After a decade of similar below-target investment earnings, punctuated by huge losses during the stock market crash in 2008, the nation’s two largest public pension funds are looking at different futures.
The California Public Employees Retirement System, putting a new focus on risk, worries about another recession dropping pension funding levels to 40 percent or below, a “warning track” zone that could make it difficult to get back to full funding in the future.
The California State Teachers Retirement System, no longer aiming for full funding, has developed several limited funding scenarios for legislative consideration that would keep the system from running out of money three decades from now.
The views emerged as CalPERS and CalSTRS lowered their earnings forecasts from 7.75 to 7.5 percent. The small drop raises employer pension costs to offset lower investment earnings, which are expected to provide two-thirds of future pension revenue.
The reason the two retirement systems are looking at different funding scenarios is that the CalPERS board, like most public pension boards in California, has the power to set annual contribution rates that must be paid by government employers.
But CalSTRS, the nation’s second largest public pension system, also is one of the oldest, formed in 1913. As if trapped by time, CalSTRS is an outlier unable to raise employer contribution rates, needing legislation instead.
For more than five years, CalSTRS has been trying to get the Legislature to raise contribution rates. It has explored getting the power to raise contribution rates, pursued more aggressive lobbying and even issued a $600,000 public relations contract.
Teacher unions, one of the most powerful groups at the Capitol, are consumed by historic cuts in school funding and teacher layoffs. School districts are said to have had more than $20 billion in reductions in the last four years.
Now the annual increase in contributions needed to get CalSTRS to full funding in 30 years, more than $4 billion, is approaching the total amount of contributions CalSTRS received from all sources last fiscal year, $5.3 billion.
A breakdown of the contributions, little changed from the previous year: teachers $2.4 billion, employers $2.3 billion and state $600 million. The state contributes another $600 million to a separate inflation-adjustment fund.
Meanwhile, pension payments going out to CalSTRS retirees last year increased to $10.1 billion, up 7.8 percent. Spending nearly twice as much on pensions as received in contributions eats up an investment fund valued at $150 billion earlier this year.
Even if investment earnings hit the target, 7.5 percent (which critics say is overly optimistic), the CalSTRS investment fund is expected to run out of money in about 30 years.
In an era of deep cuts in funding for current school operations, future teacher retirement costs have not been a priority. Gov. Brown’s 12-point pension reform plan does not specifically address the CalSTRS funding gap.
Part of the governor’s plan would put new state and local government hires in a “hybrid” plan combining a lower pension with a 401(k)-style individual investment plan. Phasing in a hybrid, opposed by unions, could take decades to yield significant savings.
“It would have some impact — nothing nearly enough to address the problem,” Ed Derman, CalSTRS deputy chief executive, told the board last month, referring to an analysis of the governor’s concepts done before bill language was introduced.
A two-house legislative committee is working on pension reform. Unions support curbs on excessive pensions and other abuses, but are skeptical or opposed to cost-cutting structural changes such as a hybrid, delayed retirement and higher worker contributions.
At the request of legislators, CalSTRS gave the committee a half dozen easily altered funding scenarios to consider. Only one, which boosts new member contributions by the Social Security rate, is projected to get CalSTRS to full funding.
But under that scenario CalSTRS would not be 100 percent funded until 2085, with a 47 percent chance of running out of money at some point before then.
Under the other five scenarios, CalSTRS is projected after 75 years to have funding levels ranging from 14 to 32 percent. The chance of running out of money before then is calculated to be 54 to 56 percent.
“If we are not going to be fully funded, quite honestly I think the next best solution is to know we can pay benefits forever, that we never run out of money,” Derman told the board.
The CalSTRS scenarios seem to put pension debt in a new light. Some point to the “unfunded liability,” when projected assets fall short of covering future pension obligations, as if it is a mortgage that has to be paid off in a given time period.
A well-publicized Stanford graduate student report two years ago showed how the reported $55 billion unfunded liability of the three state pension funds (CalPERS, CalSTRS and UC) ballooned to $500 billion if a lower risk-free earnings forecast is used.
The unfunded liability is based on the shortfall of projected assets needed to reach full funding in 30 years, the amortization period recommended but not required by the Governmental Accounting Standards Board.
What the CalSTRS scenarios show is that the pension funds, when under duress, have the unhappy option of not trying to reach full funding in 30 years. Future generations would be forced to pay for services received by current generations.
