Wednesday, December 14, 2011

CalPERS Responds To Stanford Pension Study

At the risk of ripping off the scab that has been trying to form on this open wound here in Costa Mesa, today I present to you - without editorial comment - the response CalPERS issued yesterday to a recent Stanford Institute for Economic Policy Research study. According to news reports HERE and HERE, this study, released yesterday, studied California's three largest pension systems - CalPERS, the state teachers' retirement system and the University of California retirement system - and concluded that the funds cannot earn enough to cover growing pension obligations. According to the real media, Treasurer Bill Lockyer was so upset by the Stanford report that he resigned from the advisory panel in protest.

CalPERS Issues Response to Stanford Pension Study

Below is the statement which CalPERS issued today in response to the
Stanford Pension Study. It can also be found on our CalPERS Responds
website at:

CalPERS today responded to the Stanford Institute for Economic Policy
Research (SIEPR) report examining CalPERS, the California State Teachers'
Retirement System (Casts) and the University of California Retirement Plan

"The study is written from a perspective that is intended to exaggerate
perceived costs and the instability of pension systems," said Ann Boynton,
Deputy Executive Officer of CalPERS Benefit Programs Policy and Planning.
"The report's findings were based on low discount rates to artificially
magnify unfunded liabilities. It is important to remember that CalPERS
invests in a highly diversified portfolio that includes stocks, real estate,
and other assets that have historically earned significantly higher returns
than the rates assumed in the study."

The health of the CalPERS fund has improved in the last two fiscal years as
noted below:

Over the past 20 years through June 30, 2011, CalPERS has earned an
average annual investment return of 8.4 percent in excess of the pension
fund's actuarial rate of return assumption of 7.75 percent needed to pay
long-term benefits. The Fund has achieved this rate by investing in a
diversified portfolio with an acceptable level of risk. This historical
average includes steep losses experienced in 2008-09.

As of the most recent fiscal year end, the Fund earned a 21.7 rate of
return and gained back $60.8 billion from the recent 2009 low of $181
billion. CalPERS assets currently stand at more than $224 billion.

CalPERS has maintained good levels of funding and delivered promised
benefits for 80 years. Currently we are near a 75 percent funded status,
with an unfunded liability of $85-90 billion.

For every dollar paid in pension benefits over the last 20 years the vast
majority came from investments:

Investment earnings 66 cents
Employer contributions 21 cents
Member contributions 13 cents

More information on CalPERS pensions is available in our Guide to CalPERS
Pension Facts.

For additional CalPERS news and information, visit our Press Room at:


And so, round and round we go, looking for the truth about the pension situation in our state and, by extension, in our city. There's nothing like more conversation about unfunded liabilities to get you out of the old Christmas spirit.



Anonymous RickandJenn said...

Silence on this one so far. Haven't seen any comments. Maybe the BC is behind on posting, or maybe the usual haters and do-nothings who just want the system to stay in place and bankrupt us all have no response to this.

Math is math. Numbers are numbers. Fix the problem now at the local and State level or just dump the problem onto your kids. Solution is hard but it's a problem we must solve.

Fix the pensions Costa Mesa and Sacramento!!! Fix them now!

12/14/2011 03:02:00 PM  
Blogger The Pot Stirrer said...

Nope, yours is the first - and only - comment so far. Maybe folks are so immersed in the holiday spirit that they don't want to put on their Grinch outfit and rail about pensions. Oops, I guess not ALL folks are staying away, huh? Nice to have you back... again..

12/14/2011 03:29:00 PM  
Anonymous MLK Was an Amazing American said...

The writing style of "RickandJenn" sounds like that of the racist CM blogger.

12/14/2011 04:01:00 PM  
Anonymous Reality bites said...

The pension changes as a sresult of SB 400 in 1999 were totally unsustainable. It is just that simple. It was a mistake and until new legislation fixes it, it is up to local governments to immediately reform their own pension schemes. No more 3%@50 in ANY MOUs. Employees pay the full employee contribution. New hires get a 401(k) and Social Security - no more CalPERS.

