News

City to oppose pension-initiative lawsuit

Menlo Park's city attorney will file an opposing argument to the legal challenge by two public employee unions of the citizen-driven pension reform initiative, and will ask the court to allow the initiative to remain on the November ballot.

City Attorney Bill McClure was given the instruction to proceed with the court filing by a unanimous vote of the City Council during a July 13 closed-session meeting, he reported after the meeting.

The unions, AFSCME Local 829 and SEIU Local 521, and resident Katy Rose filed the lawsuit on June 23, challenging the legality of the initiative. The lawsuit names the city of Menlo Park and resident Ned Moritz, treasurer of Citizens for Fair and Responsible Pension Reform, the group that gathered some 3,100 signatures to qualify the initiative for the ballot.

The initiative would increase the retirement age for new, non-police employees from 55 to 60 years of age, and would also decrease the pension payments those employees receive.

The lawsuit asserts that the pension reform initiative violates Article XI, section 7, of the state Constitution; and provisions of the Meyers-Milias-Brown Act. It asks the court to decide the issue, and keep the measure off the ballot if it agrees that it's illegal.

Comments

Posted by willows parent, a resident of Menlo Park: The Willows
on Jul 14, 2010 at 12:10 pm

For reference:

CALIFORNIA CONSTITUTION
ARTICLE 11 LOCAL GOVERNMENT

SEC. 7. A county or city may make and enforce within its limits all
local, police, sanitary, and other ordinances and regulations not in
conflict with general laws.

SEC. 7.5. (a) A city or county measure proposed by the legislative
body of a city, charter city, county, or charter county and submitted
to the voters for approval may not do either of the following:
(1) Include or exclude any part of the city, charter city, county,
or charter county from the application or effect of its provisions
based upon approval or disapproval of the city or county measure, or
based upon the casting of a specified percentage of votes in favor of
the measure, by the electors of the city, charter city, county,
charter county, or any part thereof.
(2) Contain alternative or cumulative provisions wherein one or
more of those provisions would become law depending upon the casting
of a specified percentage of votes for or against the measure.
(b) "City or county measure," as used in this section, means an
advisory question, proposed charter or charter amendment, ordinance,
proposition for the issuance of bonds, or other question or
proposition submitted to the voters of a city, or to the voters of a
county at an election held throughout an entire single county.


Posted by fie upon you!, a resident of Menlo Park: Central Menlo Park
on Jul 14, 2010 at 12:57 pm


It was the right thing to do. Fie upon the Almanac for valuing democracy so little as to advise the city not to defend the right to vote! The particulars of the petition are not what's at stake, it's the citizen's petition process that was imperiled.


Posted by Ranch Gal, a resident of Atherton: West Atherton
on Jul 14, 2010 at 2:59 pm

In my opinion, RETIREMENT age should be at 65. These government SEIU workers and others have a cushy over the top pension plan that is bankrupting our cities, counties and states. Who gets a 90% salary of their last year worked (including overtime too!) if they worked for the government 30 years anywhere in the private sector? Who??? I don't blame the workers as much as I blame our city councils, our county stupidvisors, our state congress and senate for GIVING the unions these pensions years ago. Now the piper must be paid. Put it on the ballot. We are a democracy and LET THE PEOPLE SPEAK!!!


Posted by Roy Thiele-Sardiña, a resident of Menlo Park: Central Menlo Park
on Jul 14, 2010 at 4:31 pm

We are overjoyed that the city will be defending this vile attempt at usurping our citizens right to a ballot measure.

We hope to be working together on the defense of this lawsuit and will continue to work tirelessly on this legal issue.

Thanks for all your support
Roy Thiele-Sardiña


Posted by Fiscally Responsible, a resident of Menlo Park: Fair Oaks
on Jul 17, 2010 at 11:35 pm


Does anyone know how the voting went? It's not in the story. I'd like to know who voted to defend the petition and who voted against. It will help me decide in November.


Posted by Info, a resident of Menlo Park: other
on Jul 18, 2010 at 8:49 am

"Fiscally Responsible" - the CC vote was unanimous.

This New York Times article may be of interest:
Web Link
Jeff Adachi in San Francisco is taking what may be an even more aggressive approach to increase employee contributions to their pensions.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 18, 2010 at 9:46 pm

Daniel Borenstein: Oakland faces a recipe for fiscal disaster

By Daniel Borenstein
Staff columnist
Posted: 07/18/2010 12:01:00 AM PDT
Updated: 07/18/2010 11:21:21 AM PDT

IF YOU think Oakland city finances are bad now, you haven't seen anything yet. Although city officials laid off more than 10 percent of their police force last week to wipe out much of a $31 million budget deficit this fiscal year, they face a much bigger problem that has barely been mentioned.
Simply put, the city faces a financial time bomb, fueled by at least $2 billion of unfunded liabilities for employee pensions and retiree health care costs.
That's an amount equal to about five times the annual general fund budget. It's the result of unrealistically generous benefit promises to workers, the city's failure to adequately fund the benefits, and the financial downturn's erosion of money that was set aside.
Little wonder that, as city officials last week sought pension contributions from the police union, they could ill-afford to promise there wouldn't be layoffs in the future.
The city's looming debt means that more belt-tightening is a necessary, but not sufficient, step to avoid a total fiscal meltdown. In essence, city officials are struggling to figure out how to make the short-term credit card payments while saying little about the ballooning mortgage.
To be sure, the short-term problem is huge. For the current 2010-11 fiscal year, before the police layoffs, the roughly $400 million in general fund revenues would have been short $31 million. By 2013-14, the annual shortfall would have increased to $66 million. That alone was reason to reject the officers' demand for job security. When public safety accounts for 72 percent of the general fund budget, there's no solution that avoids police cuts.
Cheryl Taylor, the city's Budget Office director, warned in a recent memo that "the severity of the city's fiscal crisis is unprecedented." In the past four years, general fund reserves have been almost exhausted. Real estate transfer taxes have plummeted. Spending and programs have already been cut drastically. "The city's back-office functions — finance, human resources, legal counsel — have virtually been gutted, diminishing oversight of the city operations," Taylor writes.
But, while the work force paid out of the general fund has been cut by 12.5 percent, personnel costs have declined less than 3 percent. The reason: Salary increases for police and firefighters along with rising payments for health care and retirement benefits have offset most of the savings from layoffs.
That's why City Council members were asking police, the only city workers who pay nothing toward their retirement, to start making pension contributions. And that's part of the reason why council members are considering a November parcel tax measure that would raise another $360 a year from each house-owner in the city.
To get some idea of the magnitude of employee benefit costs, consider this: For every dollar Oakland spends on city workers' salaries, it pays another 62 cents for health care, pension and other benefits. By fiscal year 2014-15, that's projected to grow to 77 cents.
In that, police have the most expensive pensions. For every dollar the city currently spends on an officer's salary, it spends an additional 37 cents on his pension. Don't blame that on the downturn in the economy. The rate has been roughly the same for the past seven years. Most of the investment losses of the past couple of years have not been built into the city's pension payments. Those increases are yet to come.
Rather, blame the lucrative pension benefits that Oakland and most other law enforcement agencies across the state began offering their officers about eight to 10 years ago.
The benefits are based on a pension formula that grants an officer a pension equal to 3 percent of his final salary for every year of work as early as age 50. Thus, a 30-year veteran can collect 90 percent of his salary. It's a benefit unmatched in the private sector, and in most of the public sector, too.
For those reasons alone, city leaders were correct to insist that officers contribute to their pensions and were unable to offer any long-term job guarantees in return.
Such promises would have been fiscally irresponsible based on the budget forecasts of the next few years.
If only that were the extent of the problem.
Unfortunately, it's much worse than that. The city faces huge long-term debt because of the unfunded costs of employee retirement benefits.
The city has three major debt obligations stemming from employee retirement benefits:
First, the California Public Employees' Retirement System administers the city's pension program for employees hired after August 1970 and police and firefighters hired after June 1976. As of June 30, 2009, because of investment losses, the city's pension plan with CalPERS was about $1.3 billion short. It was only about 57 percent funded, meaning that it had barely half the assets it should to pay current and future retirees.
As a result, CalPERS will require the city to make greater pension payments in the future to make up for the shortfall. Unfortunately, even those payments will not be adequate. That's because CalPERS uses overly optimistic assumptions about investment returns. And it is allowing cities to take up to 30 years to replenish the money lost during the past two, thereby unreasonably adding financing costs and pushing the burden onto future generations.
Second, the Oakland Police and Fire Retirement System administers the pensions of public safety employees and retirees hired prior to July 1976. The system is supposed to be funded by a special annual city property tax assessment of 0.1575 percent. That works out to $788 a year for the owner of a $500,000 house. But the property tax revenue hasn't been enough. As of July 1, 2009, that system was $435 million short, with only 44 percent of the funds it should have.
That's despite the 1997 city-issued bonds that were supposed to cover the system through June 30, 2011. The bonds were to be repaid by 2023 from the property tax revenues. But, with the pension system underfunded, the city will need to start making annual payments of $44 million to make up the shortfall.
Rather than use general fund money to make those payments next year, the city is looking to issue more bonds and repay them primarily with property tax revenues collected more than a decade from now. Like the bond issue of 1997, this would be another horrible example of pushing debt obligations into the future.
Third, there's the city's promise to its employees that it would pay part or all of their health insurance premiums when they retire. It's like a pension, a promised benefit in retirement for which the city should be setting aside money now. The problem is that the city hasn't been setting aside money. It's been merely covering the health premium payments of retirees as they come due.
With an increasing number of retirees, stagnant or declining tax revenues and increasing health costs, that's a recipe for disaster. Costs will escalate in the future while available funds will decline. Actuaries in 2008 calculated the city should have set aside $592 million by then to ensure there is enough money in the future to cover retiree health costs.
To make up for that, the city should now be budgeting $86 million a year for retiree health, according to actuarial estimates. Its failure to do so now means that annual payment figure will increase in the future.
With the upcoming mayoral election, coupled with the parcel tax proposal on the same ballot to raise money for police, there undoubtedly will be much finger-pointing by the candidates over last week's layoff of 80 officers. The reality is that city officials had no choice. Failure to act would have been fiscally irresponsible, as would have been promising job security in exchange for pension contributions. Any candidate who says otherwise is merely pandering.
But it's critical to recognize that the police layoffs are only a small part of a much larger fiscal crisis. Voters should demand that the mayoral candidates address the bigger problem.
Daniel Borenstein is a staff columnist and editorial writer. Contact him at 925-943-8248 or dborenstein@bayareanewsgroup.com.


