions and benefits. ”

    Nearly unanimous agreement.

    And then there’s TL. Seldom in doubt, often in error.

  49. SeeSaw Says:

    TL is a shill for the corporations and he suffers from “Lockbrain”–the hatrid is all petrified and the truth will never be able to enter.

  50. SDouglas47 Says:

    TL:

    ” SeeSaw, Many who claim they are underpaid, are unproductive and/or incompetent….. which is WHY they are paid less than others.”

    LOL………..

    Apparently, SeeSaw, if you earned MORE than the private sector, you’re a greedy thug in collusion with the corrupt/incompetent politicians. If you earned LESS, you’re unproductive and/or incompetent.

    Catch 22? Or just more fallacious logic from TL?
    ……………………..

    Reminds me of the other argument: Public sector workers “claim” they are underpaid, so why do they stay in the public sector?

    Following that line of reasoning, it’s tautologically impossible to *ever* be ‘screwed on pay’, in either the public or private sector.

    Ironically, there’s a grain of truth in there. Most public sector workers aren’t.

    “Aren’t” public sector workers that is. Only about one fifth of public sector workers are “career” employees (30 years or more). About half of public sector workers don’t even stay long enough to vest in a pension. Workers move in and out of the public sector as part of their career advancement, or in response to normal business/economic/employment cycles.

    “We have met the enemy and he is us.”

  51. Tough Love Says:

    SDouglas47,

    Like I said earlier, you’re Delusional and Clueless (and very greedy).

    Your comments make that very clear.

  52. Pete Says:

    Tough love

    Appreciate your attempt at math. Look up the concept of amortization of the unfunded liability and payments thereron—a real simple answer to your attempt at math.

  53. Pete Says:

    Sorry, hit send too soon.

    To finish my reply. The original poster, John Moore, asserted Sonoma County and Ventura County had pension deficits of $1 billion, and that in “just ten years, the deficits grow to 2 billion per year. ” In other words, he meant that in 10 years there would be a unadressed deficit of $2 billion.

    That, of course, cannot be true because an amortizaton policy addresses the unfunded laibility, and if all actuarial assumptions come true, then the deficit will be constantly reduced and then eliminated during the amortization period.

    Nobody disputes the overall liability grows each year–and the “unfunded liability” is part of the overall liability. However, the claim which is refuted is Moores’ claim that the unfunded laibility exists and the unfunded laibility continues to grow each year, unadressed, as time goes on.

  54. Tough Love Says:

    Pete, Above you very specifically stated…”If a pension fund earns its target rate and the assumptions don’t change, the unfunded liability will not grow at all.”, and in my above (long) comment I demonstrated that they indeed increase EXACTLY as commentators John Moore and John Dickerson stated. Refusing to accept that you were wrong and admit it is quite immature.

    Again, since I DEMONSTRATED that the $4,000 liability would INCREASE to $4,300 (which is a 7.5% target rate increase just as BOTH “Johns” said) your above statement is very CLEARLY wrong.

    Time to fess up up and admit that you really just another Public Sector worker/retiree (bag of wind) trying desperately to protect your grossly excessive pension and pretending to understand pension math.

  55. SeeSaw Says:

    “Champion–Most Despicable Human Being”. Is that trophy on your mantel, TL?

  56. SDouglas47 Says:

    As I understood Pete:

    “It is these annual payments–the “normal cost” plus the “unfunded accrued actuarial liability” interest payment which plan sponsors pay EACH year—designed to pay the ongoing cost and pay off the unfunded liability.”

    Appears to me your “above (long) comment” doesn’t factor in the extra payments on the unfunded liability.

    You were right about the (long) part, though.

    HopelessDouglas

  57. Pete Says:

    Thanks , TL, for proving reading comprehension is not your strong suit. I quote the original poster, respond on point, and you respond with a non-sequitur.

    But, I don’t expect much from you, residing in Bitterville. As usual, when you run out of logic, the ad homniem attacks start—which in your case is usually pretty quickly.

