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Permalink Like Dislike I Agree with every single point and absolutely acceptable. I only wish there was a cap, like social security does as well.
I have no problems with pensions, but the benefit should commensurate with value.
http://gov.ca.gov/docs/Twelve_Point_Pension_Reform_10.27.11.pdf
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#4-11 are very interesting anti-abuse reforms, many of which were likely long overdue.
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Baltimore, MD
#2 doesn't go far enough. New employees should only get 401K, just like everybody who is in the private sector.
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This is very well written. Would love to see the final details.
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zzyzzx says
Private sector offers profit sharing and bonuses and Christmas Bonuses and stuff like that, stuff that you will not find in public employ
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MarsAttacks! says
Can't remove a flea from the host without a struggle.
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2. “Hybrid” Risk-Sharing Pension Plan: New Employees
Most public employers provide employees with a defined benefit pension plan. The employer (and ultimately the taxpayer) guarantees annual pension benefits and bears all of the risk of investment losses under those plans. Most private sector employers, and some public employers, offer only 401(k)-type defined contribution plans that place the entire risk of loss on investments on employees and deliver no guaranteed benefit.
There hasnt been anything preventing a 401K/IRA account from holding a safe and liquid high grade AAA government security.
So what does he mean by .. no guaranteed benefit ?
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thomas.wong1986 says
Most pensions formulas (and everything related) are computed based on a 7-9% annual rate of return long term expectations. So to the extent that the returns are as expected, there's no need to adjust contributions, retirement age to bring the obligations back to balance as the obligations should match the assets. Most actuarial studies show that the pension funds are 25-50% of where they need to be, a large portion of which probably is blamed on actual return performance.
With a 401K, your eventual outcome depends on the actual rate of return. If it is 3% actual, it will seriously underpeform pension holders. If all you hold is AAA rated Goverment bonds, your balance will suck bigtime relative to those on the pension system, guaranteed. However, if rate of return is over 10%, then you don't want to be in a pension and the pension holder will be the one complaining.
So when Brown talks about guaranteeed benefits, they are talking about the 8% that state employees enjoy even though actual results may be 3%.
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SFace says
There is no way anyone can guarantee they will make 8-9% in the market. To do so would mean taking a much high risk. Like anyone who has a IRA/401K, I will decide how much risk im willing to tolerate.. not the state who may well blow all it ... If they blow it.. what than ?
LOL! they are sounding more like Berney Madoff. Good and bad years in the market, always produce 20% return.
8% payout from 3% earning where you gonna come up with the differernce.. Back to borrowing and debt ?
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Davis, CA
Bap33 says
+1
I spent a number of years in public employ with friends laughing at me how I was missing out on stock options and bonus. When their companies and fortunes went up in smoke back in the DotBomb a lot of them came sniffing around looking for a boring but safe government job all of a sudden.
Whether you are fixing a Jeep in the Army, or running a desk somewhere in Federal or State employ, you KNOW you are not going to get rich, advancement is slow, and even if you get to upper levels you will still be making a THOUSANDTH of what any executive in private industry makes.
I'll admit the pension managers do get whacky ideas about investing in real estate and overpromising returns. However this is because IMO they swim in a sea of financial people, who all tell them when things are booming that they are MISSING OUT if they don't take some risks. What a bunch of rubes you municipal people are, if you don't sign onto this fancy Goldman Sachs scheme you might as well buy CDs. So they sign on, and because it's boom-time nobody in private industry really cares. They just care that the actual taxes paid are kept low, they don't give a crap that the plans are house-of-cards do they? No. During boom time nobody is paying attention to anything but next quarter's bonus, and ensuring everyone in financial world gets well rewarded for their brilliance NOW. Yeah let's sell them this fantasy they'll at least enjoy a retirement that doesn't involve clipping coupons for cat food. Oh wait suddenly it's no longer boom-time and you know those returns have evaporated and not only have you been stuck with sucky raises for ages, now your pension is getting nibbled away. Oh yes and the pension manager left 5 years ago to work on Wall Street, so they don't care about the carnage left behind. It reminds me of something:
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Baltimore, MD
Bap33 says
You obviously haven't worked in the private sector lately.