Posted by Read more carefully, a resident of Menlo Park: Allied Arts/Stanford Park
on Jul 19, 2010 at 8:03 am

Fiscally Responsible, the council's vote IS in the original story. It says the vote was unanimous. I hope you refrain from multitasking when you read your voters guide analyses before you vote in November.


Posted by truth, a resident of Menlo Park: Belle Haven
on Jul 19, 2010 at 9:52 am

The CC imposed 2@60 before this petition was circulated. That is the news.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 19, 2010 at 2:02 pm

Truth:

when did the CC impose 2@60? I went back through the last year's meeting minutes and I can't find it. Do you have some documentation that the CC imposed 2@60 before the petition or are you just making things up again?


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 19, 2010 at 2:28 pm

Menlo Voter asks of Truth:"Do you have some documentation that the CC imposed 2@60 before the petition or are you just making things up again?"

I believe that Truth is, as usual, not telling the truth but, of course, Truth could PROVE me wrong by cutting and pasting the answer from the Council minutes.

We await the truth.


Posted by Close enough for jazz, a resident of Menlo Park: Allied Arts/Stanford Park
on Jul 19, 2010 at 2:34 pm

Here's a link from the May 12 Almanac:

Web Link


Posted by truth, a resident of Menlo Park: Belle Haven
on Jul 19, 2010 at 3:40 pm

So let's get into this.

Calendared for vote on April 29th for staff report. Which means the that council took on the item in negotiations which were in April and March and february and January...and so on...

And since the council cannot take away a better offer in negotiations...well, think about it...2@60 was on the table long before press events.

That is a fact. Many, actually.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 19, 2010 at 3:55 pm

Truth claimed:"The CC imposed 2@60 before this petition was circulated"

Then Truth stated:"well, think about it...2@60 was on the table long before press events."

There is a big difference between 'imposed' and 'on the table'.

I think we all now know that Truth simply makes things up as she goes along and that there is no truth in Truth.


Posted by POGO, a resident of Woodside: other
on Jul 19, 2010 at 4:24 pm

And when did the petition drive start?

Roy?


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 19, 2010 at 4:57 pm

The completed petition with more than 3000 signatures was filed 26 April.

The Council action to place the initiative on the ballot on 19 May.

We are still waiting for Truth to show proof that "The CC imposed 2@60 before this petition was circulated".


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 19, 2010 at 5:12 pm

Here is what happens when you don't deal with salary and pension issues:


"Vallejo fire department shifts resources, closes two stations; response times expected to climb. Fire Department spokesman Bill Tweedy said Monday that the remaining firefighters - now 15 on duty at any one time - will respond to all calls, but will rely on neighboring communities for help.

Two years ago, six engine companies were open. There will now be four, plus Station 21 at 1220 Marin St. that will have a ladder truck only. Shift staffing also has been cut from 18 to 15. Two years ago, before the city entered bankruptcy, it was 22, although the firefighters' former contract called for 24."


Posted by Blue Collar Public Worker, a resident of another community
on Jul 20, 2010 at 12:48 pm

The Pension reform supporters should share in the cost of this miss step. Maybe everyone in Menlo Park is not a supporter of your idea. You created this issue don't ask the tax payers of Menlo Park to bail you out!
Peter knows that the Vallejo deal is just more posturing and a trumped up bankruptcy. As the judge in this case ruled go back and make a deal don't waste the courts time with this type of maneuvering. Rather than pay the council opted to do layoffs and reduce the Cities services. The Fire and Police have taken drastic cuts in pay and benefits. For years the City was over spending and then they spent 5 million on this law suit not very smart!
BCPW


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 20, 2010 at 2:31 pm

BCPW states:"The Pension reform supporters should share in the cost of this miss step"

Unbelievable - the union sues and now BCPW wants the petitioners to pay the cost of defending the suit! The Council voted to put this on the ballot so this is now the City's responsibility.

All the union is doing is costing the taxpayers money at every opportunity including this phony law suit.


Posted by Ethan, a resident of Menlo Park: University Heights
on Jul 20, 2010 at 2:31 pm

Besides pensions, another costly benefit for civil service retirees is subsidized medical coverage. This unnecessary subsidy for former workers should end. New hires ought to be paying into Medicare, like most everyone else. If they decide to retire early, they can purchase individual insurance until they reach age 65. Expensive for them, personally? Yes. But that's the current system that everyone else has to live under.

Of course, if the U.S. had a single-payer medical system, it's likely municipalities could shift existing retirees out of high-priced private insurance policies and into the universal program. Another argument for "Medicare for everyone."


Posted by POGO, a resident of Woodside: other
on Jul 20, 2010 at 2:58 pm

News alert, Ethan. Medicare is going broke. This link is from the last annual report of the SSA: Web Link

When a ship is leaking this badly, suggesting that everyone "get aboard" may not be the best advice, especially to the 85% of us who have coverage.

Fix the 15%, leave the rest of us alone.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 20, 2010 at 3:58 pm

Blue Collar:

this is not a "misstep." The unions filed suit not the city. The only reason the city is having to pay out money is because of the union's frivolous lawsuit which will be thrown out of court. Thus costing the tax payers of Menlo Park unecessary funds. Thanks unions.

I'll tell you right now, I have belonged to unions. I don't any more. At the time I belonged to a union I was not happy I did because they took my dues and did stupid things with it like this ridiculous lawsuit. This lawsuit has just reinforced my poor opinion of unions, especially public worker unions. From the conversations I have had with numerous residents of Menlo Park, many of who are union supporters, they are pissed! The unions have shot themselves in the foot with this lawsuit and you can bet it will come home to roost big time. The days of public workers gorging themselves at the taxpayers' expense will soon come to an end.


Posted by Ethan, a resident of Menlo Park: University Heights
on Jul 20, 2010 at 4:25 pm

Pogo, do I detect a note of inconsistency here? If public pensions need reforming because they cost too much, so does the very expensive non-SS retiree medical coverage. Are you suggesting that if public employees and others started paying into the SS system, it would be LESS solvent? If everybody is in the boat, you can bloody well bet that serious leaks will be attended to. That private insurance works at all is due to the fact that so many people are intentionally left out, and that the real costs of coverage are hidden from employees--who nonetheless "pay" when insurance-strapped employers keep a lid on salaries and other benefits.

The every-man-for-himself attitude has certain drawbacks. Be sure to kiss your boss today, or you too may end up among the 15% (actually, in California, it's more like 20%) without adequate coverage. Then you surely will be left alone.


Posted by Ethan, a resident of Menlo Park: University Heights
on Jul 20, 2010 at 7:01 pm

The references to "SS" above should of course have read: "Medicare."

Here's an East Coast (Boston area) take on the high cost to taxpayers of for-profit, post-retirement healthcare coverage for municipal workers:
Web Link

If we fixed Medicare and applied it to everyone, cities would benefit enormously, as would businesses. Why limit the reform to pensions?


