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Menlo Park residents have reported receiving phone calls in an apparent marketing poll concerning a “pension reform” initiative that a group of residents has launched.
Based on reports from residents, the poll seems designed to shape a marketing campaign against the initiative effort, which would scale back pension payments to future non-police municipal employees. It provides a glimpse into the tactics that might be employed in such a campaign, such as linking the initiative to former council members Lee Duboc and Mickie Winkler, and noting that it would reduce pensions for librarians.
The company conducting the poll did not say who had paid for it, according to people who were surveyed.
Sharon McAleavey, a spokeswoman for the union that represents the city’s middle management employees, said that her union is not connected to the poll. A call to a representative of Service Employees International, the city’s largest employee union, was not returned.
The initiative would reduce pension payments to public employees from four-fifths to three-fifths of their annual salary, would increase the retirement age from 55 to 60, and would require a popular vote for any future increase in pension benefits.
Henry Riggs, one of the leaders of the initiative drive, said the group had expected resistance from employee unions from the beginning. “To be honest, so far this looks to me pretty light,” he said. “I’m expecting more drama, not less. … We’ve talked about it, and have been prepared (for resistance) since the time we said, ‘OK, we’re gonna do this.'”
The group is in the process of gathering signatures to qualify the initiative for the November ballot. It’s on target for its goal of 2,400 signatures by its deadline of early May, according to Mr. Riggs.
He said that his group plans to campaign in support of the initiative until November, assuming it makes the ballot.
“There’s no 15-word blurb that addresses what we’re trying to do,” Mr. Riggs said. “The alternative points of view will be disseminated thoroughly, whereas we will be lucky to knock on the doors of 20 percent of voters.”
The fact that the poll is being conducted could be a boon to proponents of the initiative, some of whom have sought to cast themselves as grassroots advocates standing up to well-funded special interests. In an e-mail to supporters, Ms. Duboc said that she anticipated a “shoot the messenger” campaign from opponents of the initiative drive. She is involved in the effort, but is not its public face.
“The unions will spare no effort or expense in attempting to derail” the pension initiative, she wrote in a January e-mail.
John Kadvany, a member of Menlo Park’s Planning Commission, provided The Almanac with detailed notes he took when contacted in the survey. According to Mr. Kadvany, the caller asked several times whether he would support the initiative, testing the effectiveness of various arguments in favor of and in opposition to it. It asked for respondents’ reaction to several names, including those of Ms. Duboc and Ms. Winkler, the “pension reform” group, the Tea Party movement, CalPERS (the state pension fund), and SEIU (the employee union).
According to Mr. Kadvany, the interlocutor asked whether he would support the initiative if he knew it would apply to road workers and librarians, and if he knew that public employees do not receive Social Security. He was also asked whether he would be persuaded by arguments that the city needs to stand up to the unions, and that the initiative drive represents a mean-spirited attack by Tea Party activists.
I am not surprised that there are ulterior motives behind the campaign for the “pension reform” initiative.
It sounds more like the story highlights ulterior motives behind those opposing the initiative. Why quotes for pension reform?
The rhetoric is that the PERS fund is unsustainable and that the CIty will have to make up the difference by raising City taxes. Please go to the web site and see for your self. GO to the Facts vs Myth under Cal Pers Responds. Every issue raised on the Pension Reform site is addressed http://www.calpers.ca.gov/
Blue Collar:
it’s not “rhetoric.” It’s fact. The pensions as currently set up are unsustainable. DO THE MATH.
Menlo Voter
OK the PERS actuaries have done the math and addressed all the questions. They have all the info including number of enrollments, ages, years of service, fund info, etc. Please tell me how you or anyone else can DO THE MATH and then SHOW ME YOUR WORK right here on this forum. These are facts not rhetoric spewed out by the Pension Reform know it all’s. In another thread (pounding the pavement for pension reform) you spewed the same rhetoric now it’s time to do the work. Get a pencil get it good and sharp and SHOW ME! In that thread I showed everyone how the reform site is misleading making people think money for parks would be used for pensions. Remember I listed 10 parks plus two more projects that are completed or are in construction now, can you argue that? Can you argue that PERS has been around for 80 years and is the best public retirement plan inb the nation. Yes it has had it’s ups and downs but all plans do. So show me your math, I’m waiting!