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MarsAttacks! says
Shrek, I would say that you are clueless (which does seem to be true, but not as much so with the new and improved Shrek 2.0, MarsAttacks edition), but the truth is I think you sometimes just don't think before you speak
The unions aren't powerful in this environment. As a teacher in one of the biggest unions in the country (LAUSD) we are still paid our 2008 salary minus furlough days. That is, we are under pay cuts of a few %, from our 2008 salary.
Newsflash 2: We want our pensions - that is we want them to be well funded, and we do not want things to get to a extreme crisis level where we lose significant benefits. In other words it is very much in our interest to reform pensions.
Brown isn't even suggesting we increase our contribution (yet), which we will do, if it's required, and if the state matches the increase. Also, I don't think his pension spiking plan goes far enough. It says that the avg of the final three (or highest 3 years must be used).
What about some connected administrator or public service employee who gets a sweet job with a 50K raise for the last 3 years. Probably tough to police this kind of thing, but even that is a type of spiking.
They could add a condition that the last three years can't be more X% above the average of the previous 6 years, or something to that effect.
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Bap33 says
Private sector offers you freedom. I don't mean the private sector where you work for a man, I man the sector where you are the man. Can't live an American dream if you aren't a self made man.
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thomas.wong1986 says
SFace says
SF is descibing guaranteed benefits a little backwards (not that he's wrong).
A "defined benefit" is where the actual retirement benefit is defined in your employment contract, based on number of years worked, and some factor depending on ones age at retirement.
We have an under funding problem now for a variety of reasons, some of which are addressed by Brown's reform suggestions, most of which should be easily approved (I hope).
Some may not recall recent history. Long and short term bonds paid well over 10% in 1980. The stock market (dow) went from about 800 in 1982 to well over 10,000 in recent years. THe increidble gain of that period caused pension plans to be well funded in 2000, and this is also the cause of slightly unrealistic gains expected.
They aren't that unrealistic though. There are many large money managers who routinely average over 8%, even after 2000, and I'm not talking about hedge funds. I say average because they may have a return 14% followed by 3% the next. When I say large money managers, I don't mean that they are that big, but rather that they don't take investors with say less than 100K (or much more as minimum).
Still, SF is probably right that at present 8% is a high assumption, for long term average returns. In 1980 when bonds were 13%, it wasn't exactly going out on a limb.
But I do think some minor increases in contributions, at least for a while are probably coming, although if he gets the hybrid for new employees, the problem is much smaller. In the long run we are talking about compensation costs for government employees which have a very real downward pressure right now.
It's pretty sad.
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marcus says
Your unions are broke because you people spend way more than you bring to the table.
Back in the 80's when corporations made those kinds of unsustainable promises without accounting for them they ran into bankruptcy and eventually were regulated in accounting. Yet your unions never quite did that. You still have pipe dream of 8% guaranteed investment returns, along with Bernie Madoff. You people can still retire at 55 and get a full pension with vacation and overtime spikes. That can't last, and it won't. All while all the state bureaucrats like Robert Rizzo who havent been caught yet are living off 7 figure pensions.
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FortWayne says
The only way my colleagues can retire with a "full pension" is at age 62, that is if they have 40 years in. This is the exact truth. I should know.
Should we take this outside where I can tell you what I really think of your made up lies (as usual. Too much talk radio propaganda from this guy. Always was on this issue).
FortWayne says
Actually some corporations essentially raided their pensions. As I said ours were very sound just a few years back. But our problem is the same one that's all around. The economy's growth is well below what we thought it would be. And yes, some overly optimistic assumptions.
The 8% investment returns are used to assure funding out 40 years or something like that. MY guess is their assumptions will easily be met, even if it's in part by not raising salaries to match inflation. And if not and if they had to increase our contributions a little, and the states, then so be it.
Back to ignore. Please try not to lie so much.
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Well, I am glad to see something reasonable come off of Moonbeam's desk. I generally don't agree with his ideas, but these are good, so good for him.
I would like to see the "anti-spiking" ones applied to all employees, rather than new ones though. Still, I'll take the present incarnation over nothing at all.
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zzyzzx says
that is true.
And my background is all construction based, where bonuses came from bringing a job in early amd/or under bid. I am sure many of the posters on here are from a different background. I never got a bonus just because I happened to be working someplace when the holidays came.