Posted by Joseph E. Davis, a resident of Woodside: Emerald Hills
on Jul 20, 2010 at 8:32 pm

What we need is the 50-50-50 plan.

1. Fire 50% of the public sector workers. Since most of them are useless or actively harmful, this will be a net benefit to society.

2. Reduce compensation (wages and benefits) of the remaining workers by 50%. Anyone who doesn't like it can leave and try their luck in the private sector.

3. Cap any existing pension payout to no more than 50K per year. Anything more than that is an unconscionable ripoff of the public.

Maybe once that is done we will be able to afford to keep the library open on long weekends.


Posted by POGO, a resident of Woodside: other
on Jul 20, 2010 at 9:21 pm

Ethan -

You said "Medicare for everyone." I didn't SUGGEST anything. I SAID Medicare is going broke, which is factually indisputable. Your sugggestion that we add more people to Medicare is akin to adding gasoline to a fire.

Yes, the healthcare cost curve is bending. Unfortunately, not in the right direction.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 21, 2010 at 8:15 am

Peter Carpenter states, "I am not a union buster" I bet you don't remember that but they will. Every post you write smacks of your distaste for unions, I am afraid this will come back to haunt you Peter. Not everyone agrees with the pension reform initiative and it is a miss step and should be supported by the founders..............


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 21, 2010 at 8:27 am

BCPW states:"Peter Carpenter states, "I am not a union buster"

BCPW you are simply LYING - I never made such a statement. Do a search of ALL the postings in the Town Forum and you will never find me making that statement. In fact, the phrase 'union buster' only shows up once before in such a search - on May 11, 2010 and is made by another poster. This is a PERFECT example of the way in which you invent facts and statements to serve your purpose.

I have deep respect for responsible unions and responsible union leadership. I have no respect for some local union leaders who refuse to negotiate in good faith and who use law suits in lieu of intelligence.

I have no respect for people who lie.


Posted by POGO, a resident of Woodside: other
on Jul 21, 2010 at 8:48 am

BCPW said "not everyone agrees with the pension reform." I agree, I'm sure that not everyone agrees with pension reform.

So what do you say, BCPW, how about we have a VOTE and actually count the number people who support or don't support pension reform?

But the union doesn't want an election, do they? I can't imagine why... but we're going to find out really soon.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 21, 2010 at 9:19 am

Blue Collar:

plenty of people don't agree about a lot of things. That's why we have a system where we put things on a ballot and VOTE on them to decide if the majority agrees with it. The system is very clear, you can't short circuit the process by calling something "unconstitutional" until it has been voted on and enacted into law. Frankly, what the unions are trying to do with their lawsuit is unconstitutional, not to mention morally reprehensible.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 21, 2010 at 9:53 am

Peter
So you agree that you are interested in Union busting. If you agree that you did not say " I am Not a Union buster" then you are. I know I'm twisting it right? More smoke and mirrors, this will surely come back to you, too bad.

MV this is a land of laws and if you are not in agreement with a topic you have the right to sue or not to sue...........................


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 21, 2010 at 10:07 am

BCPW states:"So you agree that you are interested in Union busting."

BCPW is a totally irresponsible union spokesperson - first he claims I said something that I never said - ""Peter Carpenter states, "I am not a union buster" and then when I prove that I never said it he then claims that I am therefore "interested in Union busting.".

Lying and playing with the truth are exactly why union leaders and union spokespersons like BCPW are held in such contempt.

SHAME on you.


Posted by POGO, a resident of Woodside: other
on Jul 21, 2010 at 10:36 am

BCPW -

Yes, of course you have the right to sue. But to stop an election? Really? This is the stuff of banana republic dictatorships.

But assuming we have an election, will you agree to abide by the results? At the minimum, you should be willing to say that you were wrong about your assessment of the voters.

I will be glad to do both.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 21, 2010 at 3:34 pm

Blue Collar:

yes, one can sue for anything, but from what I've seen the case law is quite clear on this. The judge can't rule on it unless and until it passes and becomes law. Only then can he decide the issue of constitutionality. What the union is doing, and what so infuriates me and many others, is trying to disenfranchise the voters of Menlo Park. That's right, they are trying to take away our right to vote on an issue that was legally placed on a ballot. This is an attack on the foundation of our rights as Americans. It's disgusting.

I would propose that you and your union buddies would be just as incensed as we are if the situation was reversed. Suppose the union got an intiative on the ballot that said the city council had to give the union whatever they wanted? What if a group of citizens didn't like that and sued to stop it? Do you think you and your union buddies would be screaming bloody murder and demanding that the city defend the suit? Your damn right you would! And you know the worst of it? The city would have to defend it and waste that money because that initiative was legally placed on the ballot. Are you starting to see how things work now?


Posted by Observer, a resident of Woodside High School
on Jul 21, 2010 at 4:38 pm

you can remove initiatives prior to elections, but it is exceedingly rare


this guide www.ppic.org/content/pubs/report/R_904TGR.pdf provides an excellent concise summary of initiatives ... page 11-13 deal with limits and challenges.

From the Save Stanislaus Area Farm Economy v. Board of Supervisors (1993) 13 Cal. App. 4th 141 decision: the standard [to govern the trial court's exercise of discretion in preelection review of a qualified initiative] is one of great deference to the electorate's constitutional right to enact laws through the initiative process; a court will remove an initiative from the ballot only "on a compelling showing that a proper case has been established for interfering." (Farley v. Healey, supra, 67 Cal.2d at p. 327.) The standard is one that is cognizant of the injury to the public that would result from an erroneous determination to keep an initiative off the ballot; "[i]f doubts can reasonably be resolved in favor of the use of this [initiative] power, courts will preserve it." (Mervynne v. Acker (1961) 189 Cal.App.2d 558, 563-564 [13 Cal.App.4th 151] [11 Cal.Rptr. 340].) "In our view, the court should shortcut the normal initiative procedure only where the invalidity of the proposed measure is clear beyond a doubt." (Gayle v. Hamm, supra, 25 Cal.App.3d at p. 258.)

but then again I am not a lawyer


Posted by Blue Collar Public Worker, a resident of another community
on Jul 21, 2010 at 9:49 pm

PERS released it's returns today and it is 11.4% the fund is now up to 204 billion. The plan is based on a 7.75% rate of return. So much for sustainability LOL. As the plan continues to recover the amounts payable by cities and agencies will decrease. It will be interesting to see how everyone will respond when the City of Menlo Parks funding liability returns to normal or zero again. If the city employee pensions cost the taxpayers zero will they still be too much, anyone care to comment?
BCPW


Posted by POGO, a resident of Woodside: other
on Jul 21, 2010 at 10:08 pm

While an 11.4% return is impressive, this number is quite misleading by Calpers own admission. You omitted the part of Calpers press release that states "...Returns for real estate, private equity and some components of the inflation-linked class reflect market values through March 31, 2010 (not June 30, 2010). Final performance including the last quarter of the fiscal year will be available after asset valuations are completed."

BCPW, what this means is that Calpers left out the returns from the last quarter for these asset classes which, as you may recall, didn't perform so well. In fact, between April 1 and June 30, financial markets took some significant hits - the Dow was down 10% (from almost 11,000 to just above 10,000) during that time. We'll see where Calpers ends up when they publish their AUDITED financials. I'll bet you lunch the number will be lower than 11.4% because it always is.

Even so, this impressive return is still well below the returns that Calpers will need over the next decade to make up for their past losses and achieve that 7.75% projected return. Relying on a 7.75% return is not realistic, in fact, it's folly.

Finally, it would be nice to answer my earlier question. You've said there are a lot of people against the pension reform initiative. Perhaps you are right - so are you willing to abide by the results of the election?


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 22, 2010 at 6:42 am

BCPW - as Pogo points out one swallow does not a summer make.

And here is another view:
Great Expectations

By David Crane
Special Advisor to Governor Schwarzenegger for Jobs & Economic Growth
Wed, July 21st, 2010
During a recent public discussion about expected investment returns, the Chief Investment Officer of a California public pension fund was quoted as saying that "I would argue, and I have, with people who said it's going to be 6 percent or lower that they are basically saying the United States is going to go in the drain in the next 100 years. I'm not willing to go there."

By all accounts this CIO is a very smart fellow. However, in making that statement he's up against some tough math because, for the 100 years of the 20th century - not exactly "in the drain" for the USA - an investor with assets allocated like the typical pension fund would have earned (you guessed it) around 6 percent.

Somehow a perfectly good return in the 20th century has become a poor expected return for the 21st century. How did that happen? As Warren Buffett explained in a remarkably prescient article in 1999, sometimes people extrapolate from statistically insignificant periods to draw invalid inferences about future long-term performance. For example, many people today came of age during the 17-year investment boom from 1982 - 1999, but as Buffett pointed out, "The increase in equity values [from 1982 to 1999] beats anything you can find in history."