BCPW
Blue, it’s very hard to find the figures that you claim support your case via the link you provided. The actual CALPERS numbers are here:
http://www.calpers.ca.gov/index.jsp?bc=/employer/er-forms-pubs/pubs/actuarial-reports.xml
You will notice that the most current figures only show numbers as of June 2008, at which point CALPERS claimed to have unfunded liabilities of under $40 billion. Many have questioned the accuracy of those numbers, which have continued to rise. Stanford’s recent study suggests that “California’s public retirement plans are underfunded by more than a half trillion dollars, equal to about $36,000 per household and far exceeding previous estimates.”
Problem is, Blue, that our households don’t have $36k apiece to hand over to your retirement! Our state may in fact be bankrupt soon. That is reality.
Thank you for directing us to look at the website, even though I had to do some digging to find the information you cited. There are a lot of numbers there, which can be intimidating at first, but you don’t have to be an econometrist to see that the pension funds are in serious trouble.
Blue Collar:
I am not going to do your homework for you. As Did the Math stated, the recent Stanford study shows 500 trillion dollars in unfunded liabilities. That’s trillion with a T, Blue. Our state is running billions of dollars in deficits. Just where do you think this shortfall is going to come from? That’s right, the tax payer. I for one am not interested in seeing my taxes go higher, but that is what is going to happen if the state doesn’t get these unsustainable pensions under control. It’s either that or cuts in services.
To Menlo Voter and Did the math,
I’m sorry however you will get no credit for your effort, the assignment was to do the math and SHOW YOUR WORK! You failed to SHOW YOUR WORK. However I am fair so if you like you can have another chance to disprove the PERS system. Go back DO THE MATH and SHOW YOUR WORK or else NO CREDIT! I would encourage you to try however I know you won’t because the answer will not benefit your side of this argument. But I am certainly open to seeing your work? Look harder the numbers you seek are at the site but again will not bolster your argument.
BCPW
It’s ridiculous to ask Calpers if everything’s okay with California pensions. Why don’t you ask the municipalities that fund Calpers? When those sources that fund Calpers dry up, the party’s over for everyone.
For these municipalities – towns, cities, counties and the state – the percentage of their budget that they are devoting to pensions has grown inordinately over the past two decades. There are two obvious solutions – cutting services and raising taxes, and they are doing both. But even with these cuts and tax increases, it is still unsustainable. Pension reform is the only sane answer.
BCPW – we’re not making this up. Here’s a link to a New York Times article earlier this month:
http://www.nytimes.com/2010/04/07/business/07pension.html
Feel free to attack the messenger.
For anyone who has been following threads relating to government pensions, it is quite clear that Blue Collar Public Worker is unable to see any view but his or her own. Are they a paid poster for the unions? Blue, you are in no position to dictate to anyone about what work or math needs to be done. You work for us, the taxpayers. Remember. Without private sector taxes, you have no job, no salary, and no retirement. No things are not just fine with pensions. One not be a rocket science to do the math. Obscure all you want, deny anything you don’t like, and so on, as you have done in virtually every post on this site. The reality is that if one takes a fixed amount of money and devotes an increasing amount to pensions, and guarantees those pensions to go up at a rate above inflation, and above what the rest of the economy is doing, it will not be sustainable. And if the percentage of money going to pay for pensions is more than that taken in (accounting for inflation and so on), and a city doesn’t raise taxes indefinitely (which the area cannot sustain), the city will have fewer funds to pay for services going forward. Essentailly what has happened is that public representatives gave sweethart deals to govenrment employees in the form of overly generous pensions, the effects of which wouldn’t be evident until the ones making the deals were long gone. Now we have nowhere near the money to pay for commitments made and people will unhappy in either case. For what it’s worth, blue collar, there are many people (I’d guess likley myself) who have fully paid into Social “Security” and will either see it become insurance (needs based) or see benfits markedly reduced and/or retirement ages increased. Frankly, while I don’t like it, the country will need it. The same applies to California government unions. You can’t tax people for your benefit.