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marcus says
I told aspiring kids at junior achievement that Government jobs will not be as lucrative as before as pension problems will effect future raises. Those state jobs will have many years of stagnant pay.
FortWayne says
That may be true for safety workers, but not professionals and teachers. My neighbor is a state tax auditor/supervisor and 100% salary takes about 40 years of service or retiring in the mid 60's. Most of them go on to work for a few more years and grab social security as well.
FortWayne says
Completely fabricated. Government books are audited by independent CPA's and is a huge practice for some local firms. A seven figure pension will never pass without scrutiny.
Bap33 says
generally true but private employer comes in all shapes, sizes and roles so it may mean different things to different people. The government is a great place to work to be protected, good for most people, but useless for the go-getters. For the upside, the private sector beats government hands down. Zynga offers 15% quarterly bonus and yelp, twitter, salesforce.com are not that far off. The thing is working in the private sector, you must think ahead and treat yourself like a business entity to ensure making it to the end. There is no one to protect you, it is all about adding value, learn something new every year, build relationship and utilize work leverage to justify your rate of pay.
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SFace says
and safety workers are special why? If you can spike your pension to 100% early than why wait 40 years?
SFace says
If it was fabricated than how was that he slipped through the cracks to make the headlines? How come Feds are investigating another CA city for funds "mismanagement" (we all know know what that means).
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marcus says
Thats a pipe dream, with all the mismanagement, risky investments, and underfunding that isn't going to happen. Every time a governor asks employees to shore up some risk or properly fund the pension system unions are picketing on the street that life is unfair...
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http://www.sacbee.com/2011/10/29/4015232/california-assemblywoman-mary.html - articles like this "are" CA government, entrenched corruption and theft from taxpayers.
Still Fabricated Ace?
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http://www.sacbee.com/2011/10/29/4015232/california-assemblywoman-mary.html - articles like this "are" CA government, entrenched corruption and theft from taxpayers. Saw this on the main forum posted by Larry.
Still Fabricated Ace?
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Baltimore, MD
It's not just California:
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FortWayne says
I've never seen anyone on this forum who just outright pulls BS out of their ass to the extent you do. IF you lie here, you must lie in all other areas of your life. Including to yourself. I feel bad for you. I bet you have a lot of drama in your life too.
I thought I put you back on ignore, I will now.
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It's never too late!
lets start with removing the invaders and their spawn
then, some death row reduction by punishment completion.
then, outlaw gang activity with an automatic third strike for gang activity.
then, end welfare.
And THEN, go after working people's benefits!
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Your list is exactly what the occupy freaks want done to wealthy white American males.
you (I'm sure didn't) miss the entire point. There are people ready to take and take and take from those who are productive, or lucky, or smart, enough to have more than the mimimum required to survive. And they take that position at a time when the entire system is bursting at the seams due to the effects of leftist progressive liberalism. The issues I put up are in place due to a lack of law enforcement. The resulting social situation created by the lack of law enforcement has a HUGE negative impact on the quality of life all Americans have.
Every welfare program was part of the creeping incrementalism that works so well for all leftist progressive activities.
Every gun control law
Every anti-death penaty movement
Every pro-baby murder demand
Every demand to have sexual deviant behavior accepted in the public eye, espicially schools
Every law that came without a voice of the people through activist judges
Every voter initiative blocked by activist judges (Prop 187 should have resulted in marching in the streets)
Every time you press 1 for english
The list goes on, the effects are lasting, and the end will be bad.
Now is the last chance we have.
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marcus says
Like Bill Cellini? Cellini, the convicted Illinois Republicrat, had his hands in, among many other things, the Illinois Teacher's Retirement System.
Cellini seemed to be a very successful with the teacher's pension money but was convicted before he could fully branch into the wonderful world of Hollywood bookkeeping.
marcus says
I know it will be painful for everybody involved, but the 8% assumption needs to be thrown out in the current economic environment. Any fraudster can promise 8% on pension safe investments but delivering is unlikely.
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Bap33 says
Honky, please, you don't even know what an activist judge is.
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Cook County resident says
IT's really not that high. Remember it's long term. In 1980 an 8% assumption would have seems way too low (with long bond paying over 10%).