    But, if it makes you happy, keep posting here and elsewhere on the interwebs your rants against public employees. It accomplishes nothing, persuades nobody. Unless you count those successful pension reforms by Dan Pellisier’s 2012 initiative (never mind, dropped from the ballot), the 2014 Chuck Reed statewide initiative (never mind, dropped from the ballot), the 2012 Redd pension rollbacks in San Jose (never mind, overturned by a court), the 2014 pension initiative in Ventura (never mind, overturned by a court)

    Man, what a string of successes!

  58. Tough Love Says:

    Pete, I’ll leave it to the readers to determine who knows what they’re talking about, suggesting that they read my long mathematical demonstration above.

    Enjoy the fantasy (your current or future promised pension & benefits) for a bit longer.

  59. SDouglas47 Says:

    LOL!!

    Reading comprehension !!

    Did you even TRY to read what Pete said??

    You made up your own question, and answered that one.

    TL math. It just doesn’t work.

    The reader.

  60. Captain Says:

    Pete, John Dickerson gets it right. Your comments are off base.

    “John Dickerson Says:
    August 13, 2014 at 4:16 pm
    RE – the ”deficit growing at 7.5% per year.”

    Leaving aside the mathematical impact of smoothing, IF a Pension Fund is underfunded AND exactly earns its target rate AND all other actuarial assumptions stay the same AND they are met (AND probably a number of other “ANDS”), THEN the unfunded obligation will grow at the target rate of return. In that case the target rate functions like an interest rate.

    Period. That is the math.

    (How are “normal people” supposed to get their heads around this stuff?)

    But – given how complex all this is, all those Ifs will never happen. Even so – it’s entirely “fair” to consider the target rate as an effective interest rate applied to unfunded pensions. After all – the Retirement Board is setting all those assumptions – that’s their pension funding plan. Even though we can be certain actual results will vary from their plan – it IS their plan.

    Perhaps it’s more mathematically correct to say that – in the context of the adopted pension funding plan – the target rate is planned to be applied as an effective interest rate to the unfunded obligation.

    Another support for the notion it’s an effective interest rate – hundreds of billions of Pension Obligation Bonds (POB) have been sold across the country. The general “sales pitch” by the financial firms that help governments create and sell POBs is that the governments will lower their interest costs by selling the bonds because the rates applied to the bonds will be lower than the effective interest rate imposed by the target rate of return.

    The sauce that’s good enough for that goose (that POBs will cut a government’s interest costs) is good enough for this gander (an argument between pro and anti-pension reformers).”

  61. Captain Says:

    SeeSaw Says:”Captain, the Board Member is Michael Bilbrey–oh yes, he is a bonafide CalPERS Board member, so you can hold your usual snark. I was at a meeting where he was speaking in person.”

    Michael Bilbrey was a UNION VP who worked as as a book store coordinator for a community college district. Those were his credentials – a JOKE. I watched the CalPERS broadcast where the candidates stumped. Bilbrey was underqualified, as were all the union candidates, but his speech focused on his work as a union representative as well his conviction that he wouldn’t cave to CalPERS management. As far as his financial acumen – he’s still clueless.

  62. Captain Says:

    SDouglas47 Says: “As I understood Pete:

    “It is these annual payments–the “normal cost” plus the “unfunded accrued actuarial liability” interest payment which plan sponsors pay EACH year—designed to pay the ongoing cost and pay off the unfunded liability.”

    Appears to me your “above (long) comment” doesn’t factor in the extra payments on the unfunded liability.

    You were right about the (long) part, though.”

    ??? – really? SDOUGLAS47 = clueless.

  63. Captain Says:

    “Pete Says:
    August 18, 2014 at 5:28 pm
    Sorry, hit send too soon.

    To finish my reply. The original poster, John Moore, asserted Sonoma County and Ventura County had pension deficits of $1 billion, and that in “just ten years, the deficits grow to 2 billion per year. ” In other words, he meant that in 10 years there would be a unadressed deficit of $2 billion.

