Image-sensitive CalPERS has down week in media

Last week was not a good one for CalPERS, which carefully tracks mentions of the giant pension system in the media and gives each story a rating of positive, neutral or negative.

Wednesday, Gov. Brown said CalPERS adopted regulations that undermine the anti-spiking provisions for new hires in his pension reform. He directed his staff to determine what actions can be taken to protect the legislation enacted two years ago.

Thursday, the state Fair Practices Political Commission rejected a proposed $1,000 fine for CalPERS board member Priya Mathur, suggesting a $4,000 fine for a serial offender who has repeatedly failed to file campaign funding reports.

A major CalPERS increase in employer costs is under way for several reasons, including big investment losses during the recession. But for a decade, CalPERS has been under fire from critics, who say it’s an “unsustainable” drain on government services.

Former Gov. Arnold Schwarzenegger briefly backed a proposal early in 2005 to switch all new state and local government hires to 401(k)-style individual investment plans, which avoid long-term government debt but switch investment risk to employees.

Schwarzenegger dropped the proposal after being hit with a union-backed statewide television campaign attacking him and the proposal, one of the first setbacks of his administration. But for CalPERS the threat remains.

A statewide poll issued last January by the nonpartisan Public Policy Institute of California found, as in previous polls, strong support for switching new government hires to a 401(k) plan, 73 percent of likely voters with majorities in both parties.

The question about switching to a 401(k) plan was preceded by another question about whether public pensions are a state and local government budget problem, getting even stronger support, 85 percent of likely voters.

Beyond cost, another potential problem for CalPERS, a fiduciary entrusted with protecting member benefits, is the issue of inequality. The private sector continues to switch to 401(k) plans, which critics say are risky for retirees and often inadequate.

Some don’t even have 401(k) plans. A Federal Reserve report issued early this month said “one in five people who are near retirement have zero money saved,” the Washington Post reported.

The California Public Employees Retirement System is a rare state agency that faces a continuing cloud over its existence. While working to improve services and control costs, CalPERS keeps an eye on movement that, one way or another, might begin to phase it out.

So, it’s probably no surprise that in an annual report on the CalPERS five-year strategic plan issued this month, two of the three listed goals mention “sustainability” in addition to cultivating a high-performing organization.

The report shows progress. Investments earned 18.4 percent last fiscal year, well above the 7.5 percent target. The funding level, after dropping to 61 percent in 2009, is now about 76 percent of the projected assets needed to pay promised pensions.

A small section on “our perception in the media” at the end of the annual report summarizes the monthly media reports to the board last fiscal year. Negative mentions were 13 percent of the total, down “significantly” from the previous year.

Mentions

The governor objected to a CalPERS board decision, made last April and then put out for public comment before adoption last week, that allows temporary pay for short-term promotions to boost pensions.

“This disregards the rule that pensions will be based on normal monthly pay and not on short term, ad hoc pay increases,” Brown said in a letter to CalPERS about clarifying pay used to calculate pensions for new hires under his reform.

His aides said short-term promotions can be used to “spike” or improperly increase pensions. Unions argued that pensions are part of pay and some short-term promotions last a full year, the period often used to calculate pay for pensions.

The reform bill caps pensions earned by employees hired after Jan. 1 last year at the maximum wage taxed for Social Security ($117,000 this year) for members of CalPERS, the California State Teachers Retirement System and 20 county systems.

Some current annual pensions are far above the Social Security limit. Topping a pension reform group’s $100,000 club are a $371,000 CalPERS pension for a Solano County retiree and a $302,000 CalSTRS pensions for a Modesto elementary retiree.

Brown did not object to the CalPERS regulation allowing nearly 100 “extra pay” items to count toward pensions, many that sound like routine or marginal work. Much of the media criticism of the CalPERS regulations has focused on the extra pay items.

In the governor’s view, the extra pay items apparently were covered by the negotiated agreement on the reform bill, AB 340 in 2012. The pay items are part of “normal monthly pay” and are set by government employers, not CalPERS.

Mathur, elected to the CalPERS board in 2002, was fined $6,000 by the FPPC in 2006 for failing to file required campaign reports and a total of $7,000 in 2010 for similar offenses.

