City Journal Winter 2014

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Winter 2014
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Steven Greenhut
Progressives for Pension Reform? « Back to Story

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Have no a lot of cash to buy a car? Worry no more, because that is real to get the credit loans to resolve all the problems. Thence take a short term loan to buy all you want.
Its a damn disgrace that these unions are crippling this country..Teachers I know are going to Italy,Spain ,Hawaii..What a joke..We need a new bill like SB 400 to become law..These are the same guys who invested in cigarette companies while teaching kindergarden kids,etc. !So Sad..
A recent study that compared private sector compensation and public sector compensation found the following facts to be true:

Jobs in the public sector typically require more education than private sector positions. Thus, state and local employees are twice as likely to hold a college degree or higher as compared to private sector employees. Only 23% of private sector employees have completed college as compared to about 48% in the public sector.

Wages and salaries of state and local employees are lower than those for private sector employees with comparable earnings determinants such as education and work experience. State workers typically earn 11% less and local workers 12% less.

During the last 15 years, the pay gap has grown - earnings for state and local workers have generally declined relative to comparable private sector employees.

The pattern of declining relative earnings remains true in most of the large states examined in the study, although there does exist some state level variation.

Benefits make up a slightly larger share of compensation for the state and local sector. But even after accounting for the value of retirement, healthcare, and other benefits, state and local employees earn less than private sector counterparts. On average, total compensation is 6.8% lower for state employees and 7.4% lower for local employees than for comparable private sector employees.

Read more here:
http://www.nirsonline.org/index.php?option=content&task=view&id=395
Fiscal thug public employees are nothing but new age "pirates". Hijacking public assets and budgets, paying themselves oversized total compensation in every category as ransom to the complicit union toadie and bribed officials. Under the guise of "safety and children" these thugs embedd their largess in "operating budges" which is simply their benefits skyrocketing and blame the need for unending fees, taxes and more unfunded debt ... which is intellectuall dishonesty and, in my mind, a ponzi scheme. Taxpayers - and good hearted voters - have been raped by these bandits and their children literally thrown overboard as they will be left the true victims of these greed which says "consume today and leave the kids the bill tomorrow"...our country is in danger.
SeeSaw said ..."Robert Reich, currently a university professor and former Secretary of Labor has been quoted as saying, in so many words, "When apples are compared with apples, including experience and education, private sector pay comes out ahead of public sector pay"."

Note the word "PAY" in that quote. Well do the comparison on "TOTAL COMPENSATION" (which includes Pensions & Benefits as well as pay), and Civil Servants will ALWAYS be WAY higher than comparable Private Sector workers.

That's WHY pension & benefits in the Public sector need to be reduced and for CURRENT (not just new) workers.
Have no enough cash to buy some real estate? You should not worry, just because it's available to receive the loans to work out such problems. Thence take a sba loan to buy all you want.
Robert Reich, currently a university professor and former Secretary of Labor has been quoted as saying, in so many words, "When apples are compared with apples, including experience and education, private sector pay comes out ahead of public sector pay".
"It is difficult to get a man to understand something when his salary depends on his not understanding it." — Upton Sinclair.

Who, himself, was a socialist.
Quoting Honest Abe: "allow me to guess; Greenhut makes over $100k/yr himself, perhaps even more than $1mil/yr -right. Exactly how is his livelihood paid? "

Not sure about Steve Greenhut (although his efforts address a very problematic issue), but it's clear (from your comment) how YOU must make your living ..... riding one of the many Civil Servant Gravy trains .... and you're doing your part (via comments like this) to keep that gravy train rolling right along.
allow me to guess; Greenhut makes over $100k/yr himself, perhaps even more than $1mil/yr -right. Exactly how is his livelihood paid?
What we are seeing is the result of Lenin's order to all Communists to inflitrate labor unions by any and all means possible, to take them over, and to destroy Capitalism from within the workplace. His genius for revolution is confirmed with every labor strike, work and benefits increase beyond what the economy can support, and the buying of political support with votes and cash contributions to campaigns. Lenin and Marx win. Everyone else loses.
Quoting ..."By 2015, nearly 20% of the city’s general fund budget is expected to go toward the retirement costs of police officers and firefighters, who now have an average retirement age of 51. The figure was 8% last year. Once civilian employees are factored in, nearly a third of the city’s general fund could be consumed by retirement costs by 2015.”"

THIS SITUATION is BEYOND ABSURD .......

All Civil Servant pensions/benefits in excess of that received by comparably paid Private sector taxpayers (retiring at the SAME age with the SAME years of service) should be disavowed ..... meaning NO MORE taxpayer funding.

Virtually all of these Plans have been "negotiated" with nobody at the "bargaining table" looking out for the taxpayers' interests.

Greedy unions (and their members) and corrupt/enabling, self-serving, contribution-soliciting, vote-selling politicians are to blame.

Let THEM (NOT taxpayers' money) deal with the problem.
Let's call this article what it is: "union scapegoating."
However , this is great news for the rest of the republic or at least the well managed states such as Texas and N.Carolina . Those jobs leaving Cali are going somewhere . Unfortunately they're also going to India and China .
steve i hope you are right but the people involve are so myopic and short sighted i have my doubts. Basically they think every govt worker is a "servant" even a toll collector or DMV worker and every engineer, accountant, sales person etc is a multi millionaire ripping off the system. Even if you show them facts they will say "what about Mark Hurd of HP who got 14Mill"- not too bright
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.
THERE IS NOTHING THAT CAN BE DONE. SAN FRANCISCO WILL BE THE PROOF THAT.
IMAGINE THE AVERAGE RETIREMENT AGE OF 51.
JUST VOTE A CAP ON ALL RETIREMENTS AT 75K AND AGE 65. MAKE IT SIMPLE. THATS IT.
I can not believe this effort to villainize unions, loyal public servants and collective bargaining. Pension funds are not a slush fund to be raided every time the economy is suffering. The public servants that paid into these funds and the bargaining the unions made on their behalf were to compensate these public servants for years of salaries far below what they could make in the private sector.
You are mixing apples and oranges. The CalPERS $100,000 pension club database include city employees, county employees, fire district employees, water district employees, utility district employees, and a few state employees. The top of the list is a former city manager of Vernon California.