12/14/2011 04:46:00 PM  
Anonymous X said...

the 3@50, some of it retroactively if you can believe that, was what put us over the top. That rate demanded much higher ROI. So calpers has to gamble in riskier areas to get needed return. If they win, all is ok. If they lose, taxpayers stuck for gamble. 3@50 must be repealed before any new hires are brought on. The general employees pension at around 2@55 is not so dire but still too generous. They can "retire" and come back as consultants and draw wages and get pension. Plus the younger people don't get to replace them in their jobs. When you retire, you should not be able to come back to government service. Go ahead and start a business or work somewhere else but you should be blackballed from being a consultant at your previous position. Give the jobs to the kids! go fish. better yet, raise the retirement age to 65.

12/14/2011 06:20:00 PM  
Anonymous Andy E. said...

Yup, "math IS math" and from what CALPERS says their math is working out fine. What would they have to lie about? What's to gain? I don't trust the Stanford study and I'm a Stanford Alum.

401k plans are not now and never were meant to be primary retirement instruments. Putting every worker on a 401k is not the panacea. It's a mistake.

Sure overhaul PERS, but do away with it as one poster said? The fund has historical basis with which to base it's actuarial data. It has been paying out benefits longer than the 401k has been around. PERS has a long standing track record.

You are right Mr. Pot Stirrer; just more fodder for idealogues and those with weak minds who follow the ideas of others.

12/14/2011 08:08:00 PM  
Anonymous Facts don't lie said...

Andy E., nice dodge. Social Security and 401(k), not just 401(k). Don't play games.

Calpers may have worked historically, but retroactive 3%@50 has doomed it. They knew that when it was changed, and it has been proven a disaster.

Ron Seeling, the CalPERS chief actuary, stated in testimony that Calpers pension costs are not unsustainable. You can try and hide the facts, but Calpers itself has identified the current system as doomed.

Calpers said in January 2011 that it needs 7.75% annual returns, and that it can only cover 70% of its obligations - leaving local governments on the hook.

"CalPERS and CalSTRS need returns of 7.75% per year to meet these obligations. Even with the recent year's good results, both funds have averaged returns below that rate over the last decade. This has put state and local governments on the hook to cover shortfalls, and has increased pressure on public employees to increase the contributions they make from their paychecks.

In January CalPERS said that under current projections it would only be able to cover 70% of its future obligations."

Keep spinning, this is reality - not ideology.

12/14/2011 11:47:00 PM  
Anonymous Phil said...

Kudos to the Pot Stirrer for posting this. We may not agree on many things, but one thing I will give him credit for is posting stuff on the good and the bad. Glad the information is out there for folks to make up their own minds on.

You will see this as the big election issue in CM in 2012. Folks will have to pick a side. Financial reform, or revert back to business as usual.

12/15/2011 08:10:00 AM  
Anonymous Reality bites said...

I think Facts don't lie has a typo - Ron Seeling said that CALPERS pensions costs were NOT SUSTAINABLE, or UNSUSTAINABLE, not the opposite.

12/15/2011 11:04:00 AM  
Blogger The Pot Stirrer said...

Reality bites,
Saw that, too... thanks for the catch and correction.

12/15/2011 01:08:00 PM  
Anonymous Faders? said...

Here's a question.

Looks like all the Council Haters are fading. It is difficult to keep up al that energy.

Also Cancel the Layoff signs are fewer and fewer.

That is the reality.

I am wondering if now is a good time for a name change?

Should we start calling Geoff West, Greg Ridge, Sandy Genis, Ramadan and a couple others that are left ...

Should we start calling them the Faders, to memorialize their efforts?

That's the big question out there.

12/15/2011 01:16:00 PM  
Blogger Angry White Man said...

If I'm not mistaken the courts have already determined municipalities can't get out of the current 3@50 deals, (just ask moorlach or any OC Deputy) The pension reformers need to get a grip on reality and focus on a new second tier system and increased worker contributions.
A defined and guaranteed pension is something every civil servant should have.
As far as our city is concerned I know this current corrupt council has no intention of EVER negotiating in good faith simply because they need to keep demonizing the city workforce. Pigheimer needs his boogeyman and the free (taxpayer funded) publicity his schemes generate

12/15/2011 01:25:00 PM  
Anonymous Solutions, Not Attacks, Please said...