But that would not be a first. For example, the “intergenerational transfer” of debt already is the apparent policy for the rapidly growing cost of state worker retiree health care, expected to be $1.7 billion next fiscal year.
Legislation two decades ago by former Assemblyman Dave Elder, D-Long Beach, created a fund to begin investing money to help pay for future retiree health care. But lawmakers chose not to put money in the fund.
Now state Controller John Chiang estimates that the state owes $62 billion for retiree health care promised current state workers and retirees over the next 30 years. His actuaries say it would cost $1.6 billion a year to “prefund” the retiree health care.
“Even slight amounts set aside will help lessen the impact on future generations, and ensure that we fulfill our responsibilities to the state workforce and our taxpayers,” Chiang said in a news release last month.
The same notion, pay what you can even if it’s far from the full amount owed, delays the phasing in of increased contributions under the CalSTRS scenarios until 2016, when the state may be surfacing from more than a decade spent deep in red ink.
The CalSTRS “unfunded liability” as of June 30, 2010, was $56 billion and the funding level 71 percent. A new annual actuarial valuation due next month may report a larger unfunded liability and a lower funding level.
But as the CalSTRS scenarios show, the unfunded liability is a conventional measure of the shortfall in assets needed to reach full funding in 30 years, not a debt that must be paid off in three decades.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 29 Mar 12
Calpensions 
March 29, 2012 at 2:38 pm
The future prospect of promises being fulfilled is bleak.
Perhaps acknowledging the excessive nature of the PROMISES, and LOWERING them, INSTEAD OF struggling to figure out HOW these excessive promises can be FUNDED, makes more sense.
The “math always wins in the end …. and w/o reductions, it won’t be pretty.
And for the holdouts who think Count decisions will be their salvation, when “reality” is at loggerheads with “legality”, “reality” always wins.
March 29, 2012 at 3:34 pm
CALSTRS DOES NOT HAVE TO BE 100% FUNDED.
These governments exist in perpetuity. Yesterday Fitch released a report comparing each state’s debt and pension liabilities with that state’s wealth base or personal income. For some reason Colorado and six other states were excluded from the survey. Bummer, it would be interesting to see how Colorado compares. (To view a PDF of the report visit Fitch’s website, fitchratings.com, and create a free account.)
But in reading the report one sentence caught my eye:
“Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
In Colorado, our COLA-theft bill, SB 10-001 aims to continue the theft of the contracted COLA benefit from retirees until our Colorado PERA pension reaches a 100% funded ratio. Can you say overreach?
If your mortgage is 80% paid off, you are not in a crisis.
March 29, 2012 at 4:11 pm
The stanford college student report is crap. It has been debunked time and again. Of course less than full funding does not mean it won’t be paid! With a 225 bil. cushion, increased employee payments, employer payments required by law in perpetuity—–and new tiers with LOWER payouts—- the problem will be essentuialy solved……zzzzzzzzzzzzzzzzzzzzzzz yawn
same old drivel out here– the same articles by Ed and the same responses by us! LOL zzzzzzzzzzzzzzzzzzzzzz
March 29, 2012 at 4:20 pm
I don’t think the Stanford report has been debunked. It could be wrong, it could be right, but certainly it is reasonable.
However CalSTRS has been a fairly good actor in the pension game… because of the legislative requirement, its record of contributions has been steady (unlike CalPERS and UCRS, where contributions waved up and down due to false confidence in timing the market). And the Capitol Matrix study showed CalSTRS post-retirement benefits are the lowest… see figure 6C on page 24 of…
Click to access Full_Report.pdf
BTW, along the lines of `debunking’… the Capitol Matrix study failed to do scenarios where people retire at 65 or 67… actually 67 is the preferred assumption in Social Security these days. What they would have seen… DC plans continue to grow but DB plans plateau. So for folks who work to 65 or 67, I’ll bet teachers are just about the same as the private sector.
However, all this endless back and forth on pension funding is really the human response to securities volatility, no more, no less.
March 29, 2012 at 5:45 pm
I disagree with “spension” for several reasons.
1. Promises were made and benefits were earned.
2. The legislature put unworkable handcuffs on proper funding, and need to change the law.
3. The existing thought process for teachers is that they should retire as soon as eligible after “the retirement benefits exceed their take-home pay”, so retiring at 67 is not the norm.
