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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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Culture and Religion

In UK, Ancient Heathenism Reigns Supreme

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Several minutes had passed since the medical examination of the newborn had begun. They stood inspective over the infant, occasionally murmuring to one another in a hushed tone.  The babe’s father stood nearby, pacing: his eyes intractably fixed on the small group of elders in a desperate attempt to interpret each subtle lift of an eyebrow or pinch of the lips.

Then came that dreaded nod…

The tormented father wept as the judge read the decision aloud: “as thinking it neither good for the child itself…” the child must die.

The above description is not a reference to the United Kingdom’s government-ordered killing of little Alfie Evans, nor the United Kingdom’s government-ordered killing of little Charlie Gard.

The infant’s death-order, described above, was merely the price of societal perfection for his father, living in the Statist abyss of Ancient Sparta.

In Lives: Lycurgus 16, Greek historian Plutarch (48-122 A.D.) wrote of the medical inspections of infants by “elders,” and of the state-ordered murder of infants in Ancient Sparta under the rule Lycurgus, a tyrannical central-planner:

“Nor was it in the power of the father to dispose of the child as he saw fit (as was his right in most heathen societies). He was obliged to carry (the newborn) child before certain men at a place called Lesche; these men were some of the elders of the tribe to which the child belonged; their business was to carefully view the infant, and, if they found it stout and well made, they gave order for its rearing and allotted to it one of the nine thousand shares of land above mentioned for its maintenance, but, if they found it puny and ill-shaped, ordered it to be taken to what was called the Apothetae (“depository”), a (large cave) under Mt. Taygetus (in the Peloponnese); as thinking it neither for the good of the child itself, nor for the public interest, that it should be brought up, if it did not, from the very outset, appear to be healthy and vigorous.” (emphasis mine)

Undesirable Infants – those either deemed unfit in some way, were conceived through rape, were unwanted, or were female – were often exposed, meaning that these infants were tossed into pits or over cliffs, or were abandoned in the wilderness and then left to starve or to be eaten by wild animals.

Such was life in the pagan purgatories of Ancient Greece and Ancient Rome.

Such has life begun to be again, today, in the United Kingdom.

As I type, a toddler lies in the hospital, a prisoner, detained by the pagan pride of evil monsters, by his own Statist government.

The “elders” in the UK have sentenced little Alfie Evans to die, “as thinking it neither for the good of the child itself. Alfie may not be alone in the wilderness, but he is being exposed by the sword of starvation.

Right now, a tormented father weeps for his child.

The cruel winds of an evil-ridden history are circling ’round again.

 

Once Christianity came upon the scene, Christians began to regularly rescue exposed infants.

As Tertullian stated, “Christians sought out the tiny bodies of newborn babies from the refuse and dung heaps and raised them as their own or tended to them before they died or gave them a decent burial” (Early Church History).

“The Christian idea that each individual person has worth because they were created by God was foreign to the lies of pagan society where the State, the tribe, the collective was the only value they knew” (Early Church History).

One can even visit these once abandoned babes at the Catacomb of Praetextatus. “The catacombs are filled with very tiny graves with the epitaph ‘adopted daughter of…’ or ‘adopted son of…’ inscribed on them. These inscriptions refer to the many babies and young children Christians rescued from the trash over the centuries” (Early Church History).

Unlike during the times of Ancient Rome and Ancient Greece, however, today’s United Kingdom prevents Christians from aiding Britain’s exposed children.

Christians from across the globe have offered aid and open arms to little Alfie Evans. Pope Francis has faithfully attempted to save the ailing child, arranging medical transportation for Alfie so that he might fly via air ambulance to the Vatican’s hospital.

Still, the prideful “elders” cling mercilessly to their pagan heathenism, determined to deny any and all Christian charity for little Alfie.

 

Alas! One thing is now crystal clear: in the United Kingdom, ancient heathenism reigns supreme.

For a glimpse of the future, listen to these famous voices from the past:

In On the Laws 3.8, Cicero (106-43 BC) states:

“Deformed infants shall be killed.”

Posidippus, a Greek poet, wrote:

“Everybody raises a son even if he is poor, but exposes a daughter even if he is rich.”