She was accused of ignoring repeated attempts by the FPPC to talk to her. The CalPERS board censured Mathur in 2010, temporarily removing her from the chairmanship of the health benefits committee and suspending her travel privileges.

“I feel we may be going in the wrong direction here,” Jodi Remke, the FPPC chairwoman, said last week. Remke noted the lower proposed fine, $1,000, and “numerous” staff attempts to get Mathur to file four missing reports for a two-year period.

Staff was told to come back with a higher fine, perhaps $1,000 for each count. Mathur had “zero activity” to report, said Gary Winuk, the FPPC enforcement chief, when a board member asked about the rationale for a $1,000 fine.

Mathur holds one of the six seats on the 13-member board filled in elections by active and retired CalPERS members. She has the support of two big unions, SEIU and AFSCME, but faces a challenge from Leyne Milstein, Sacramento finance director.

Milstein displayed her pension knowledge with a detailed presentation to the CalPERS board last January of the impact on Sacramento of a longevity rate hike, $12.2 million over five years, the equivalent of 102 full-time positions.

Mathur challenged the accuracy of Milstein’s candidate statement: “With recent CalPERS board decisions resulting in what could easily be 55 percent increases or greater in pension costs for more than 400 participating local agencies over the next six years …”

After reviewing a 367-page submission from Mathur and a 50-page document from Milstein, an administrative law judge, Jonathan Lew, ruled on July 29 that Milstein’s statement is not misleading.

“Candidate has provided substantial documentation based upon CalPERS published information, for her assertion …,” Lew said.

Three candidates are running for an open CalPERS board seat: Theresa Taylor, David Miller and Igbal Badwalz. The largest state worker union, SEIU Local 1000, is spending $180,000 on radio and online ads for Taylor, the Sacramento Bee reported last week.

The League of Women Voters is sponsoring a candidate forum from 5 to 6:30 p.m. Sept. 16 in the CalPERS auditorium, 400 P St.

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 25 Aug 14

10 Responses to “Image-sensitive CalPERS has down week in media”

  1. spension Says:

    The problem with 401(k)s are that the fees are huge, and can be arbitrarily increased by the banking industry at any time. Read about Shankar Iyer’s experience…

    http://www.nytimes.com/2014/02/02/business/a-long-fight-to-get-what-was-theirs-in-a-401-k.html

    Many, many private and public entities have run their DB plans, which are cheaper and safer, in the US for decades without the problems California has had.

    In California the benefits got way too high and magical thinking was used to keep contributions low. The CalPERS, CalSTRS, and UCRS decision makers were innumerate.

    A real solution is to cut back benefits in the DB plans. As far as I know that could only be done voluntarily by the pensioners and vested employees, or by Sovereign Default. Maybe the threat to the horrendous 401(k) option is just a cudgel to push folks to the voluntary option.

  2. Captain Says:

    spension Says: “Many, many private and public entities have run their DB plans, which are cheaper and safer, in the US for decades without the problems California has had.

    In California the benefits got way too high and magical thinking was used to keep contributions low. The CalPERS, CalSTRS, and UCRS decision makers were innumerate.”

    – Innumerate? According to the definition: unable to do arithmetic: lacking a basic knowledge of mathematics and unable to use numbers in calculation

    I don’t think CalPERS fits that description. The majority of the members on the Board of Administration may fit the description, but CalPERS has too many actuaries on staff for your comments to make sense. If anything CalPERS actuaries used their inside information to provide CalPERS Board of Administration Members the cover needed to fudge, screw, distort, outright lie, and bamboozle their customers – the Cities/Counties/Taxpayers/Special Districts.

    The Actuaries probably even knew CalPERS claims regarding SB 400 were fraudulent, as did CalPERS Staff, and yet the calPERS Board was lying way back then. CalPERS knew the math! Their actuaries came up with a scenario that kept rates artificially low by creating a 15-30 year smoothing policy the industry had never seen- and hofefully will never see again. They created/originated even more Wall-Street style shenanigans to further hide their ineptitude.