Concerned Parent:
“For what it’s worth, blue collar, there are many people (I’d guess likley myself) who have fully paid into Social “Security” and will either see it become insurance (needs based) or see benfits markedly reduced and/or retirement ages increased. Frankly, while I don’t like it, the country will need it.”
Social Security can be fixed without the above measures by simply removing the $106k cap on payroll taxes. By having that cap, payroll taxes are quite regressive.
Or instead of having the cap removed, apply a “donut hole” with a tax free “holiday” from $106k to $250k, or even $300k. Above $300k, the payroll taxes kick back in. Hellllllo, wall street bonuses….
That makes SS solvent for many, many decades. And fixes one part of Ronnie Reagan’s legacy: one of the largest working, middle class tax hike in history, when he doubled payroll taxes.
Willy,
Fair enough. There a number of measures that can be taken if one sees the problem of something that is unsustainable and manages it over time. Either of your solutions will require some political will (Obama may have to go back on his promise not to raise taxes on anyone with an income under $250,000, Republicans will spew forth their usual anti-tax rheotoric, etc.) as well as some sacrifice from some. Out of curiosity, with the new plan, payroll taxes up to whatever one’s income is, would a larger contributor be entitled to larger payouts? While totally off topic, it gets to whether Social Secutiry is a mandated retirement plan with the govornment giving return on an investment or is it an insurance plan to make sure that all seniors avoid poverty?
Back to government pensions. Independent of one’s views on Social Security, it does not kick in at the age of 50. If you start to draw funds earlier, your benefit will be lower. From what I can tell, the problematic pensions are fixed, and kick in for life.
Without rasiing taxes, what’s your simple fix for the state’s unfunded liability?
Blue Collar:
I don’t need to “show my work.” As I said, I’m not doing your homework for you. Just about everyone that has posted here except you can see the current system is unsustainable and will result in higher taxes or service cuts or both. There is no point in conversing any further with you on this matter as it is a dialogue with the deaf.
Stop working at age 55 and get 80% of your salary for life with no further obligations–guaranteed? The same medical benefits, too? That’s a 25+ year paid vacation! Who cut that deal? I want him with me when I buy my next car.
Algernon- the deal was cut by two thieves, plotting how to divide up the money they took from you and I.
Did the Math, Menlo Voter, Concerned Parent etc. Again I am not part of any union and yes like many PERS enrolled public employees I also pay Social Security. Also very few of my posts are from work mostly from home however I have posted a few times during lunch or a break time. No I don’t work for the City and I work Fridays I even worked last Saturday and no I did not get OT because I am salaried. No trouble I like my job and it feels good to do a good job for the tax payers of my community. I do appreciate my job it is a good one and I do whatever it takes to get the job done, just like I am sure all of you do. Now to the issue at hand I understand your argument and the info from the Stanford study at first glance does tend to bolster your side. But lets get into the math the Stanford study uses different accounting practices and numbers to factor their half a trillion dollar PERS deficit, PERS has been providing unprecedented returns for 80 years. Has the fund gone up and down yes just recently up 12% or 46 Billion dollars. I will post PERS response but I first ask this question who would you trust in this case the Stanford Study or the PERS pension fund who has been doing this for 80 years and have been very successful at it. I recall back in the day trader days when PERS had so much money in the stock market when they made trades there was a term they called it the PERS bounce. Anyway I trust the PERS Actuaries and I’ll keep my money with them.
Here is the info: Stanford’s Institute for Economic Policy Research released a policy brief “Going For Broke: Reforming California’s Public Employee Pension Systems” that relies on outdated data and methodologies out of sync with governmental accounting rules and actuarial standards of practice. The report fails to take the following into account:
Investments
* Over the past 20 years, we have earned an average annual investment return of 7.9 percent – which includes the past two years when we suffered significant investment losses due to the Great Recession. Thus, our assumptions, from actual experience, have proven valid, relative to the 7.75 percent discount rate.