4. The “human response to volatility” should be replaced with the phrase “human response to inflated promises”.
March 29, 2012 at 6:16 pm
Well said Mitchell!
… or the human response to a promise made.
March 29, 2012 at 6:35 pm
Robet Mitchell is living in Civil Servant La LA land (probably next door to Ted Steel).
Earth to Robert Mitchel …La La land doesn’t exist, nor does (nor ever will) the money to pay for the excessive pension & benefit promises. I suggest you plan accordingly.
March 29, 2012 at 6:58 pm
I promise peace in our time, freedom from hunger and want, an end to cloudy days, electricity so cheap you don’t need to meter it, and a cure for cancer and heart disease. Gonna trust my promises? What is your human response?
Did the legislature handcuff proper funding for CalSTRS? Really? In many years contributions to CalSTRS (as a percentage of payroll) exceeded those to CalPERS and especially UCRS.
At 2.4%/year, it takes 42 years to get up to 100% of salary. Capitol Matrix assumed a start date of 27 years old, so… age 69. Now of course when you retire you don’t have to save to the pension fund.. but teachers don’t make SS contributions anyway. So maybe 65. Indeed lots retire earlier, but not because they are increasing their take home pay… more likely teachers are just sick of all the abuse they receive and leave the field.
I think the benefits floated up and nobody believed the green eyeshades numbers guys who said it was all unsustainable in the face of securities fluctuations. Actually CalSTRS is the best actor among California systems, though.
March 29, 2012 at 8:36 pm
spensions– your promises are straw men floating in the metaphorical wind of am talk radio waves intersecting the sleepy rush-like drone of dull-normal repetition.42×2.4=100.8. 65, 67, 87? How long should the people who babysit your corpulent snack adled skilless lop-republichildren work? Use your human response and riddle me that.
Once you have decided, elect a representative to negotiate this or change the law. Until then, your assignment is to type comments and comments and comments sginifying the sound and fury of, well…nothing.
Teddie
March 30, 2012 at 12:33 am
Taxpayers will pay for Calpers miscues. California’s constitution puts public pension benefits ahead of all other forms of state spending, no matter how badly the public employee pension funds perform. Public pension funds aren’t managed by people who have the taxpayers’ interests at heart. Most managers are beholden to public- employee unions; some are themselves public employees more interested in their benefits than their costs.
The point isn’t to punish public sector employees, it’s to stop punishing the taxpayers. Your extravagant salaries and pension benefits are eating up so much of the overall tax-base that government’s chief purpose becomes to reward public employees. Meeting these unsustainable costs comes at the expense of the rest of the state. Parks are closing, classroom size is increasing and public services are in steep decline. The only public sector entity that isn’t suffering are the employees both current and retired.
Public employee compensation should be no better, and no worse, than what is available to other employees in the community.
March 30, 2012 at 2:13 am
Well, Ted, my point is the Capitol Matrix study unfairly stopped at 62, which makes private post-employment benefits look artificially low compared to CalSTRS. If you run employment out to 65 or 67, I think CalSTRS is little different than private, because DC plans keep getting contributions and DB plans plateau.
March 30, 2012 at 8:25 pm
spension– I understand your position.
March 31, 2012 at 3:29 am
Spension, so let’s see …
(A) Public Sector worker’s pension has a lump sum “value” at age 55 (full retirement age) of say $1 Million, but it won’t grow much after that, so at age 67 if still working, it’s still worth $1 Million if they retire then.
(B) Comparable Private Sector worker has penion whose value reaches $1 Million at age 67 (but was probably worth about half of that at age 55).
Please, if you this these 2 situations are even remotely equivalent, you need to re-take finance 101.
March 31, 2012 at 3:51 pm
I didn’t ever say nor imply that those cases are equivalent, remotely, or otherwise.
For nearest to the case you say, teacher retiring at 57 (page 24 of the Capitol Matrix Study), the present value of the teachers post employment benefits is not $1 million, but about $530,000. The present value of the comparable private sector post employment benefits s not 1/2 of $530,000, which would be $265,000, but is instead $380,000.
By age 62, the teacher’s present value is $620,000, and that in the private sector is $500,000. I think the gap might disappear by age 67. That’s all.
I’m not saying it is fair for a private sector employee to have to work to age 67.
However, for a given rate of contribution, DB systems are more efficient and less wasteful than DC systems. Had the private sector used a DB, then their system might be identical to the CalSTRS present value.