There were several reasons for the unique nature of 1982-1999, but the key point is that that period, or any 17-year period, fails as a basis for projecting long-term growth -- especially for pension funds with long-term liabilities (e.g., government employees who are 25 today will be receiving pension payments 50+ years from now). As that same CIO rightly put it, public pension investing is "a marathon, not a sprint." More relevant for pension funds is the 20th century as a whole. For that period the Dow Jones Industrial Average advanced from 66 to 11,497, for an average annual return on stocks of 5.3 percent.

Add 2 percent for dividends and that takes you to 7.3 percent for the equity portion of a portfolio, which in the case of pension funds usually comprises around 72 percent of assets. The other 28 percent is invested in fixed income assets that may be expected to earn 4-5 percent. Blended together and after expenses of 0.5 percent, that's a total return of 6 percent. (Pension funds with a larger equity exposure, e.g., 80 percent instead of 72 percent, might expect closer to 6.25 percent.)

But despite knowing they're in a marathon, our state pension fund boards have long over-estimated investment returns. In fact, at the very time that Buffett was warning investors in that 1999 article that the fast investment growth of the previous 17 years was not a good basis for projecting forward, one of those pension funds (CalPERS) doubled down in the opposite direction by successfully pushing the State Legislature to retroactively and permanently increase pension benefits for state employees while reducing contributions. CalPERS said its expected investment return would provide all the investment returns needed to meet both existing and boosted pension costs and even to cut contributions in the short term. The other major fund (CalSTRS) employed a similar return assumption.

Since then, over the past eleven years, those pension funds have earned less than 45 percent of their expected returns, taxpayers have had to spend more than $20 billion to make up the difference, and hundreds of billions more will be diverted from state budgets to pension costs for years to come.

Why is all this relevant now? The answer is that the boards of CalSTRS and CalPERS are in the process of evaluating investment return assumptions. As of now, both are 30 percent above that 6 percent rate. In fact, they're even 15 percent above Warren Buffett's expected returns for his pension funds. Simply put, they need to get real.

Unrealistic investment return assumptions allow generations to steal money from future generations. The boards of CalSTRS and CalPERS should remember who takes the risk of their great, and unrealistic, expectations.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 22, 2010 at 7:34 am

POGO and Peter,
All good points Peter and POGO you are correct in that the Real Estate fund has delayed reporting for 1 quarter. Keep in mind that this is 15 billion of the 204.8 Billion fund. Other points to keep in mind are that PERS has moved away from these assets and others, those others "Global" funds are making huge returns (24% in some areas). It all remains to be seen however I am optimistic about PERS.
BCPW


Posted by Interested, a resident of another community
on Jul 22, 2010 at 7:52 am

Blue

I share your optimism about Pers returns. The bigger question is should the taxpayer continue to take responsibility for the programs liability. For me the answer is no. And it seems to me if you truly believe what you say, then you too would prefer a defined contribution program over a defined benefit program since then those great returns would always accrue to the employee rather than the employer. You seem to be speaking out of both sides of your mouth.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 22, 2010 at 9:10 am

You want it both ways Interested, you got the last 10 years of good times for free. What do you want for nothing your money back? Of course you do. You fail to recall that those great returns of the past only benefited the Agency's and not the employee. That's right we still had to pay our share of the contribution but the Agencies did not. If anyone is speaking from both sides of their mouth it's not me!


Posted by Interested, a resident of another community
on Jul 22, 2010 at 9:42 am

No Blue. You are very confused......Lets see if I can help you. The current contracts must be adhered to. There is no way they can be adjusted. That's a fact. People can rant all they want. However, since you are so convinced that the "Cities got the good times for free" and that those good times are coming again, why don't you and your union lead the fight to change to a defined contribution plan for all new hires....?


Posted by Blue Collar Public Worker, a resident of another community
on Jul 22, 2010 at 10:47 am

Interested you still want something for nothing.................. you got the free years and that is a fact is it or is it not? And why would the union lead the fight to change the plan it has worked great for 80 years and will work great for another 80. Some people just have sour grapes and are jealous and want to take the good pension away and are using this as ammo. If you really understood the way PERS worked you would continue to support it. Look, if the City changed plans they would still have to contribute to the pension funds like almost all employer do, the same amount year after year. If you go back and do the math it is to the Cities benefit to stay in PERS in the long run.
BCPW


Posted by Interested, a resident of another community
on Jul 22, 2010 at 11:07 am

I can assure you I have as good an understanding, if not better than you, of how PERS works. Sufficient to know that your claim the "Agencies got off free for 10 years" is an absolute LIE.

If I recall correctly in the good years something like 27% of the agencies were "Superfunded", that means more than 70% had to make some form of contribution to the fund. GOT IT...

The point is that while you want Public Employees to continue to receive these great pensions THE PUBLIC DO NOT.....Do you get it now?

Private industry has abandoned Defined Benefit programs because ultimately their sustainability cannot be guaranteed, EXCEPT for Public Employees, who expect the taxpayer to guarantee their loses.

WAKE UP AND SMELL THE COFFEE, The public will not continue to put up with it......

and I will say again, I am a CalPers retiree...


Posted by POGO, a resident of Woodside: other
on Jul 22, 2010 at 11:50 am

The missing piece here is that prior to 2007, pensions were never calculated at the highest of ONE year, with overtime included, and a 2.7% multiplier.

That's a whoppping 30% increase over the prior commitment... and that's the problem that all of your calculatons and projections ignore, BCPW.

Like paying your teenager a $100,000 allowance, it may be nice for a while, but it's completely unsustainable in the long run and you will both sink. Even Calpers has admitted that it will impossible for them to fund at this level without the backstop of taxpayers making up the difference.

I do not fault unions and their leaders for asking for the pension increase. I fault politicians for being so irresponsible in granting that outrageous wish.

The truth is that we should rescind that decision, but we are not. We are only proposing to change the system for new hired employees who haven't even filled out a job application yet. That unions would resist such a modest modification which would, if fact, PROTECT their current members, is totally irresponsible.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 22, 2010 at 3:17 pm

Interested, that's good you got yours and hooray for you and screw everyone else right? Some people are just not sharp enough to see this is just the start of the attack and they will go after everyone including safety workers.
POGO FYI overtime cannot be used for PERS benefits, however there are some Counties like Contra Costa where the Sheriffs Deputies are able to use OT toward there retirement however they are not PERS.


Posted by Interested, a resident of another community
on Jul 22, 2010 at 3:40 pm

Blue

If you have construed from my posts on this issue that is my attitude then you lack any comprehension skills. I wont repeat myself. If you didn't understand it the first time there would be no point.

Attacks on ALL current employees covered by CalPers will only come if people like you don't wise up and accept that changes must be made for future hires.

If you imagine the average worker is going to support you, your crazy. Remember they too work to insure your pension, a pension they dont have....Think when it comes to a choice between their taxes and your pension they are going to choose to support your pension? Not a chance.

I will tell you again the only danger to current public employees pensions are people like you who wont accept that chnages must be made.


Posted by POGO, a resident of Woodside: other
on Jul 22, 2010 at 3:43 pm

I stand corrected and I should have been more precise.

Public employees often change their work schedules to maximize their last year of earnings which results in an exaggerated pension payment. This is commonly referred to as pension spiking. Web Link.

I regret the error.


Posted by Keep Pushing, a resident of Menlo Park: Downtown
on Jul 22, 2010 at 5:18 pm

Heck BCPW, I enjoy reading your postings, keep it up. This is further convincing me that we need to get more aggressive with pensions, salaries and positions. If you continue down the road where you are going, you are going to find moderate citizens like myself to start lobbying very hard for LESS services from the city, which means less jobs, which means lower taxes. Or, you are right, we will start lobbying to go after existing out-of-sight pensions. As long as you keep demanding, and keep pushing this entitlement attitude, you are going to get many more of us moderates to wake up and say ENOUGH. I'm almost there.


Posted by Ethan, a resident of Menlo Park: University Heights
on Jul 22, 2010 at 7:43 pm

POGO:
Let's return to my point: Why shouldn't public workers pay into and receive Medicare just like most other workers do? Because Medicare is going broke? If Medicare does indeed fail, then public workers will have subsidized health care in their old age (when it is needed most) while many of the rest of us won't be able to afford the extremely high private insurance premiums that older people are saddled with. Isn't that just another example of socialism for the well-connected and free enterprise for everybody else?