* The study appears to use the yield of the 10-year Treasury bond as the risk-free discount rate to estimate the present value of liabilities. The duration of the 10-year bond is around 8 years and well below the estimated duration of the CalPERS liability in the study. It would be more appropriate to use the yield of the 30-year Treasury bond as the risk-free discount rate for purposes of such a comparison.
* CalPERS does not believe that using a risk-free rate as suggested in the study is appropriate since the fund can earn a premium over the risk-free rate with high certainty by investing in a diversified portfolio with an acceptable level of risk.
* The study relies on data when the system had $45 billion less in assets than it has today. CalPERS assets are valued at $206 billion – a gain of more than $45 billion since the market downturn.
* Additionally, its findings are based on a mathematical model that uses current interest rates, which are very low and make liabilities appear to be much higher. That method is inconsistent with the Governmental Accounting Standards Board and current actuarial standards.
* The study recommendations are based on bond returns over the past 25 years of 7.25 percent for investment grade corporate bonds, which are only 0.66 percent lower than CalPERS total return of 7.91 percent but with much lower volatility. CalPERS experts believe that this reasoning is flawed. Prospective returns on bonds are much lower today since yields are at an historic low and the return to bonds will equal the current yield to maturity which is around 4 percent for most broad band indices. Also bonds could be more volatile than the past if economic conditions are more uncertain as in the recent period.
* CalPERS is taking steps to modify its asset allocation approach and better allocate assets according to their macro risks and fundamental characteristics. This could result in addressing inflation and interest rates as macro risks.
* It ignores our diversified investment portfolio that has been time-tested during our 78 year history. If CalPERS had followed the recommended approach in the study, we would have given up billions of investment earnings, that have helped finance pensions rather than tax dollars.
Actuarial/Benefit Formula Related
* The study misstated some of the benefit formulas in Table 3 and seems to suggest that CalPERS violate the California Constitution by using surpluses to “reduce state debt.” Pension raids were determined to be unlawful during the Wilson Administration.
* To adhere to some of the changes suggested in the report, CalPERS would be violating actuarial standards of practice and undo 50 years of governmental accounting rules in favor of an approach that would be “zero” risk.
* Funded status should not be viewed as a long-term irreversible trend. A pension fund’s funded status – whether a liability or surplus – is constantly changing, depending on current economic circumstances. It is a snapshot in time that can change dramatically over a fairly short period of time due to the health of the overall economy. Funded status snapshots are useful in showing how far or how near one is to full funding. Experts agree that a funded status of 80 percent is the mark of a very healthy plan. CalPERS notes that the Stanford Report acknowledges that using the data selected, CalPERS was more than 80 percent funded.
* Benefit formulas are not set by CalPERS. They are determined through the collective bargaining process, between the employer and the employee representatives. CalPERS recently held the California Retirement Dialogue, and information on the various viewpoints on benefit formulas is available here.
Future Steps
* CalPERS regularly evaluates its assumed rate of return every three years. At our May investment committee meeting, the Board will hold a workshop on capital market assumptions, finalize those assumptions in September, hold an asset-liability workshop in November, and take final action on an asset mix in December. In February, the Board will take the final step in the process by setting the actuarial assumed rate of return/discount rate. These meetings are open to the public and CalPERS is committed to obtaining all viewpoints on these issues. We invite the authors of the study to participate in the discussions.
So Blue Collar,
It appears that based on CalPERS provided information, there is no cause for concern? If so, there should be no problem with CalPERS guaranteeing these returns. Public emplyee unions should be happy to put their money where their mouths apparently are and go along with whatever CalPERS is able to deliver. The concern of many on this board is that many of the “tried and true” methods referenced in your post do not inspire confidence going forward. If all are willing to trust CalPERS and assure all of us there will be no taxpayer bailout to make up the shortfalls, that would be very reassuring. Somehow, despite your lengthy posting of how great things are with pension funding, I’m guessing government workers won’t trust CalPERS when push comes to shove.