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California pension system playing politics with your money

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The California Public Employees’ Retirement System (CalPERS) is in the news once again. I wish I could report that with a record high bull market that CalPERS was well on its way to becoming solvent. Unfortunately, CalPERS, the largest public pension fund of approximately $345 billion has roughly $138 billion in unfunded state actuarial liabilities. Due to unrealistic actuarial assumptions and poor investments in Environmental, Social, and Governance (ESG) funds; CalPERS is moving closer to collapse than solvency.

In simpler terms, what is going on is that CalPERS is playing politics with retiree and taxpayers’ money. Meaning future, and current retirees will inevitably see a dramatic cut in their pension benefits; which they have been paying into their entire careers. Cuts in local and state government services to redirect funds into CalPERS as well as the inevitable tax increase.

Laundering Money

One of the ways they played politics with our money was the passage of SB 400 in 1999, which gave government employees a retirement security reserved for the wealthy. This meant that many retirees could retire at 55 and in most cases collect more than half their highest salary for life. California Highway Patrol officers could retire at 50 and receive as much as 90% of their peak pay. So basically, they dramatically increased pension benefits without any way of paying for it.

Why do this? Taking taxpayer dollars and using it for your political campaign is illegal. But union contributions are perfectly legal. Government employees are not to blame; it’s their unions. Government employees have no choice, they must be part of the union and pay union dues. Most unions are like most crony capitalistic corporations. They want to limit competition through government actions and want to make money for their shareholders.

So unions work hard at eliminating any outsourcing of services and jobs to private companies. If it must be done, it must be a government union member. Meaning more employees will be needed and hired and thus more union dues paid. Unions also work hard to increase pension and salaries because yet again more money means more money for the union. The union bosses or in the corporate world known as CEOs, take those taxpayer-funded union dues and then turn around and give millions to political campaigns. Thus you have essentially laundered millions of dollars of taxpayer money and made it legal to donate to politicians that promise you billions in taxpayer-funded benefits. This is no different then crony capitalism. Different shareholders, same corruption.

Crony Capitalism & Ideological Investments

Secondly, they play politics by investing in companies that have no promise of a reasonable rate of return. They invested in failing renewable energy companies because it’s more important to invest utilizing ideological metrics than sound fiscal policy. They divested in successful businesses who engage in legal commerce because their products or projects don’t align with their ideological views. They pressured companies to diversify their board of directors to meet their ideological views of diversity, or they will not invest in their companies. This, in essence, is blackmailing businesses to do what CalPERS wants, or they will pull millions if not billions of dollars from these companies.

The consequences of these actions are that many of the most successful and profitable companies with safer and higher rates of return don’t need CalPERS money. They do fine without them. CalPERS, on the other hand, needs to invest their money and thus are limited to less financially stable and untested companies. Companies in desperate need of liquidity will do as CalPERS wants. But in the end, picking companies based on ideology instead of sound fiscal decisions isn’t a sound investment strategy. Thus, lower rates of return and higher risk for loses will continue to create greater insolvency due to these ideological and politically motivated investments. Overall, they could care less because even though they don’t invest their own money in ESGs. Their ideological investing will drive their base to the polls and keep their political coffers full.

But before you think its all about ideology it is not. Crony capitalism plays a part as well. These companies in desperate need of capital don’t do what CalPERS wants, and that’s all. These same companies turn around and donate back to these same political coalitions which gave them all that money. Why just force the hands of these companies when you can force their hand and expect campaign contributions at the same time? Its a win-win for politicians.

My Solution

For those unaware. I’m a candidate for California State Controller in 2018. When I’m elected, I will be an ex officio member of CalPERS. As Controller, I can independently audit government agencies that spend state funds. With this authority, I will work to eliminate CalPERS. Due to the corrupt nature of politics in Sacramento, this will most likely happen through a voter-approved ballot measure. As Controller, my examination and audits will be used to expose the mismanagement and most likely propose the following changes.

First, the State will no longer invest on behalf of current or retired government employees. Responsibility will be handed over to their unions. Unions told us the pension benefit found in SB 400 were not excessive and could be paid for and managed. If that is the case, they should handle the investment portfolio on behalf of their members. I understand that union members are taxpayers, but the entire population of California taxpayers shouldn’t be on the hook for their union’s decision to push for pension benefits like those found in SB 400. The state and local municipalities that participate in CalPERS will contribute a fixed percentage of current employees salaries and the union, not the taxpayer, will be responsible for the consequences of making ideological investments.