And of course CalPERS and Safety still get way more benefits than teachers.
March 31, 2012 at 4:03 pm
Spension, what you are not factoring into your discussion is that the cost of the rich benefits provided by Public Sector DB Plans is way more than Private companies are willing to spend (nor can most afford to do so w/o going bankrupt). The risk levels are also unacceptable as is the impact of required (often rapidly changing) contributions on corp. earnings.
April 1, 2012 at 4:13 pm
…and of course Love what you continue to fail to take into account is that these pensions have provided good quality of life for thousands into old age and that they work with modifications. Modifications are constant. Spension is correct that waste in a DC is a hallmark.
April 1, 2012 at 5:22 pm
Teddy, “Modifications” can be big or small (in financial impact … e.g., impacting current, or just new workers). In 99+% of the cases all we’re see are the SMALL ones.
Taxpayers need the 99+% to shift to the BIG “modifications”.
And as for the ..”good quality of life for thousands into old age”,
it sure has, for Public Sector workers, to the detriment of the Taxpayers whose contributions (and the investment earnings thereon) pay for 80-90% of it.
April 1, 2012 at 5:31 pm
love— WRONG—– (again)– in all cases so called taxpayers, (everyone) have also reaped the benefits of living in a society with good roads, hospitals, libraries, protection, sanitation, on and on and on. Yes we all pay for it. I think it’s worth it.
You might try Somalia, I hear the taxes are non existent.
99 plus percent small mods? Hmmmmm sounds like hyperbole to me little buddy.
April 1, 2012 at 6:54 pm
Teddy, Yes, we all do benefit, and yes Public Sector workers ARE taxpayers too.
But you guys take (yes “take”) more than your fair share, and for each incremental $1 in taxes paid by Public Sector workers, the Public Sector workers get about $5 back …. mostly going to fund their excessive pensions. Sure is a lousy deal for non-Civil-servant Taxpayers.
SIGNIFICANT change is coming … whether you like it or not.
April 1, 2012 at 11:07 pm
love— Change is the one constant little buddy. That’s life. I welcome it.
April 1, 2012 at 11:48 pm
Teddy, If your not that old (in which case you might escape them), I doubt that you will welcome the changes that are certainly coming.
April 2, 2012 at 12:16 am
Well, for sure public safety and Calpers State workers get better post-employment benefits than the typical private sector worker.
However, at the top of the heap in the private sector, golden parachutes and $1-million/year pensions are frequent… way, way richer than even the high end of the public sector pensions in California. Even the guys in Bell, etc don’t get what the top of the heap in the private sector get.
And what do the top of the private sector do to get their huge pensions: they send American jobs to FoxConn in China, where workers work 120 hours a week, get payed $0.80/hour, and are booted out on their butts when their bodies are mangled by machines.
The top of the US private sector doesn’t care that Chinese can’t vote in their own country, or are arrested and subject to torture in Chinese Jails for the least criticism of their government.
The message is clear: if you love communism and torture you can get a $1 million pension in the US private sector, while you cynically subsidize superPacs that do everything imaginable (like defend the pederasty in the Catholic Church) to suppress average Americans and create a Chinese-like government here.
Well, or, you can be a financial swindler on Wall Street.
I’m not defending the public sector pensions above about $100K/year which are too much. But anybody who says the private sector in the US is a modicum of virtue is sadly mistaken.
April 2, 2012 at 12:38 am
Spension,Trying to explain away the excessive pensions (expressed as a % of pay) that virtually ALL Civil Servants get by comparing them to the perks and pensions of the captains of industry (instead of comparable middle class Taxpayers) is absurd … and I think you know it.
Consumers have a choice when in comes to a corporation’s products. Perks and pensions too big will be reflected in their expenses and ultimately make their products unattractively priced and consumers will buy from a competitor. CEO’s richly rewarded are so rewarded because they bring great value to the Corporation’s bottom line.
Public Sector service providers are a monopoly. We cannot choose our police or DPW or Library services … and the taxes to pay for it are forcibly collected under threat of law (or property confiscation).
April 2, 2012 at 12:44 am
Oh goodness what twaddle… somehow arguing that US Corporations bring great value to anybody. They are swindlers who export jobs to China, hate america, and lawyer up to defend their soulless anti-american exploitation, for the most part.
April 2, 2012 at 12:57 am
Spension, If you don’t like Capitalism …. MOVE.