BTW: Medicare would be in much better shape if there were no income cap on contributions, making it a progressive rather than semi-regressive system. How about we put an arbitrary cap on private medical insurance premiums, just to level the playing field? Also contributing to Medicare's financial difficulties: the $1 trillion Bush prescription medicine fiasco, which I suspect was intentional sabotage.


Posted by POGO, a resident of Woodside: other
on Jul 22, 2010 at 8:18 pm

Ethan -

You make a completely legitimate point. I have no problem having government workers pay into Social Security and Medicare and losing their other benefits. Just one catch - they won't do it because they have better benefits. And you are correct, they would help subsidize it.

I am on record being in favor of a fully privatized pension system (ie, doing away with Social Security altogether). It's far too long of a discussion for this forum, but if the same percentage of wages that are currently being paid by employees and employers into SSI and Medicare were paid into private 401(k) accounts - and limited to restricted investments (ie, NOT Enron...) - even modest income people would retire with a million bucks of their own to support their retirement. Unlike SSI, any unspent savings could be passed on their children. The only catch is what to do with those people who are on SSI until the transition happens... but that amount is approximately equal to the expected cost of propping up the system. For people younger than 25 years old, there's no reason they shouldn't be on this kind of system today. My proposal takes the government out of the SSI business, which I think is a good thing.

Regarding Bush's prescription drug benefit, when Clinton was in office, the Democrats wanted it and the Republicans were against it; when Bush was in office, the roles were reversed. I'm against ANY new entitlement programs until we prove we can pay for the current ones. If you worry about the cost of Bush's drug benefit, wait until you see the costs of adding 20 million people to Medicaid!

I appreciate the civil discourse.


Posted by Interested, a resident of another community
on Jul 22, 2010 at 10:23 pm

Government Workers do pay into Medicare guys


Posted by Observer, a resident of Woodside High School
on Jul 23, 2010 at 12:35 am

Ethan writes: "BTW: Medicare would be in much better shape if there were no income cap on contributions"

It's not that easy: there is no cap on contributions (hasn't been since 1994)


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 23, 2010 at 8:46 am

""What matters are the returns over many years, not one year like this one when they're up or one year like last year when they were down," Crane said. "What people should care about is CalPERS' returns over the long term."

CalPERS' average gain of 7.75% is unsustainable over the long haul, and the fund shouldn't expect to average more than 6.15% a year, Crane said. He pointed out that the pension fund averaged an annualized return of only 3.5% over the last decade."


Posted by Blue Collar Public Worker, a resident of another community
on Jul 23, 2010 at 11:46 am

Peter FYI PERS average for the past 20 years is 7.75%+
Interested see Keep Pushings threat? There is your answer!


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 23, 2010 at 11:58 am

BCPW states:"FYI PERS average for the past 20 years is 7.75%+"

Please give the source for this figure. If it was 3.5% for the last decade then it would have had to have been over 12% for the decade before that to have averaged 7.75% - which I think is highly unlikely.


Posted by Interested, a resident of another community
on Jul 23, 2010 at 12:01 pm

No Blue.....Keep Pushing is not giving me an answer, THEY ARE MAKING MY POINT.


Posted by POGO, a resident of Woodside: other
on Jul 23, 2010 at 12:37 pm

BCPW -

You never answered my question. Show a little integrity and step up to the plate.

You have repeatedly stated that more people oppose pension reform than we think. So, for the THIRD time, are you willing to abide by the results of an election?

Yes or no?


Posted by Ethan, a resident of Menlo Park: University Heights
on Jul 23, 2010 at 5:47 pm

Right you are, Observer. I was thinking of the Social Security income cap. (It's why, as a self-employed person, I pay more into SS than Larry Ellison.) Still, Medicare contributions are quite a small percentage, considering what we expect to reap from them in the future.

BCPW: I haven't been able to get information for Menlo Park, but my impression is that in general government workers receive very generous healthcare benefits after retirement based on the private insurance plans they had when they were working. This is certainly true of state workers, for example. I assume that if you have paid into Medicare you will be eligible to receive benefits at 65.

POGO: It's a complicated subject, and "Medicare for all" is just my shorthand for a system that covers everybody, however it is configured in terms of public/private. But I think it's obvious that the "insurance" paradigm for healthcare payments is fast becoming completely untenable. We're just so used to it that we find it hard to think outside the box. The overhead is way too high, people are cheated as a matter of course, and trying to get insurance companies to cover the people they don't want to cover only makes things worse--and more expensive. It's a 20th century solution for a 21st century problem, established in a time when medicine was relatively unsophisticated and a lot of medical treatments, even short hospitalizations, could be paid for out of pocket by the average person.

Regarding the Medicare prescription drug benefit, isn't it pretty clear now that it was simply a giveaway to big pharma. The Canadians make fun of us; their government is allowed to negotiate prices.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 24, 2010 at 5:27 pm

Peter 7.75% + here you go
Web Link
POGO I oppose the reform NO that is integrity. Integrity is having the body parts to do the right thing, like when you make a deal sticking to the deal.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 24, 2010 at 6:15 pm

BCPW - using YOUR source here is their stated 10 year return:

" rate 10 years for period ended 04/30/2010 3.46%"

BIG difference from 7.75%


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 24, 2010 at 6:57 pm

Blue Collar:

[Portion removed; disrespectful language violates terms of use] No one is changing YOUR deal. "A deal's a deal." The change is for NEW employees. What don't you get about that?


Posted by Blue collar public worker, a resident of another community
on Jul 24, 2010 at 9:47 pm

Peter
More smoke and mirrors ah? What did I say? 20 years Peter not 10 years, redo the math and see.
MV it is not a deal and they will go after current contracts if they can. Now you may call that or me stupid but that's my opinon \and it is not a stupid one.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 25, 2010 at 6:37 am

BCPW - please quote your source for your 7.75% CalPers returns for the last 20 years and paste the actually wording in your reply.

The web link you cited only shows " rate 10 years for period ended 04/30/2010 3.46%" and those were the boom years. For the twenty year average to be 7.75% then the first ten years would have had to be over 12% which is highly unlikely.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 25, 2010 at 9:14 am

Blue Collar:

please post the language from the initiative that allows anyone to go after current employees pensions. You can't because no such language exists. So what you've said is "screw the voters if they adopt this initiative. I don't agree with it so I won't abide by it." Nice.


Posted by Blue Cllar Public Worker, a resident of another community
on Jul 25, 2010 at 9:16 am

Peter,
Same link scroll down to Historical rate of return sinse 1984 it's there.
Web Link


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 25, 2010 at 9:32 am

BCPW - a search of the cited document for 7.75% yields the following answer:Acrobat has finished searching the document. No matches were found.

Please copy the portion of the document that you claim shows that Calpers "FYI PERS average for the past 20 years is 7.75%+".

You cannot just keep making assertions without evidence to back up those assertions and this is not the first time that you appear to have played with he truth.

Here is another example from this same thread:

BCPW states:"So you agree that you are interested in Union busting."

BCPW is a totally irresponsible union spokesperson - first he claims I said something that I never said - ""Peter Carpenter states, "I am not a union buster" and then when I prove that I never said it he then claims that I am therefore "interested in Union busting.".

Lying and playing with the truth are exactly why union leaders and union spokespersons like BCPW are held in such contempt.

SHAME on you.


Posted by POGO, a resident of Woodside: other
on Jul 25, 2010 at 1:35 pm

For those of us who have (or had) teenagers, we know there comes a time in an argument when a parent says, "I've heard you and I've made my decision." Sorry, BCPW, with respect to pensions, this is where most voters are. We've heard the arguments. Now it's time count the votes.

It's interesting that even liberal, VERY pro-union Democrat Jerry Brown has sensed the changing wind. Yesterday, Brown said that the current level of compensation to public workers is unsustainable and wants a ROLL BACK. Web Link

BCPW - when you lose someone like Jerry Brown, it's the chess equivalent of check-mate. It's time for you and your fellow public workers to hit the reset button.


Posted by Blue Collar public worker, a resident of another community
on Jul 25, 2010 at 6:25 pm

Peter
Come on now I'm not making this up and I did the math for you it is an average of 13.1% return over the last 25 years.
POGO what is Jerry Brown? A politician and you know as well as I do he will say what ever it takes to get elected and then change his mind when he gets into office.
One last item gentlemen, as far as the name calling is concerned that's fine you can call me all the names you want to but that is usually what people do when they run out of ammo and facts to fight an argument.


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 25, 2010 at 6:39 pm

BCPW states:"I did the math for you it is an average of 13.1% return over the last 25 years. "

Please show us your calculations so that we know how you got your result.


Posted by Curious, a resident of another community
on Jul 25, 2010 at 7:57 pm

This July 15, 2010, Calpers press release says:

SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) today reported an 11.4 percent return in preliminary estimates for the one-year period that ended June 30, 2010.