Secondly, all future state employees can either decide to have their unions invest in a pension on their behalf or they can decide to invest on their own through an IRA or 401k. Current government employees can also decide to pull out a portion of their funds and invest on their own. With CalPERS heading for a fiscal cliff, we should allow government employees to determine what is best for them.

By doing this, we can fix the problems we are currently experiencing with this pension crisis. Taxpayers are protected, and government agencies will have a set percentage based on wages on what they must contribute to their employees’ retirement. If we take sound fiscally responsible actions, we can not only increase the rate of return on CalPERS investments, but we can protect taxpayers, reduce corruption, and give great stability and certainty to government workers.


Sources – CalPERS Pension Reports & Pension Crisis

CalPERS’ green investments underperform, business group says | The Sacramento Bee

http://www.sacbee.com/news/politics-government/the-state-worker/article188047259.html#emlnl=Breaking_NewsletterThe nation’s largest public pension fund is leaving money on the table by favoring environmental and social causes in its portfolio, a business-backed nonprofit argues in a study it’s releasing Tuesday on the California Public Employees Retirement System.

The report by the American Council for Capital Formation criticizes CalPERS’ sustainable investing strategies, which include engaging with companies to encourage them to address climate change, pressuring companies to diversify their boards of directors and investing in certain funds that nurture companies with those priorities.

How a pension deal went wrong and cost California taxpayers billions – Los Angeles Times

http://www.latimes.com/projects/la-me-pension-crisis-davis-deal/More than 200,000 civil servants became eligible to retire at 55 — and in many cases collect more than half their highest salary for life. California Highway Patrol officers could retire at 50 and receive as much as 90% of their peak pay for as long as they lived.

CalPERS had projected in 1999 that the improved benefits would cause no increase in the state’s annual pension contributions over the next 11 years. In fact, the state had to raise its payments by a total of $18 billion over that period to fill the gap, according to an analysis of CalPERS data.

The pension fund has not been able to catch up, even though financial markets eventually rebounded. That’s because during the lean years, older employees kept retiring and younger ones continued to build up credit toward their own pensions. Pay raises and extended lifespans have magnified the impact of the sweetened benefits.

By far the largest group of state workers — office workers at the Department of Motor Vehicles, the Department of Social Services and dozens of other agencies — contributed between 5% and 11% of their salary in 2015, and the state kicked in an additional 24%. To fund their more costly benefits, Highway Patrol officers contributed 11.5% of pay and the state added 42%.

CalPERS Report – ACCF Corp Gov

The nation’s largest public pension fund, the California Public Employees’ Retirement System (CalPERS), is severely underfunded.  With more than $300 billion in assets, CalPERS future liability exceeds those assets by more than $100 billion. How did things get so bad? A number of factors have contributed to CalPERS’s relatively recent and precipitous decline.

Mr. Roditis a candidate for California State Controller. He is an entrepreneur and owns several companies. He graduated from UCSD with a B.A. in Political Science/International Relations. He's a former City Commissioner with the City of Anaheim, CA. He's a Conservative Constitutional Federalist. Follow him on Twitter @KonRoditis

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4 Comments

4 Comments

  1. T B

    December 8, 2017 at 11:51 am

    I will definitely vote for you!

    Here’s my solution to the public pension crisis:

    https://drive.google.com/file/d/0B90sU3A85q46OE9BZHJFSWEzbGM/view?usp=drivesdk

    Thoughts?

    • Konstantinos Roditis

      December 8, 2017 at 12:42 pm

      Thank you for your support and sending me this article. My initial concern with this proposal is that this would take pensions run by the states and local municipalities and merge it with social security and thus move more power to the federal government. I’m a federalist, and I believe that social security is unconstitutional and the power for the federal government to have social security is not found in the constitution, specifically Article I, Section 8 of its enumerated powers. On the federal side, I would prefer to see a plan that would begin to shrink and eventually eliminate social security and devolve and transition those powers to the states as our constitution prescribes.