April 2, 2012 at 2:11 am
US Corporations that got $25 trillion in the 2008 taxpayer bailout are… Capitalism? Think again, Tough Love. That is state subsidized cronyism.
US Corporations ***LOVE*** communist China. US Corporations hate capitalism, and they pay to brainwash and misrepresent how they have hijacked the US economy.
Sorry, Tough Love, they’ve got you brainwashed.
Not that I agree with the folks who have exploited our government for oversized pensions either. But all the unions and public sector employees learned their tricks for exploitation right from the lying US Corporations.
Uh… how much tax did GE pay in 2009? Uh… not one red cent? And how many billions in subsidies does Big Oil get? Not capitalism, no way, no how.
April 2, 2012 at 2:23 am
Put the diversion aside for a moment……….
With cash pay no less than their Private Sector counterparts, WHAT justifies Public Sector pensions (as a % of pay) ROUTINELY 2, 4 (even 6 times for safety workers) greater than their private sector coiunterparts retiring with the SAME pay, the SAME years of service, and the SAME age at retirement … and it’s true whether the resulting pension is $250K, $100K, $75K, $50K, or $25K.
April 2, 2012 at 3:29 am
lovey— you know nothing about me–lol— change is THE only constant in the material world– I embrace it—
April 2, 2012 at 3:44 am
I love this guys like little lovey who ask the question….is the pay we give to the help “justified”?– after they have bargained for it and received the work! Meet the new Republican party! What a shame.
April 2, 2012 at 3:50 am
Teddy, It’s not the pay, it’s the excessive, unnecessary, PENSIONS & BENEFITS that are the problem ….. and must be eliminated or significantly reduced for CURRENT workers.
April 2, 2012 at 5:40 am
Tough Love, this thread is actually about CalSTRS and teachers. Teachers in California do not get the outsized post employment benefits you are claiming. A bit higher than the private PEB, but not by much.
I’m not forgetting the $25 Trillion in taxpayer funds the so-called capitalist industries of the US got in the 2008 bailout. Never. Tough Love, you are totally brainwashed if you think private corporations are anything but 10X as corrupt as the public sector. And yes, the public sector ain’t great.
April 2, 2012 at 7:39 am
Spension, While CalSTIRS pensions are often less than CalPERS, they are still AT LEAST twice that of the comparable Private Sector workers retiring with the SAME pay, the SAME years of service, and the SAME age at retirement.
With no less pay, there is simple ZERO justification for this .
Diverting attention to the misdeed of the Private Sector CEOs in no way makes this acceptable, necessary, or fair to Taxpayers.
April 2, 2012 at 2:23 pm
Tough Love, the Capitol Matrix Study
Click to access Full_Report.pdf
at age 62, the teacher’s present value of PEB is $620,000, and that in the private sector is $500,000. As far as I know, apples-to-apples.
In the generally accepted mathematics used on Earh, $620,000 is not twice as great as $500,000.
Tough Love, you also think the US is a capitalist country in spite of overwhelming evidence that business interest subvert the distribution of taxpayer dollars and tax breaks to themselves. That is where the public sector learned how to do it.
The only group consistently screwed are fair and honest people who try do to the right thing.
And remember the recent price tag: $25 Trillion of taxpayer $ to the private sector (at least) in the 2008 bailout.
April 2, 2012 at 2:31 pm
lovey you still don’t get it. The benefits are the compensation. You are a modern republican. Your word is no good. You promised the compensation for the work, let the employees do the work– now you want the money back. What a shame for you.
April 2, 2012 at 4:10 pm
Spension, the Capitol Matrix Study is 136 pages and I cannot find the #s you are quoting. Can you provide the page(s) so I can see the surrounding context?
April 2, 2012 at 4:59 pm
Chart bottom page 24.
April 2, 2012 at 5:35 pm
TL is the one who doesn’t like capitalism. He wants every worker, in every sector, to make the same amount of money–that’s socialism.
April 2, 2012 at 6:00 pm
Spension,
First, I (incorrectly) was not focusing on CalSTIRS (but on CalPERS and other pension Plans in CA). Clearly the CalSTIRS pensions are smaller and with MUCH less Retiree healthcare benefits…. but still better than Private Sector pensions.