The upturn for the 2009-10 fiscal year exceeded the long-term annualized earnings target of 7.75 percent, which CalPERS has attained over the past 20 years.

Web Link


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 25, 2010 at 8:05 pm

Peter:

what he did is add up the returns and losses for the last 25 years and divided by 25. Of course if you do the same thing using Pers numbers for the last ten years, it doesn't coincide with their own numbers of 3.4% return. That method yields a greater return.


Posted by POGO, a resident of Woodside: other
on Jul 26, 2010 at 8:44 am

Curious -

As we've previously reported, the rest of the Calpers press release states that they did not include second quarter results (April, May and June) for three asset classes in this calculation. As you may recall, the quarter ending June 30 was a disasterous quarter in the stock market (falling 10%). Let's see the AUDITED results when they are released.

Even so, Calpers will need greater than 12% returns for the next TEN YEARS to balance the last ten years and make that 7.75% return they are predicting. Not coindentally, Calpers also has a bridge they are trying to sell...


Posted by Blue Collar Public Worker, a resident of another community
on Jul 26, 2010 at 12:40 pm

Peter
Do the math for your self and quit dancing around the truth. If you don't like the math or the numbers find some obscure article from some internet rant some place and cut and paste the facts as needed to fit your argument. I can't believe you can say that the PERS system is making this up. Or better yet just call me some more names............. You'll make your point to yourself and go back and be happy knowing you have defended the right!


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 26, 2010 at 12:48 pm

BCPW is NOT able to show his calculations. Therefore we can only assume that he either has nothing to show or has something to hide.


Posted by POGO, a resident of Woodside: other
on Jul 26, 2010 at 12:49 pm

BCPW -

In the time it has taken you to provide three totally unresponsive posts, you could have provided the answer.

Again, you said "I did the math for you [and Calpers returns are] an average of 13.1% return over the last 25 years."

It's not a difficult or unreasonable question, BCPW and I'm not saying it's true or false. Please show us your calculations or the text from Calpers to substantiate your claim.


Posted by POGO, a resident of Woodside: other
on Jul 26, 2010 at 12:52 pm

In response to my point that even Jerry Brown has now come out for pension reform (roll backs, even!), BCPW said, "POGO what is Jerry Brown? A politician and you know as well as I do he will say what ever it takes to get elected and then change his mind when he gets into office."

As if I needed another reason not to vote for him.


Posted by Hank Lawrence, a resident of Menlo Park: Sharon Heights
on Jul 26, 2010 at 1:33 pm

A vote for Jerry Brown is a vote for destabilizing the State of Califonia's fiscal health.

This is what President Franklin Delano Roosevelt said about Government employee unions.

"All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. It is, therefore, with a feeling of gratification that I have noted in the constitution of the National Federation of Federal Employees the provision that "under no circumstances shall this Federation engage in or support strikes against the United States Government."


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 26, 2010 at 1:51 pm

Blue Collar:

I to am curious as to how you arrived at your figure of 13.1% return for the last 25 years. No matter how I do the math I don't come up with that figure. How did you arrive at that figure? It is certainly not published in the document you linked to.


Posted by MenloGuy, a resident of Menlo Park: South of Seminary/Vintage Oaks
on Jul 27, 2010 at 1:10 am

I'm definitely not in favor of the stupid suit or BCPW's perspective, but y'all should actually look up the numbers before ranting based on what you think the numbers are - Google "calpers 20 year rate return". You'll find:

April 7, 2010 - ...Over the past 20 years, CalPERS has earned an average annual investment return of 7.91 percent – which includes the past two years of investment declines. This performance exceeds the pension fund's actuarial rate of return assumption of 7.75 percent needed to pay long-term benefits.

July numbers would be slightly different, but nowhere near the differences people are basing their speculation on. Now let's argue about potential future returns instead of stuff we CAN actually know :)


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 27, 2010 at 6:25 am

Just be thankful that Menlo Park is not a charter city (like Palo Alto) or it would be sharing Calpers' costs for this $30+ million retirement:

"Cities To Fund Bell Official's Huge Pension

BELL, Calif. (CBS13) ―

City officials in the southern California town of Bell are coming under fire for their outrageously high salaries, but the pension of one official in particular could cost as much as $33 million. And, CBS13 has learned that some local cities will be forced to pay for it.
He's the new poster boy for government worker greed.

"We're all paying for it," said Marcia Fritz, a member of the group Calif. Foundation For Pension Reform.

Small town taxpayers across California are on the hook for a millionaire manager created by the city of Bell, according to accountant and pension reform advocate Marcia Fritz.

"He's retiring early. He's only 55 years old. He's going to live probably another 30 years," said Fritz.

Based on Robert Rizzo's salary of close to $800,000, Fritz estimates he'll earn $26 to $31 million dollars in retirement, which the cost covered by small cities.

"Citrus Heights, and then Lincoln and Rancho Cordova," said Fritz.

There are 140 of them -- all part of a pension risk pool created by CalPERS.

"So it's like auto insurance. If somebody crashes, their rates will go up. Bell's rates will definitely go up because of this, but so will Citrus Heights, Rancho Cordova and Lincoln," said Fritz. "The tax payers all over the state will be paying for this."

In a statement, CalPERS said it's "taking a long hard look at the salaries in the city of Bell to determine if they should be used to calculate pensions at all. At this time, it is too early to say what if any impact the potential pension would have on other employers in the pool."

"How did this happen? What were they thinking over there?" said Jerry Brown, state attorney general.

Meanwhile, Brown subpoenaed bell's employment contracts and related emails as the city's outrage spreads across the nation.

"We want to find out exactly how they came to the conclusion that public officials can make this much money -- in two cases, more than the President of the United States," said Brown.

CBS13 is asking the question-- how could this happen? City councilmembers in Bell were able to give themselves raises because they changed to a charter city in 2006.

"There was a state law passed in 2005 that set some limits on that compensation, and that did not apply to charter cities," said Chris McKenzie, a spokesperson with the California League of Cities.

So the state couldn't regulate those salaries, like they do in other cities. But the spokesperson for the California League of cities says the Bell situation is unique because most charter cities still include some sort of salary guidelines when the charter is drafted since voters have to approve it.

There are 119 charter cities in California. The list of those cities is on our website, CBS13.com. The local cities include Folsom, Modesto, Stockton and Vallejo.



(© MMX, CBS Broadcasting Inc. All Rights Reserved.)


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 27, 2010 at 7:33 am

Menloguy:

all we're asking is for Blue Collar to back up his claims. Something he seems incapable of doing. The one item he has provided a link to does not back up his assertions. I find it rather telling that you didn't link your quote so we could see the source. What was the source?


Posted by Interested, a resident of another community
on Jul 27, 2010 at 8:07 am

Peter.....The fact that Menlo Park is not a charter city has nothing to do with it.The Risk Pools are based on the number of employees an agency has. I think you will find MPFD is in the same pool as Bell.


Posted by Interested, a resident of another community
on Jul 27, 2010 at 8:08 am

Corrected to say, it is of course dependent on what "plan" non safety MPFD employees are enrolled in.


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 10:28 am

Menlo Guy -

Thanks for your thoughtful post. Perhaps you missed it, but I cited that exact same press release and Calpers historic rate of return in another thread.

As Menlo Voter said, the purpose of the question was to find out how BCPW obtained his number of 13.1% for the past 25 years. Your reference doesn't substantiate BCPW's claim either. Several posters have asked BCPW for his reference but he hasn't been able to provide it. It seems to be pure fiction...

But you are correct that this is about future returns and how they will be funded. We have to switch from a defined benefit plan to a defined contribution plan - if not for current workers, then at least for all future public worker hires.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 27, 2010 at 11:07 am

MV, Peter,POGO

Any degrees the three of you hold should be revoked as evidenced by your inability to calculate and average, your third grade math teacher is surely disappointed I hope she gets a raise this year. LOL!

FYI

Web Link

By the way Menlo Guy my average was based on 25 years of returns, if you have and advanced degree it should also be revoked.


Posted by Interested, a resident of another community
on Jul 27, 2010 at 11:14 am

Blue are you a current government employee?


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 11:34 am

Amazing, BCPW. You spend more time obfuscating and avoiding the question than it would take to answer it or cite your reference.

So here's some math for you. If you paid attention in school, it's on a third grade level, so you should have no problem with it.

Let's agree to take Calpers official press release about their returns as gospel. Using Calpers stated return of 7.91% over the 20 year period ending April 2010, that means that Calpers would have to have had an AVERAGE rate of return of 34% per year during the period from April 1985 to April 1990 to achieve that 25 year average return of 13.1% that you say they had.

I'll let you google their returns for that period for yourself to see if they did. Hint: They didn't.