      The federal government has never shown signs of fiscal responsibility, and thus I doubt any safeguards put in place will actually work because the federal government will rather spend recklessly and just print more money and raise the national debt. I believe we must eliminate power for the federal government and the state government and move to greater local control. That is one reason why I created Trickle-up-Taxation ( http://noqreport.com/2017/11/07/trickle-taxation-plan-bring-local-control-california/ ). I believe moving forward a plan similar but maybe not identical to Prop B that was passed in San Diego is needed for all future government employees ( https://www.sandiego.gov/sites/default/files/legacy/city-clerk/elections/city/pdf/retirementcharteramendment.pdf ).

      Cuts in defined benefits will happen as the courts have ruled that defined benefits can be adjusted, but it must be a reasonable benefit. The issue with this is it is not defined what is reasonable. All pensions are different and have different contribution rates and defined benefits, as well as, various jurisdictions with different laws governing them. So with your plan, some pensions might be defined as reasonable to take maximum social security payout and other it might not be. It is entirely subjective, and it will depend on the judge ultimately, as almost every pension will fight this in court. They want to keep their defined pension benefits.

      Ultimately, I believe that all new employees should move to a 401k system. I think this is the best solution. Move pension investment from the politicians’ hands to the unions, and they can invest it themselves or better yet hire the right people to do this. Most of the people on CalPERS have not investment or financial experience. Make changes to defined pension benefits with a maximum payout per year. As State Controller I will study this and look for the best solution, not the best political solution and move to fix the problem and thus best protect the taxpayers and the government employees which have done nothing wrong.

      If you would like to help support my campaign, please consider contributing today. https://secure.anedot.com/roditis/donate

      • T B

        December 8, 2017 at 12:53 pm

        Thank you for your quick and thoughtful response, a lot of what you say makes sense. I understand my approach would only be considered after an apocalyptic correction in the stock market, thereby rendering all public pensions around the world insolvent. Not sure how accurate it is, but I have read many expert’s opinion that once a fund dips below 50%, it will never recover to full funding status.

        • Konstantinos Roditis

          December 8, 2017 at 1:02 pm

          Many factors including payouts, number of retirees to current employees, number of future employees (increasing or decreasing), the age of retirement, the rate of return, etc. play into when the point of no return happens if changes are not made. But I wouldn’t be surprised if 50% isn’t a reasonable rough average of future collapse of a pension system.

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Guns and Crime

ICE gets media beating for taking illegal immigrant into custody over Mexican homicide warrant

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ICE gets media beating for taking illegal immigrant into custody over Mexican homicide warrant

It’s the type of story the media craves. An illegal immigrant, Joel Arrona-Lara, who “hasn’t done anything wrong” was detained by ICE agents while transporting his pregnant wife to the hospital. She ended up having to drive herself the rest of the way before delivering their son.

The spin is predictable. They skim over the fact that he has an arrest warrant in Mexico for homicide while putting all the focus on his wife’s dilemma. They even attempt to cast doubt on the warrant because the lawyer for the family says he couldn’t find a record of the warrant. This last part is most peculiar because it would be simple for a major media outlet to confirm the existence of the warrant. They did, of course, but they won’t report that when they have a better quote from the lawyer denying its existence.

Eventually details will emerge about the warrant, but not until the media inflicts as much damage as possible on ICE and anyone in favor of legal immigration being the proper way to enter the country.

Here’s the story. If you click through, you’ll even get a link at the bottom to the family’s new GoFundMe page:

ICE Detains Man Driving Pregnant Wife To Deliver Baby, Says He Is Wanted For Homicide In Mexico

https://losangeles.cbslocal.com/2018/08/18/joel-arrona-detained-by-ice-san-bernardino-driving-wife-to-deliver-baby/Her husband Joel Arrona-Lara was driving his wife to the hospital for a scheduled Cesarean section Wednesday afternoon when they had to stop to get gas. That’s when their car was approached by two SUVs. Maria said they were officers with Immigration and Customs Enforcement.

The mother of five was then asked to show her identification and complied. When the agents asked Arrona-Lara, the couple said he didn’t have the ID on him, but that they lived nearby and could go get it for them. The agents then asked Arrona-Lara to exit the vehicle, searched the car for weapons, and put Arrona into custody, leaving Maria alone at the gas station.

My take

There’s no doubt the circumstances surrounding all of this are unfortunate. Pregnant wives should not have to drive themselves to the hospital for a scheduled C-section. On the other hand, suspected murderers shouldn’t be entering the country in the first place. That point won’t be mentioned by mainstream media.