Perhaps I missed some details, but the CA Private Sector total gets close to the “school Teacher” #s primarily via the Private Sector SS and DC elements. While I do think I saw somewhere in the report (but not here) that the DC #3s are only for the portion from the employer match, that’s important because if the DC element includes the contributions and growth from the employee’s own contributions, the comparison with the “school Teacher” #s would not be apples-to-apples. Similarly it’s not clear if the SS element includes the portion from the employees own contributions … as including such leads to the same problem.
And a question, is the $45k teacher salary after 25 years at age 62 realistic … sounds way too low. A higher salary would lncrease the column differences (due to a smaller growth in SS as pay increases).
Basically, (subject to the questions above) what I been saying all along that ….
“Public Sector pensions (as a % of pay) ROUTINELY 2, 4 (even 6 times for safety workers) greater than their private sector coiunterparts retiring with the SAME pay, the SAME years of service, and the SAME age at retirement … and it’s true whether the resulting pension is $250K, $100K, $75K, $50K, or $25K.”
….. Is accurate for all but CalSTIRS, being higher than Private Sector Pensions for CalSTIRS, but considerably less higher than for CA other pension Plans.
April 2, 2012 at 6:02 pm
Seesaw,
No I don’t. I just do find it unnecessary to overcompensate Public Sector workers (primarily via excessive pensions & benefits).
April 2, 2012 at 9:57 pm
There are copious appendices that describe the details.
$45K is the *starting salary at age 27*… the appendices describe a standard rise up the salary ladder by age 62.
Page 60 describes… Teachers contribute 6% or 8% to their pensions depending on the year/calendar period. Not sure that is subtracted from the present value…
Not sure how SS is handled…
April 3, 2012 at 5:08 am
After re-reading the Capital Matrix study, I think only the value of the post employment benefit is computed, with no accounting whatsoever of who funded it. So for teachers, they contribute 6-8%… for those with OASDI contribute 6.2% or so until lately.
But in any case, CalSTRS benefits are not greatly outsized with respect to the private sector.
April 3, 2012 at 5:30 am
Spension, …..which leaves us with the greatly outsized CalPERS State and Local Plans and WORSE, the safety officer’s Plans.
So might you possibly be agreeing with me that the accrual rate THOSE Plans need to be significantly be reduced …for future service accruals for CURRENT workers ? No point in unjustifiably digging this hole even deeper.
April 3, 2012 at 6:17 am
Hey… I’ve always agreed the Calpers and Safety Pensions exceeded the amount saved (or planned to save) for them.
I don’t agree that the origin of the excess is undue graft, collusion, crime. I just think that all organizations are set up to push for `more’ for their members, and that innumeracy in the pension actuaries allowed excess demands to be implemented through bad advice to just about everyone.
Public sector unions lobby for more pensions. Private sector business groups argue for tax breaks and bailouts. It is all indiscriminate feeding at the public trough. There are no heroes here.
Well, except, teachers aren’t the worst. And in my experience, about 4 out of 5 teachers are pretty darned good. And they put up, day in, day out, with a lot of unnecessary crud.
Now I’ve always said the only way out is voluntary pension reductions by current retirees and employees. Fat chance, everyone says. But after they refuse, I’ve always argued for Sovereign Default to restructure state finances.
My only point has been… state bondholders, creditors, etc… are no less worthy of a haircut than pensioners. Carve the same overall percentage out of everybody, but in pensions, protect the first $30K/year, cut a little of the next $30K/y, and by $120K/y get down to a penny on the dollar.
April 3, 2012 at 6:30 am
Spension, We’re now a lot closer. I’d just drop your $120K cutoff (where you suggest above which they get 1 penny on the $1) to $75K, as VERY few Private Sector workers get $75K….. and especially since $75K WITH COLA increases is roughly equivalent to $100K w/o COLA increases, and NO Private Sector Plans get automatic annual COLA increases.
FYI, in most states, the teachers get the same excessively generous pensions as other non-safety workers …. where reductions ARE appropriate. CA seems unique in giving ONLY teachers quite a bit less than other Public Sector workers.
April 3, 2012 at 7:42 am
Yup, odd historical twist of fate for CalSTRS, that its contribution system needs special legislative approval to change, and perhaps, that made them conservative with handing out benefits too.
COLAs would be OK if they were properly planned for. For a DC plan, that is why the usual advice is to keep the initial withdrawal rate at 4%, even though the expected return rate is rather higher than 4%… the difference is a combination of COLA and staying cautious in case there is a rare serious downturn, like 2008.