Again, cite your source for that whopping 13.1% twenty five year return.

And you're trying to give us a math lesson? The good news is that you won't need a math lesson to understand the election results in just under 100 days. The headlines will tell you the whole story...


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 11:48 am

Just in case you don't know how to google, here are Calpers historic rates of return.

YEAR YEAR END 6/30 YEAR END 12/31
1984 -3.1 12.9
1985 35.4 28.0
1986 24.6 15.9
1987 13.8 4.3
1988 3.9 12.8
1989 15.7 21.3
1990 9.7 -0.8
1991 6.5 23.0
1992 12.5 6.5
1993 14.5 13.4
1994 2.0 -1.0
1995 16.3 25.3
1996 15.3 12.8
1997 20.1 19.0
1998 19.5 18.5
1999 12.5 16.0
2000 10.5 -1.4
2001 -7.2 -6.2
2002 -5.91 -9.5
2003 3.9 23.3
2004 16.7 13.4
2005 12.7 11.1
2006 12.3 15.7
2007 19.1 10.2
2008 -4.9 -27.1
2009 -23.4 12.1

Web Link


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 27, 2010 at 2:18 pm

Blue Collar:

clearly you don't know how to average. Using your method the average rate of return for the last 25 years is 10.7808%. The sum of all retruns listed for 25 years is 269.52% - divided by 25 equals 10.78%. Where do you get 13.1%? You certainly can't get it using your numbers and method. So fess up, you just made up that number didn't you? Or when you did your math did you just ignore the negative numbers?


Posted by Blue Collar Public Worker, a resident of another community
on Jul 27, 2010 at 2:30 pm

OK good now that I have managed to lead you all down the dark path you all forgot something!What the original argument was about, it was about PERS being sustainable and I sited the fact that the plan has made 7.75% plus over the past 25 years. Too which Peter said it did not and used the last 10 years average and said it was 3.7 something. The whole point here is the plan is sustainable and you guys finally said it.
Quote MV says: "divided by 25 equals 10.78%". Thank you!


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 2:45 pm

BCPW -

You apparently aren't even prepared for that third grade math course you recommended.

Calpers will need to AVERAGE a whopping 13.25% return for EVERY ONE of the next EIGHT years in order to achieve that 7.75% targeted return you think is so realistic. That means that even their recently announced spectacular 11.4% return for the past twelve months (which conveniently excluded three asset classes...) - will not be sufficient to make that target. In fact, even your "made up" number of 13.1% is insufficient to get them to 7.75%.

Worst of all, even Calpers historic return of 10% over 26 years will be well below what is required for them to achieve that 7.75% expected return.

This math isn't very difficult...

Kool aid, anyone?


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 27, 2010 at 3:15 pm

Blue Collar:

you conveniently ignore the fact that you stated PERS had 13.1% returns for the last 25 years. You either made it up or you can't do math. Which is it? If you're going to just make stuff up then there is absolutely no point in having a conversation with you.

Also, just because PERS has had historic returns of 10+% it doesn't mean they will have them going forward. AS POGO has pointed out they will have average more than that to make the 7.75% expected return. What about this don't you understand? The math isn't that difficult.

The plan is not sustainable and I never said that it is. I'll say it again - the plan is not sustainable at current rates of return without hitting the municipalities for more money which will result in service cuts. Your mythical rate of return is not going to happen.


Posted by MenloGuy, a resident of Menlo Park: South of Seminary/Vintage Oaks
on Jul 27, 2010 at 3:57 pm

OK, so we all agree !
Calpers missed their target, averaged over the past 10 years (3.46%), but Calpers achieved their target, averaged over the past 20 years (7.91%). The whole argument of what future return is needed to make up for the 3.46% return is specious, since both the 20 year return and presumably the 25 year return (based on the average of 1985-19989 historic return numbers being greater tahn 7.75) are above the target.

I tend to beleive like Menlo Voter that returns are not sustainable at 7.75, and will likely be driven to 5 or 6% over time, which is indeed not sustainable. It might be interesting to see a system where the public employee shares the cost of supplemental funding when Calpers doesn't meet assumptions for 2 years in a row and refunds to the public employee when the Calpers subsequently runs over target for more than 2 years (or x years) in row. This might make them a little more sensitive to CalPERs returns and added costs their future pension impose on communities her in the present.


Posted by Interested, a resident of another community
on Jul 27, 2010 at 4:01 pm

Poor Blue...Not only is his math terrible, his English is no better....


"and I sited the fact"...................


I hope to God your not working at an agency I pay for............


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 4:33 pm

If the aptly named Blue is any example of the expertise within our public sector, it's easy to understand the mess we're in. Fortunately, voters should have the last word very soon - unless, the unions successfully stifle that.

MenloGuy - yes, WE agree, but unfortunately, the unions do not. They are still unwilling to contribute (in some cases) and totally unwilling to share the burden or risk. Although the union says everything is coming up roses at Calpers, they still demand their risk-free defined benefit plans and are unwilling to "put their money where their mouth is" and go with a defined contribution program like the rest of us.

I'll repeat my earlier advice to Blue: When you find yourself in a deep hole, stop digging.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 27, 2010 at 4:40 pm

It's OK the facts are there it has been and will be sustainable. Because the fund is down and you guys see an opening to take advantage of that you will use anything you can so prove your side of the argument. Name call, point out grammatical errors and on and on. But at the end of the day the PERS fund has sustained it self for 80 years and will for another 80 years. I believe it and purchased 5 years of service. It cost me some money but I truly believe the plan is stable. You can't discount the years when they 25% and 28% they did it and can do it in again. I guess the funny thing is some day I'll be retired and enjoying myself and you guys will still be here crying about the pension I'll get and pointing out my bad grammar. Maybe I'll take an English class when I retire? LOL


Posted by POGO, a resident of Woodside: other
on Jul 27, 2010 at 4:49 pm

No one like an arrogant employee, Blue.

I don't think it would take a lot of arm twisting to get voters to reconsider our position on retroactive pension changes that effect all employees, not just future hires. Even that far right winger, Jerry Brown, seems to have gotten religion.

You know the old saying... pigs get fat, hogs get slaughtered.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 27, 2010 at 5:32 pm

POGO
Very predictable. Name call and go after more of our pension and then more name calling. You forgot how many times you said it's just the new guys it's not the current employees. Oh my, now your true thoughts are coming out. By the way it is not arrogance, I earned my pension, it is not yours to take away. That's why there are laws to protect it. Jerry Brown come on POGO wake up and smell the coffee he's just trying to get elected. What he says or thinks don't mean a hill of beans. It is just too bad we have such a poor choose of candidates to pick from.


Posted by Interested, a resident of another community
on Jul 27, 2010 at 5:48 pm

Pogo, Peter Carpenter, et al......

I am a retired government employee. I receive a pension from CalPers. I hope you all know that BPCW does not speak for me, nor for any other retired government worker that I know.

THE TRUTH is that the current level of retirement benefits CANNOT be sustained without massive payment from the taxpayer.

Do not be fooled by Blues concerns about attacking current pensions. He and I will both be long dead before our pensions come close to being reduced.

This initiative is intended to reduce the public pensions of FUTURE public employees. It is long overdue.......


Posted by Curious, a resident of another community
on Jul 27, 2010 at 6:05 pm

Why blame the unions? It's like blaming the Bell city manager for making nearly $800K a year. You need to blame the people who agreed to pay these salaries and benefits. And that's our elected representatives, and, ultimately, the voters who elected them, and re-elected them.


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 27, 2010 at 7:50 pm

Blue:

you still haven't acknowledged the fact you MADE UP your numbers. If you're willing make things up you are no better than a liar in my book. No need to have any further conversation with you as it will be like wrestling with a pig - I'll get muddy and you'll enjoy it. Ciao.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 28, 2010 at 9:52 am

Interested, The word foolish comes to mind because you are retired and we are not and yes they can change our deal. Do not speak for me as you got yours. Like I said before and you do not represent the true feelings of current PERS public employees who are having their retirement threatened. Please enjoy yours and stay out of mine.............
MV more name calling, keep up the good work it's all you can do at this point. Thanks for saying the plan is sustainable.


Posted by POGO, a resident of Woodside: other
on Jul 28, 2010 at 10:13 am

BCPW -

The only thing any of us brings to this forum is our integrity. Being able to substantiate claims, cite references and even admit our mistakes is a big part of that. Over the past few months, you have revealed yourself to many people on this forum and I'm perfectly content to let them draw their own conclusions. It looks like many of your readers, including retired city workers, have already shown their disgust.

But far worse than that, is the disservice that you have done to the many fine, dedicated city workers in our community. Like most of us, they simply want to be paid an honest wage for an honest day's work. They want to be able to afford a reasonable lifestyle and support their families. Most of them seem to realize that the current pension system is none of those things, even if you don't.