In On Anger 1.15, Seneca (4 BC-65 AD) wrote:

“…mad dogs we knock on the head…unnatural progeny we destroy; we drown even children at birth who are weakly and abnormal.”

In Politics 7.1335b, Aristotle (364 BC-322 BC) wrote:

“As to exposing or rearing the children born, let there be a law that no deformed child shall be reared;  but on the ground of number of children, if the regular customs hinder any of those born being exposed, there must be a limit fixed to the procreation of offspring, and if any people have a child as a result of intercourse in contravention of these regulations, abortion must be practiced on it (the child).”

In Theaetetus, the Greek philosopher Plato (quoting Socrates) wrote of the important societal task of killing infirm infants:

“For we must take care that we don’t overlook some defect in this thing that is entering into life; it may be something not worth bringing up, a wind-egg, a falsehood. What do you say? Is it your opinion that your child ought in any case to be brought up and not exposed to die? Can you bear to see it found fault with and not get into a rage if your first-born is stolen away from you?”

In Ad Nationes, Tertullian (155-220 A.D.) recorded the frequency of pagan infanticide in the Roman Empire during the late 100’s and early 200’s A.D.:

“…because, although you are forbidden by the laws to slay new-born infants, it so happens that no laws are evaded with more impunity or greater safety, with the deliberate knowledge of the public, and the suffrages of this entire age…But then you make away with them in a more cruel manner, because you expose them to the cold and hunger, and to wild beasts, or else you get rid of them by the slower death of drowning.”

In Book 3 of Instructor, Clement of Alexandria (150-215 A.D.) wrote of Roman women caring more for animals than for children:

“And though maintaining parrots and curlews, they do not receive the orphan child; but they expose children that are born at home, and take up the young of birds, and prefer irrational to rational creatures.”

 

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News

Face Off: Congress v Zuckerberg

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Facebook founder Mark Zuckerberg’s congressional testimony revealed much about both the social media industry, and our government’s mentality.

First, Zuckerberg. He seemed “in over his head,” repeatedly inserting “run out the clock” words and phrases into his responses to evidently hide his nervousness (do you blame him?). How many times did he say, “Congressman!” and “that’s a great question”? (Well, of course it was a great question, I waited for someone to say, because if it wasn’t so great, I wouldn’t have asked it!) Zuckerberg time and time again seemed to be buying time, running seconds off each elected representative’s four or five minutes of allotted time.

Zuckerberg got buffeted by representatives on privacy, on European regulations, and most notably by Senator Ted Cruz and Representative Steve Scalise on the subject of political bias.

Yet Zuckerberg disappointed before a worldwide audience. He had a chance to tell the world that:

1. no, a private tech company is not an unpaid deputy of the government, acting with the authority and power of the state;
And

2. A private tech company is not acting
in loco parentis when it obtains user information, and

3. Users across the world are free to use, or leave, Facebook and that these freedoms often exceed the freedoms people enjoy under the laws of most nations in the world today. Facebook, warts and all, is one of the most democratic institutions on the planet!

Instead, Zuckerberg came to Capitol Hill, showing contrition over the involvement of Cambridge Analytica (a third party as to which Facebook’s responsibility is unclear and dubious). What we saw — what the world saw — was the United States Congress bullying a private social media company.

Now, Zuckerberg is hardly a sympathetic figure. Many people envy him for his fantastic wealth and profile, and for his youth. Also, Silicon Valley and indeed much of American big business is quite leftist (Zuckerberg acknowledged this). But his beating — which he handled pretty well, all things considered — was both undeserved and likely to backfire.

Some representatives used the hearings to preen, showboat and showcase their “fighting for the common man” bonafides, and any business leader makes for a great whipping boy these days. But almost everyone grilling Zuckerberg showed a zeal for flexing the awesome powers of government.

There are many problems with the operations of major social media platforms. The growing publicity surrounding these problems is already causing reform, and in some cases, boycotts and departures from the platforms, and innovations by new competitors.

All we got from Washington, DC was a group of elected representatives reminding the tech innovators of America of “who’s the boss.”

I can’t help but think that, across the world, innovators and disruptors are heeding that message. So are, I fear, America’s competitors.

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News

Paving a greener California, $40000/mile at a time.