ICE has a responsibility to take people like Arrona-Lara into custody so it can be determined whether or not they should be deported. There may have even been a certain degree of leeway given had there been no records other than his status as an illegal immigrant, but being a suspected murderer with an arrest warrant took away any chance at leeway. The ICE agents did the right thing.

As a legal immigrant, I have no sympathy for those who cheat the system and break our laws. Blaming the ICE agents for doing their job correctly in order to keep us safe is the type of insanity mainstream media loves to sell us.

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Democrats

The real reason Ocasio-Cortez is afraid of the press

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The real reason Ocasio-Cortez is afraid of the press

For at least the second time, reporters were barred from covering an event featuring Socialist Democratic darling Alexandria Ocasio-Cortez. The campaign’s reason: we want attendees to feel comfortable since there’s so much national press covering her.

This is an absolutely ridiculous excuse, of course. Nobody goes to a campaign event without knowing the press will (should) be there. It doesn’t make them less comfortable and may actually give some a sense of security knowing the answers to their questions will be judged by more than the audience at hand. That’s one of the reasons for the press in the first place, to give information about an event to people who cannot attend.

Instead, the press is getting another roadblock:

Ocasio-Cortez bans press from covering campaign event

http://www.foxnews.com/politics/2018/08/17/ocasio-cortez-bans-press-from-covering-campaign-event.htmlAlexandria Ocasio-Cortez, the Democratic socialist star running for New York’s 14th congressional district, is facing criticism after her campaign banned journalists from covering a town hall meeting with voters this week.

The Queens Chronicle, a local news outlet, reported that the campaign for the 28-year-old progressive prevented reporters from attending a campaign event in Corona on Sunday, even though it was open to the rest of the public. The campaign reportedly barred reporters from a prior event as well.

It’s conspicuous that a local publication was barred because it runs contrary to the narrative the campaign is trying to sell. So why is she being hidden from reporters at these types of events?

My Take

It’s clear that her exposure is her best friend and worst enemy. Being talked about is a politician’s best friend on the campaign trail, but it also offers a risk of failure. This is most common in events like the town hall meetings she is holding because she’ll be forced to think on her feet.

What if she can’t think on her feet? What if her answers when placed in an unscripted situation the type of answers many would expect from an inexperienced socialist?

Until she’s ready to handle the pressure of having press cover these events, she won’t be ready to hold public office at this level. The House of Representatives isn’t for people who need to be protected from their own answers.

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Culture and Religion

Bettie Cook Scott is a racist politician. And she’s a Democrat.

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Bettie Cook Scott is a racist politician And shes a Democrat

Racism is owned by the Republican Party. That’s the narrative the press and their handlers, the Democratic Party, wants America to believe. Someone forgot to get that memo to Michigan state representative Bettie Cook Scott.

Detroit Rep. Bettie Cook Scott on Asian opponent: ‘Don’t vote for the ching-chong!’

https://www.metrotimes.com/news-hits/archives/2018/08/16/detroit-rep-bettie-cook-scott-on-asian-opponent-dont-vote-for-the-ching-chongMore than a dozen community groups have called on Rep. Bettie Cook Scott (D-Detroit) to apologize for a series of racial slurs sources say she used to describe her primary election opponent, Rep. Stephanie Chang (D-Detroit).

Scott is alleged to have referred to Chang as “ching-chang” and “the ching-chong” to multiple voters outside polling precincts during last Tuesday’s election. She’s also said to have called one of Chang’s campaign volunteers an “immigrant,” saying “you don’t belong here” and “I want you out of my country.”

My Take

There are two important takeaways here. First is the hypocrisy surrounding Scott, a (formerly) rising star in the Michigan Democratic Party. If the comments she made were spoken by anyone other than a Democrat, the calls wouldn’t be for an apology. The press and social groups would be calling for her to step down and jump into a hole somewhere.

The second point is that in the real world, the one not seen through the lens of liberals and the media, racism exists everywhere. It is not owned by Republicans, conservatives, old people, white people, or any other classification. One can even make a valid argument that it’s no more prominent in the Republican Party than it is in the Democratic Party that supports groups like Antifa and Black Lives Matter.

Racism must be eliminated from society. That will never happen as long as so many people naively believe it only exists in the minds of certain people on the political right. It exists everywhere. Accept that and we can work to make it stop.

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