    That, of course, cannot be true because an amortizaton policy addresses the unfunded laibility, and if all actuarial assumptions come true, then the deficit will be constantly reduced and then eliminated during the amortization period.”

    – It is becoming obvious that the people defending Defined Benefit Pension plans haven’t a clue as to how they work/don’t work.

  64. SeeSaw Says:

    Captain, is that all you have to offer? A litany of opinions without any facts to back up your characterization of MB, as a joke? He is still a Bookstore Coordinator in a community college, and he is not a union VP. He is a Union President, CSEA, consisting of 210,000 classified employees in CA’s public school and community colleges. He also has an MBA. Those are the things he does in his day job. He is a Board Member of CalPERS–not the CEO, or Actuary, or Investment Officer of CalPERS! He says, according to you, he won’t cave to CalPERS management? What the heck does that mean? Union candidates? There is no union category for CalPERS Board members! You are the one who is the Joke, Captain.

  65. SDouglas47 Says:

    Most people opposing defined benefits are wildly misinformed, also.

  66. Tough Love Says:

    Almost ALL people SUPPORTING DB Plans are Public Sector workers (who receive them) ….. because it is FAR FAR easier to understate the true cost of promised DB pensions than DC Plans.

    The TRUE annual cost of TYPICAL Public Sector DB Plans (using appropriate assumptions and with the promised pension fully funded during the worker’s career) is a level annual 25%-40% of pay for non-safety workers and 40%-60% of pay for safety workers …. vs the 3%-5% 401K pay “match” that Private Sector employers typically grant their employees.

    THAT’s why Public Sector workers like DB Plans …. they help hide the grossly excessive promised pension benefits (and hence COST …. 80-90% routinely foisted upon Taxpayers).

  67. SDouglas47 Says:

    And wildly misinforming.

  68. Tough Love Says:

    A VERY good example of why DB Plans don’t work ….. because all the involved parties (in THIS case CalPERS) unfairly and unjustly collude to work AGAINST Taxpayer-interests.

    http://www.reuters.com/article/2014/08/19/usa-pensions-calpers-idUSL2N0QP1NU20140819

  69. SDouglas47 Says:

    Nice try, but not a good example at all.

    About fifteen years ago, federal regulation changes required a commercial license for any vehicle over 26,000 lbs. These were formerly legal with a regular (class C) license.

    CalTRANS maintenance had MANY vehicles over this size, so they NEGOTIATED a change in job qualifications, and increased the pay scale to reflect this.

    Our department, among others, had fewer large vehicles, so instead of increasing the pay for all workers, they offered five percent extra for those who maintained a commercial license. It solved the legal problem and saved the state money. For fifteen years, that extra five percent was part of my “regular pay” and it was included in my pension calculation.

    Not a bonus. Not spiking.

    Coincidentally, about fifteen years ago, I submitted a safety suggestion through a program that gave a reward based on a percentage of projected savings to the state. I received a very substantial reward, and the state has, and still is, reaping the savings.

    If that award had come in my FINAL year, it would not have been used in calculating my pension.
    Rightly so. It was not part of my regular base pay. As the driver pay WAS.

    These “100 extra pay types” will not “increase pension costs” they have been counted for years. CalPERS is merely clarifying the rules.

    J.J.Jelincic is correct. This determination does NOT increase the cost to cities. It ALLOWS these payments to be used in pension calculations. It does not REQUIRE them.

    So far, every headline, and many of the detailed articles, mischaracterize this non story.

    AND

    It has nothing to do with Defined Benefits. The same payments would occur with DC. They are “regularly occurring normal pay.”

  70. Tough Love Says:

    SDouglas, Yeah, adding back in 100 separate ways to “spike” ones pension …. has, in your (“entitlement mentality”) opinion nothing to do with DB Plans”.

  71. SDouglas47 Says:

    LOL!!!!

    You go, girl!!

    As Ed says, we’ll have to agree to disagree.

    I could agree with you, but then we’d both be wrong.

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