Angry White Man...You are correct. The courts have ruled that existing pension formulas can not be taken away from current employees. Another note is the unfunded liabilities do not disappear either if staff is laid off. Since public safety is the significant cost with pensions, it is necessary for police and fire to pay substantially more towards their pensions like the other bargaining units do. The problem is that they are under no obligation to negotiate until their contracts expire and bullying them will not produce the results the council wants. I am not sure why the council is focusing their venom on the general employees when they already pay a significant portion of their retirement and do not get 3% at 50. Laying off a few maintenance staff will have negligible costs savings. Becoming a charter city will not change existing contracts. So what is the solution? Anyone have any ideas other than personal attacks?

12/15/2011 02:13:00 PM  
Blogger Colin said...

Facts don't lie - Ok, so including SS, he'll get $1.55 a month, instead of $1.43 ;) Man, SS isn't going to be there when I retire (I'm 34) and 401Ks as we can see in the last few years can be looted from the stock market. So if you cash out in the bad years, too bad for you. The safest retirement programs for people are pensions with wide ranging investments. Everything else is a crap shoot.

12/15/2011 03:20:00 PM  
Blogger Colin said...

Faders ? - No, we're still here, your boy is trying a fast one with the Charter nonsense, since the courts decided that his union hissy fit wasn't legal. :) We just don't like to rub every little thing in your nose, like a child that found one false thing a adult said, then keeps harping on it cause they think it makes them smarter or better.

12/15/2011 03:23:00 PM  
Anonymous Mike M said...

No, us council 'haters' are still out here... and we're not going away until after the election. But nice try.

12/15/2011 03:32:00 PM  
Blogger Joe said...

I'm Joe and I'm a hater.

Chorus: Hi Joe!

I hate those who steal from the taxpayer and the less fortunate. I vote at the polls and with my checkbook.

Have a nice day. And fade this.

12/15/2011 04:22:00 PM  
Anonymous Can't fix stupid said...

Exactly how many people in Costa Mesa got a "retroactive 3@50"?


X....Stop talking out your arse! You are clueless!

12/15/2011 10:14:00 PM  
Anonymous X said...

can't fix stupid: i was talking about more than CM when speaking of retroactive pension benefits. Relax and go issue some parking tickets. Google retroactive 3@50 for examples, to much to list here

12/16/2011 06:22:00 AM  
Anonymous Central Valley Farm Animals said...

@Can't Fix:

Don't criticize Menssy aka X, he's just not that sharp.

Unlike him, you might have a real badge. :)

12/16/2011 08:15:00 AM  
Anonymous xyz said...

X: zzzzzzzzzzzzzzzzzz it has already been determined this scheme has zero to do with pensions. Next please.

12/16/2011 07:43:00 PM  
Anonymous Wyatt Earp said...

No sides taken on this post, just a quick history lesson. CMPD was already on a 3% @50 long before 1999. They were in PERS 2% @50 and the city funded a 1% annuity to arrive at the 3% @50. Now, from 1989 to 2002, the city paid NOTHING towards the cost of the pensions (both the 2% and the 3% after 1999) because the return on investment PERS made was so great. PERS simply came along and told the cities and counties it was time the employees benefitted from the tremendous amount of money every year from the return on investment as the benefit was intended. The benefit was not intended to benefit cities to the extent they did not have to pay anything towards the costs all those years. God knows what that was money was instead used for because we know, at least in the case of Costa Mesa, that that money was not saved for future costs. In fact, as best as anyone can figure out, not even a fraction of that cost was saved for the future.

It is debatable whether that was right or wrong, but common sense seems to dictate saving even a fraction of that money for future costs would have been the prudent thing to do. BTW, the cops, FF's and general employees all suggested to the city over those years that some of that money be saved and they were roundly ignored.

Further, the 1999 law only allowed the 3% @50 formula. It did not require it. Therefore, every city and county that went to it did so through negotiations. I know in CM's case it was only done so through concessions from the cops and FF's in other compensation areas. In the CMPD case, the city received $16 million when the annuity was cancelled upon going to the PERS 3% @50 formula. Again, was any of that saved? No, none was saved (If you are wondering how the city accomplished this, again, PERS investments continued to fund the costs even after going to the 3% @50 formula negating the need to use that $16 million or any other funds).

This is neither here nor there at this point. But it can at least demonstrate why employees may not be willing to simply blindly work with the city without some guarantee that more sound policies from the city will emerge. Trust is obviously an issue at this point between both sides. Remember it was Hatch who related the council did not trust the employees. Rather difficult to work in such an environment.

12/17/2011 08:40:00 AM  

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