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Many weird ideas come out of California. Painting roads a lighter color to reduce heat in order to combat global warming is a new one. It is well known that paved surfaces are hotter that natural surfaces. So consequentially cities create heat islands through urban sprawl. Los Angeles Mayor, Eric Garcetti, is a vocal critic of Trump, especially when Trump pulled the United States out of the Paris Climate Accord. Last June, Eric Garcetti was quoted saying:

“Climate change is a fact of life that people in Los Angeles and cities around the world live with every day. It is a grave threat to our health, our environment, and our economy — and it is not debatable or negotiable,” said Mayor Garcetti. “This is an urgent challenge, and it’s much bigger than one person. With the President pulling out of the Paris Climate Agreement, L.A. will lead by committing to the goals of the accord — and will work closely with cities across America and the world to do the same.”

It appears $40000/mile every seven years is part of the effort for LA to lead the country in fighting climate change.

The Story

LA DailyNews: ‘Cool pavement’ to cut urban street heat gets first California tryout in Canoga Park

“We’re exploring ways to reduce the heat island effect by reducing the absorption of heat in the built environment.”

Street Services, working in conjunction with GuardTop LLC, an asphalt coating manufacturer based in Dana Point, had first tested the cool pavement seal in the Sepulveda Basin.

Asphalt at a parking lot at the Balboa Sports Complex once averaged 160 degrees in summer. After the seal was applied two years ago, company officials say, surface temperatures dropped to between 135 to 140 degrees.

Now, after rigorous testing for durability and wet skid potential, the CoolSeal coating was being slathered across a half block of Jordan Avenue just north of Hart Street near the headwaters of the Los Angeles River.

If the new seal could boost solar reflectivity —and dramatically cool a street lined with two-story apartments in the hottest region of the San Fernando Valley — it could do it anywhere, city officials said.

The experiment will soon be duplicated in 14 other council districts before the end of June. If successful, city officials hope to encourage manufacturers to help develop cool pavement that could be incorporated into a multimillion-dollar drive to fix a backlog of L.A.’s failing streets.

“I’m thrilled to be here. This is a great day for all of us. We look forward to seeing what the results will be,” said Kevin James, president of the Los Angeles Board of Public Works.

A CoolSeal coating could cost an estimated $40,000 per mile and last seven years, city officials said. But that’s subject to change pending pavement innovation.

“We’re going to try to make Los Angeles as cool as possible,” said Jeff Luzar, national sales director for GuardTop, a privately owned firm that has covered coated mostly playgrounds and parking lots. “We’re going to be the coolest island in Southern California.”

Average temperatures in Los Angeles have risen 5 degrees in the past 100 years on account of the heat island effect produced by miles of asphalt freeways, roads, parking lots, roofs and more, climatologists say. In summer, temperatures have risen an average 10 degrees.

In addition, extreme heat days near 100 degrees have risen from two a year in 1906 to 24, while their duration has increased from a few days in a row to heat waves of two weeks, said climatologist Bill Patzert of the Jet Propulsion Laboratory.

“I’m all for it,” Patzert said of the cooler pavement. “We could certainly stop the rise — and perhaps reverse it.”

Unfortunately, he added, the urban forest across Los Angeles is dying because of insufficient watering during the recent drought. “They can paint the streets gray,” he said, “but when all these trees die, you’ll see a dramatic increase in the heat island effect in the whole Basin.”

My Take

The lack of fiscal responsibility is reason enough that this idea should be thrown out upon arrival. The idea isn’t bad. Reducing city heat does have a public benefit, in the summer. However, $40000 is comparable to a person’s yearly salary. That’s a lot of cash just to paint about one mile of roadway. California has problems and environmental concerns, and these concerns ought to be addressed. But the most pressing concerns are sourced from the fact that California is overpopulated.

California could stand to benefit from more plants as noted in the article. But plants require water, of which California has struggling issues with. California’s booming agriculture requires a lot of water and the entire country would hurt if it went thirsty. This was a foreseeable issue that California is behind on addressing. California should be leading the world in desalinization, thus watering its state and perhaps other states as well. But instead, they would rather focus on high price low reward methods of combating environmental concerns. Environmental policies should keep to a strict cost-benefit analysis. Eric Garcetti needs to learn that unlike climate change, fiscal responsibility should be non-negotiable.

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