You said, "I guess the funny thing is some day I'll be retired and enjoying myself and you guys will still be here crying about the pension I'll get." BCPW, no one will think it's "funny" when they discover their next pension distribution is an IOU.

No, I haven't changed my mind about retroactive changes for existing pensions. For me, a deal is a deal. But if I do change my mind, you have only to thank your own arrogance and dishonesty.


Posted by Interested, a resident of another community
on Jul 28, 2010 at 10:39 am

"current PERS public employees who are having their retirement threatened."

Blue, it really is time for you to put up or shut up.......

Name one pending action or proposal that threatens current public employee pensions.

You can't because there aren't any......In other words your lying through your teeth.......


Posted by Blue Collar Public Worker, a resident of another community
on Jul 28, 2010 at 11:08 am

Name calling that's all you have left to fight with.............. SAD SAD SAD


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 28, 2010 at 12:16 pm

It is time for some new FACTS:

"The Sun Never Sets On An Optimist

CalPensions.com' Ed Mendel finds a late-20th century prediction about the massive California Public Employees Retirement System (CalPERS) that turned out to be right. Needless to say, the prediction was a worst-case scenario:

The actuaries said the annual state payment to CalPERS, $159 million in 1999, could soar to $3.954 billion in fiscal 2010-11 — a long-range forecast that scored a near bull's-eye on the $3.888 billion state payment for the fiscal year that began this month.

The investment shortfall was one of several outcomes the fund considered at the time:

If investments hit the earnings target assumed by CalPERS, an annual average of 8.25 percent (since lowered to 7.75 percent and now under review), the state payment this fiscal year would be $679 million.

But if earnings during the decade averaged 4.4 percent, a repeat of the decade from 1966 to 1975, the state payment would be $3.954 billion. If earnings averaged 12.1 percent, a repeat of 1947 to 1956, the payment would be zero...

As it turned out, a scenario based on a 4.4 percent average return was not "down" enough. CalPERS earnings during the last decade averaged 3.1 percent, according to a Wilshire consultants report in March.

If the actual return came in even lower than the lowest-return scenario, shouldn't that make the taxpayer-funded shortfall even larger than CalPERS' actuaries predicted?

Note that the Golden State's public employee pension fund managers continue to forecast magical rates of return. The chief investment officer for the California State Teachers' Retirement System (CalSTRS) says cautious investment outlooks are unpatriotic:

Asked for a breakdown of the assumed 8 percent earnings rate, Chris Ailman, the CalSTRS chief investment officer, said 3 percent is inflation and 5 percent is real growth, reduced further by the nearly 2 percent usually received from stock dividends.

"I would argue, and I have, with people who said it's going to be 6 (percent) or lower that they are basically saying the United States is going to go in the drain in the next 100 years," said Ailman. "I'm not willing to go there.

As Gov. Schwarzenegger's economic advisor David Crane notes here, 6 percent is about the rate of return investment funds got over time during the vastly prosperous 20th century. There used to be (back before the nineties became The Nineties) a rule of thumb: Anybody who promises you more than a 7 percent return per year is not just being unduly optimistic but actively blowing smoke up your anal canal. That's the kind of thing people believed in the industrial age, but this is a time of magic."


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 28, 2010 at 12:50 pm

Thank you for the article Peter. Very interesting.
Now we'll some BS from Blue about how PERS says they can sustain things with nothing to back it up.


Posted by Blue Job, a resident of Menlo Park: Central Menlo Park
on Jul 28, 2010 at 2:29 pm

Menlo Park Public workers are going to have to face reality. The voters will approve this initiative by a wide margin and no reasonable judge will rule against this. But if a judge wants to get reversed no one can stop him/her from making a bad ruling. But you can be sure that the court of appeals will most likely reverse the lower court ruling if the ruling is against pension reform.


Posted by POGO, a resident of Woodside: other
on Jul 28, 2010 at 3:37 pm

Blue Job -

The first court battle is about keeping the initiative on the ballot. The unions apparently want to deny the voters a say in the matter. Why should we have a say... we only have to pay all of these bills!

Assuming this initiative passes, the second court battle will be about preventing implementation of the provisions of the initiative. That can be accomplished in two ways - either the court will side with voters and allow them to become the new rules or the court will stay (ie, delay) the enactment of new rules. If the court issues a stay, our elected officials can easily circumvent it by simply honoring the wishes of their constituents and adopting the new rules themselves. Even the union agrees that it is within the elected official's power to do so.


Posted by Interested, a resident of another community
on Jul 28, 2010 at 4:35 pm

Pogo....

Lets hope that it works out. As I have said I am a Calpers retiree. This initiative does not worry me one bit. As you have said many times "a deal is a deal"....Any attempt to change current retirees benefits would take decades and an army of accountants to determine what my pension should be under different rules. To say nothing of the lawsuits people like me would bring against CalPers for its mismanagement of funds.

What has not yet been discussed here is the way CalPers investments have been politicized by the likes of people like "Slick" Willie Brown.

That could be a book in and of itself. As long as CalPers is "Defined Benefit" and not "Defined Contribution" no one has standing to sue in court since no one has "lost" anything. Accept of course the taxpayer who is forced to continue to foot the bill for this boondoggle....

Lets get this initiative on the ballot AND LETS GET IT PASSED......


Posted by Menlo Voter, a resident of Menlo Park: other
on Jul 28, 2010 at 7:07 pm

It is very interesting to me that a CalPERS retiree thinks this initiative is a good thing. Apparently he or she has not been drinking the union Kool-aid.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 29, 2010 at 11:10 am

POGO
Yes as Interested said Hooray for me I got mine and it will take forever to take it away so go ahead and go after the others. Thanks Brother for the support. By the way the Deal is a Deal quote is mine. But you can use it.


Posted by Interested, a resident of another community
on Jul 29, 2010 at 11:54 am

A. I am not your brother
B. If I were I would seriously consider Fratricide
C. There are no "Others" yet.....Under your insane logic an employer cannot hire a new employee unless he provides the exact same benefits as current employees. I does not work like that in the real world.


Now get back to work and do what your being paid to do.....


Posted by POGO, a resident of Woodside: other
on Jul 29, 2010 at 1:24 pm

Unfortunately, initiatives, legislation and even enlightened elected officials may not be able to solve this problem. The current level of benefits is simply unsustainable. Even those who voted for those revised (and retroactive) benefits say they were duped.

A few weeks ago, I heard an economist on CNBC say that some pension funds will ultimately collapse (ie, outflows greatly exceed inflows and returns). Many states are already teetering on the verge of bankruptcy and he didn't think government would have an appetite to bail them out, even if they wanted to.

I only hope that the aptly named blue never has to receive an IOU instead of a pension check. He won't think this is all just a big game then.


Posted by Interested, a resident of another community
on Jul 29, 2010 at 1:30 pm

Pogo, if you ever get bored look into the legislation that required "pooling". Incorporated into that legislation you will find additional benefits imposed on member agencies, over and above their objections..........It was a disgrace then. It is a disgrace now.


Posted by Blue Collar Public Worker, a resident of another community
on Jul 29, 2010 at 3:23 pm

Interested
The term "brother" was in a flippant response to your self centered remarks. As far as the Fracticed comment is concerned be careful who you threaten. Is there any chance of having a normal debait without getting into this type of foolish talk, FYI I worked 56 hours last week and 8 were on Saturday and I'm on a salary. I do get a break now and then and waited my time here. The whole point is I think PERS can continue and you do not. Can we banter without the names and the nastiness?


Posted by Peter Carpenter, a resident of Atherton: Lindenwood
on Jul 29, 2010 at 3:36 pm

BCPW states:"I think PERS can continue"

PERS can and will continue solely because it has the absolute right to reach into every taxpayer's pocket whenever it needs more money.


Posted by Interested, a resident of another community
on Jul 29, 2010 at 3:42 pm

Pers can and will continue......by the way the Fratricide comment was an attempt at humor (but just an attempt)...but thank you for taking
debait..........................

I don't suppose you write the staff reports for the County by any chance?


Posted by POGO, a resident of Woodside: other
on Jul 29, 2010 at 3:46 pm

Interested -

That has to be the best laugh of the day!


Posted by Blue Collar Public Worker, a resident of another community
on Aug 2, 2010 at 12:52 pm

Oh Roy,
Is this statement true, that Sun Micro Systems did not report it's taxes to the City of MP because they were purchased by Oracle thus causing the 2 million dollar shortfall? "Try Sun Micro not reporting because they were bought by Oracle". No wonder there is such an effort to save the City money by not paying retirement benefits. That's because Sun saved their money. So have you, will you, do you have anything to gain by supporting the pension initiative?


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