    Where we agree is here, Spension: In California the benefits got way too high and magical thinking was used to keep contributions low.

    And that is where the corruption comes in to play. CalPERS is CORRUPT!

  3. Captain Says:

    “Image-sensitive CalPERS has down week in media

    Last week was not a good one for CalPERS, which carefully tracks mentions of the giant pension system in the media and gives each story a rating of positive, neutral or negative.

    A small section on “our perception in the media” at the end of the annual report summarizes the monthly media reports to the board last fiscal year. Negative mentions were 13 percent of the total, down “significantly” from the previous year (and positive mentions were 14%).”

    – I’m guessing the recent actions of the CORRUPT CalPERS Board have sent the positive numbers spiraling downward while the negative numbers are shooting through the roof. If CalPERS were to track article comments maybe they would have a better understanding – better than clueless anyway, of how many people think they’re crooks.

    But- if the CalPERS Board of Administration doesn’t give a hoot what our Governor thinks, I doubt the CalPERS Board of Administration will show any concern toward the taxpayers whom will be required to pay even more-more to live in California – or care what I think. The Unions that control CalPERS seems to think they run the state – and maybe they do.

    Maybe we’re Jersey but just don’t know it yet.

  4. spension Says:

    I don’t think the actuaries in CalPERS are the decision makers.

    I think the decision makers used magical thinking. The slide into magical thinking certainly was aided by the fact that CalPERS can dictate contribution rates, unlike CalSTRS & UCRS, which went found alternate roads to perdition.

  5. SeeSaw Says:

    The BOA is the decision maker for CalPERS.

  6. K. Purty Says:

    Had a bad week?
    No– pretty good i’d say.

  7. Captain Says:

    “SeeSaw Says:
    August 27, 2014 at 11:44 pm
    The BOA is the decision maker for CalPERS.”

    – And that is the biggest problem with this CORRUPT organization. Most of these CalPERS Board Of Administration members are PUBLIC EMPLOYEE UNION MEMBERS that have been elected by the unions. They get their marching orders from the unions. And they make decisions/vote in accordance with what BENEFITS their members the most – while making decisions based on their CORRUPT assumption they can stick the taxpayers with the bill, dollar for dollar, for every buck they suck out of their own pension plan.

    In the CalPERS/CalPERS BOA minds, as long as they believe they can keep on raising taxpayer rates they have nothing to lose. They believe they can starve taxpayer services requiring them/us to approve additional taxes if we taxpayers want good service.

    The CalPERS BOA, and CalPERS in general, run by the Public Employee Unions, have absolutely no shame while considering the taxpayers just an obstacle easily manipulated with catch-phrases suc as: “It’s All About the Children”, “Your Safety Depends on It”, “Tough on Crime”, “We Run Into Burning Buildings While Everyone Runs the Other way, “We save Lives – The Next Could Be Yours”.

    In the meantime California residents are paying more & more, for less & Less, while CalPERS and the Unions steal more & more of our tax dollars, driving many cities into bankruptcy, with many more cities and even School districts in the on-deck circle.

  8. Mike Says:

    My daughter worked a summer town job as a parks counselor. She had to take a paycheck deduction to contribute to town employees retirement fund. Hey, SeeSaw, since you have remorse about taking other people’s assets to feather your nest, give us your information, and she will name you as beneficiary.. Sweet for you. Dignity, what is that?

  9. SeeSaw Says:

    I have not taken a dime from you or anyone else, Mike. I have plenty of dignity and need nobody to name me as a beneficiary of anything. Hopefully your daughter has more class than you. Go have a little cheese with that whine.

    Captain is as ridiculous as usual. I don’t think that three of 13 constitutes “most” of a group, does it Captain. As for the elections of the BOA, you have absolutely no clue about public employees. They could care less who gets elected to the CalPERS BOA and 3/4 of them will not even vote in those elections.

    So Captain, sit down and drip a few more tears into your beer. Worry about yourself and your family. Are you all safe and well? That is what is important–public employees have no part in that, one way or another.

  10. Mike Says:

    We all get our appropriate returns, based on our lives on this earth. Enjoy, All.

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