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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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Federalists

Vice says women shouldn’t have guns

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On Friday, Vice’s Twitter account tweeted out a previous Vice article from June 14, 2016, entitled, “A Very Incomplete List of People Gun Rights Activists Think Should Be Armed.”

The brief article is a lamentation of the belief of Second Amendment advocates, specifically “the NRA and other right-wing groups,” that “the only thing that stops a bad guy with a gun is a good guy with a gun.”

The tweet (below) reads, “The NRA wants to put guns in the hands of: Schoolteachers, Preachers, Anyone who goes into a nightclub, Women …just to name a few.”

According to author Harry Cheadle – who evidently believes that women shouldn’t be afforded Constitutional protections or exercise our God-given human rights – “the goal [of 2A advocates] is to make sure everyone is prepared to engage in a shootout at all times.”

“And by everyone, I mean everyone,” he emphasized.

So, just who, exactly, does Vice believe should be considered prohibited from exercising his/her Second Amendment rights?

“Here is a surely incomplete list of people that gun rights activists believe should be packing heat. Once all of these categories of Americans are all carrying guns on them at all times, presumably we will finally be safe…”

The listed include (as worded the article), but are not limited to:

-Women

-Gay people

-Jews

-Holocaust victims

-Some people who commit domestic violence

-Firefighters

-Every black person in America

-Pilots on planes

-People on the terrorist watch list

Yes, ladies, you read that right. A gun in the hand of a woman is as great a risk as possible terrorists. I can imagine Mr. Cheadle must be petrified at the sight of a woman behind the wheel of a car!

Ahhh!

Yes, Mr. Cheadle is apparently quite fearful of women, Holocaust victims, and black Americans, among others.

Well, as you might expect, this didn’t go over too well on Twitter. Here are just a few of the (often snark-filled) reactions.



And, in case you are wondering about my own response to Vice’s tweet… I joined the NRA.

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Guns and Crime

Scott Israel: SRO avoided confronting Cruz

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The latest breaking news on the Parkland Shooting reveals yet another failure in preventing or mitigating the shooting rampage. According to Sheriff Scott Israel, the school SRO positioned himself outside and never went in. This took place for about four minutes during the shooting that lasted about six minutes. The deputy’s name is Scot Peterson, and he resigned upon being suspended without pay while being investigated.

Cautious Take

There are a lot of perspectives on this development. We shouldn’t rush to judgement as this story is still developing. Was Scot Peterson a coward? Absolutely. He had a weapon and training. No doubt some of the colossal failure rests on him. But not all. Scott Israel is in charge of the Broward Sheriff’s Office, meaning Peterson reports to him. This could be the higher ups scapegoating an underling so that their contribution to the incident, such as the slow response time and failures prior to the shooting go unnoticed. Furthermore, are we to assume, as Scott Israel would have us, that during these four minutes Peterson did absolutely nothing? What if he was ordered to wait? Too many questions remain, so lets wait.

What’s also concerning about the situation is that Scott Israel has been going after the NRA. Many leftists are using this story as fuel against the idea of allowing teachers to have concealed carry. Perhaps that was Sheriff Israel’s purpose in throwing his guy under the bus. Remember this as the government and elected officials play the blame game: Aaron Feis did more to protect students with less.

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Democrats

Blue wave looking weak in Pennsylvania special election

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Comparable to the Arizona Special Election that is to take next week, the Pennsylvania 18th district is in a special election situation because of unacceptable behavior of Rep. Tim Murphy who during an extramarital affair reportedly asked his mistress to get an abortion. The Republicans have handily controlled PA18 for years and don’t want Murphy’s buffoonery to mess things up. The Republican champion in this race is Rick Saccone.  An open seat in a northern state presents a great opportunity for Democrats to cash in on the Blue Wave they keep boasting. The victory of Doug Jones provides a road win Democrats have so far lacked since 2016. Looking to be PA18’s Doug Jones is Conor Lamb. Lamb is an assistant US attorney who served in the Marine Corps. His platform emphasizes healthcare related issues as well as student debt and energy.

Who is Rick Saccone?

The House of Representatives would be a promotion for the current State Rep. However, Rick Saccone hardly has an active record in the PA legislature. For the most part, Saccone has a record of sponsoring lighthearted, if not outright nonsensical bills, such as a resolution appreciating Heinz Ward and Juneteenth. In the legislature, he has a record of voting in favor of guns and unborn. However, Rick Saccone is not a limited government conservative on a local level. In the past he has voted for tax increases.

State of the Race

As of now, all of the recent polling has the 18th district reliably in the GOP’s hands. However, polling in 2018 will likely continue its downward trend of effectiveness. So take it with a grain of salt. The endorsements are piling high for Rick Saccone. He has the thumbs up from both Trump and Pence, along with several conservative organizations. The recent polling is perhaps responsible for what seems like the Democrats capping their support for Lamb. The GOP, on the contrary, is throwing heavy cash on keeping a seat where Tim Murphy ran unopposed in 2016.

Rating: Likely Republican

My Take

Rick Saccone will in my mind comes away as the winner on March 13th. However, he is not nearly suitable for the job as he should be. He legislative record is one of recognizing days of the year as special for a person or group. He does not have a record of sponsoring serious conservative legislation. Though he does have a record of voting conservative, he isn’t a leader on the issues he is campaigning on. The GOP is right to break the bank for his campaign as they aren’t short on cash in this moment. Saccone isn’t a strong candidate in my opinion, but, with some bankroll, he is.

Conor Lamb isn’t a weak candidate but doesn’t have the resources. As for the Democrats, this investment looks like its going sour. Special elections present a time for more eggs to be placed in a single basket. But the Democrats seem to know they are unlikely to win. The Senate races of 2018 looks bleak for them, so the Blue Wave is supposed to take or come close to securing the House of Representatives. In order to do that, they need road wins. Just like the Arizona 8th, this will not be that road win. The crest of the Blue Wave is getting shorter and shorter.

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