And someone getting surviving on $30K a year needs some COLA… that is down in Social Security range, where the COLA does makes sense. But someone making $100K a year in retirement doesn’t really need the same COLA protection.
April 3, 2012 at 11:15 pm
Calstrs also provides $400 per month, $4,800 per year, as a longevity bonus for employees with 25 years in they system. That adds to the 2@60, or 2.4@63, payout.
From 2001 to 2011 employees contributed 6% toward their pension.
April 3, 2012 at 11:55 pm
CAptain, thatks for the specifics.
Spension, Only Public Sector Plans INCREASE the % per year of service at certain higher ages … as this is VERY costly.
And 2.4% at 63 (with COLA no doubt) is grossly excessive.
April 4, 2012 at 5:01 am
Only Public Sector Plans? Gosh those golden parachutes for private sector executives get neglected so darned easily. I could go along with `Most public sector plans and private sector executive retirement arrangements are excessive’.
No way I can be convinced the private sector executives in the US `earn’ it. Their compensation exceeds, on average, that of German executives… and did anyone notice the German economy has done quite well? Even after absorbing East Germany?
In the US the private sector enjoys massive bailouts, like $25 Trillion during the 2008 banking crisis. Don’t try to tell me we use a capitalist system.
April 4, 2012 at 7:20 am
Spension,
Again, trying to justify excess granted to middle class Publlc Sector workers against Private sector CEO;s and the like ?
Diversion form the issue?
No, the comparison should be against the PRIVATE Sector middle class. But if you did THAT, it would be VERY clear how excess these Public Sector pensions are, and that’s not what you want to hear.
April 4, 2012 at 2:49 pm
love– wrong again— if you can beat the dull mantra that public pensions are excessive as you do…spension’s point that bailouts (and subsidies)fuel private sector profit is well taken! This is where you republicans lose most of America.
April 4, 2012 at 2:55 pm
Teddy. I figured that you’d be back …. you just can’t stand the truth … that that your promised pensions like will be substantially hair-cutted.
April 4, 2012 at 6:40 pm
The connection is: the greed and raiding of public funds by the very private sector that hypocritically claims it is capitalist inflames public sector unions to be just as greedy and hypocritical.
If you see the CEOs of failing US companies getting taxpayer-underwritten bonuses, you want some of the same $. And maybe you organize unions and lobbying groups to do just what the private sector is doing, which is, hiring lobbyists and influencers to get your way. Don’t just focus on the unions; the greed and robbing of the public treasury is *everywhere* in the US.
Except the smaller the business the more honest it tends to get. I think the same is true of government structures… fewer people in the city or special district, the more honest… on average anyway.
April 4, 2012 at 10:31 pm
Lovey– When? Any prediction you’d be bold enough to make little fella?
April 5, 2012 at 12:21 am
Quoting Spension …”The connection is: the greed and raiding of public funds by the very private sector that hypocritically claims it is capitalist inflames public sector unions to be just as greedy and hypocritical.”
Except that it’s WIDESPREAD middle class Greed from the Public Unions and workers …v s….. Privater Sector greed from a few a the top of the heap (NOT the middle class messes).
You are comparing Apples to Oranges … a POOR attempt to justify the widespread Public Sector greed. Sorry, NO SALE …. Public Sections must be halved for non-safety, and bigger reductions for safety workers.
April 5, 2012 at 4:32 am
According to this article, the debt totaled up for all US status is $4 trillion or so.
http://www.cnbc.com/id/45019599/US_States_Are_Facing_Total_Debt_of_Over_4_Trillion
and in the financial meltdown of 2008, the US government taxpayer tab was $25 trillion.
Sorry, the greed of Wall Street and the private sector dwarfs that of the public sector unions. By at least a factor of 6. Actually more, because the state debt is not 100% pension… all the bonds, for example.
April 6, 2012 at 4:29 am
You guys make things too complicated. Please remember the purpose of unions is to insure their people are treated FAIR. Fair means comparable to those in the private sector who pay the union members’ compensation. If there is an imbalance, it should be adjusted until fairness is achieved. What is so complicated?
April 6, 2012 at 4:50 pm
What is so hard to understand that public employees pay the compensation ofr private sector workers, by purchasing the products/services that those workers or their employers sell. I find it hard to understand those who insist on continuing to ride the bandwagon of disdain toward public workers who provide services used by the public every day.