They diversify, and in the stock market, there are many stock with dividends of 3% or more. So if they can get another 5% with their selection and their timing they're good. Stocks routinely move 2% in a day these days !
Doesn't anyone around here know what the performance of the successful money managers is like ?
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marcus says
If you have 100 money managers, they would be ranked #1 - #100 because someone will have to rank higher. Would the top 5 money manager in 2010 be top 5 money manager in 2013, highly, highly unlikely as what works in this period may be a bad strategy in another.
The other thing is, CALTSTR have about 200B in investable assets, and a portion of which are cash and a portion of which are hedges, and another portion is fixed income. Even the best homeruns will be diluted since they can't load up a position no matter how good the prospects. It is quite difficult to beat the market significantly with those parameters and it is difficult to meet 8% in down market.
Apple, with about 50B in investable assets only earned 2% on their money the last two years. Insurance companies are only earning 5% - 6%.
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marcus says
Bill Cellini's Commonwealth Realty Advisors looked very successful -- for a while:
"In the fall of 2006, TRS said that Commonwealth was one of the system’s biggest moneymakers, earning the pension fund about 20 percent over the previous five years."
"“They have made a ton of money for us,” TRS executive director Jon Bauman told The State Journal-Register at the time. “They’re probably our top-performing real-estate manager.”"
By 2009, things had changed:
"How much money has Commonwealth Realty Advisors made for the state teachers’ pension plan?"
"That’s none of the public’s business, according to a Teacher’s Retirement System spokeswoman."
"Spokeswoman Eva Goltermann refused to say how much Commonwealth Realty Advisors has made, or lost, on behalf of TRS, which funds pensions for public school teachers outside Chicago. The pension system with a portfolio worth $29 billion as of Dec. 31 has a policy of keeping secret the performance of its investment managers, she said."
http://www.sj-r.com/news/x1056821751/TRS-spokeswoman-refuses-to-say-how-much-money-Commonweath-made-for-teachers-pension-plan
The Illinois TRS knew what the performance of a successful money manager was like. Until it wasn't.
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Either we reform pensions or end up exactly like Greece.
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right after we end welfare, and turn back the invaders, and have the anchor babies go home to breed ... THEN, we should cut back on Gov handouts to Gov workers ... but, lets go after the non-working leech system first. Go after productive leeches second.
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Los Angeles, CA
i think its gonna be AWESOME when the pension situation really peaks.
What we will get is a point in time where 100% of the budget will go to retireed pensioners. This means there will be zero cops, no teachers, and zero firemen etc.
We will have to go back to volunteer firemen, community policing and yet STILL have high taxes. Sweet! best of both worlds.lol. But the feds will still raid the pot houses to justify thier abusive prison system/pension ponzi.
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http://www.yolohub.com/economy/%E2%80%9Cinsane%E2%80%9D-even-by-chicago-and-illinois-standards-pension-triple-dipping-on-steroids-at-500kyear
“Insane” Even by Chicago and Illinois Standards: Pension Triple Dipping on Steroids at $500k/Year
“A labor leader in Chicago is expected to receive pension payments of nearly $500,000 a year, while another could get about $438,000 a year. The Chicago Tribune and WGN-TV, which obtained information about union pension benefits during a joint investigation, said at least eight union officials in Chicago were eligible for what were described as inflated city pensions on top of union pensions for the same period of employment.
The Tribune said the official who was expected to get about $438,000 a year would do so from three pensions covering the same work period: a city laborers fund, a union district council fund and a national union fund. It said an analysis showed that this 59-year-old union official, Liberato “Al” Naimoli, would get a total of about $9 million if he lived to his expected lifespan. The Tribune said the joint investigation with WGN-TV found that Naimoli, president of Cement Workers Local 76, was receiving a city pension of about $158,000 a year. It said his city pension was based on his union salary.Naimoli, who retired in 2010 from the $15,000-a-year city job, is also now eligible to receive a pension of about $60,000 a year, the paper said, from the Laborers’ Pension Fund for Chicago and Vicinity. He also will become eligible for payments of about $220,000 a year from a third pension, provided by the national union, LIUNA, on his 60th birthday next year. The Tribune said he had not worked his $15,000-a-year job with the city for a quarter of a century.
Another official, Charles LoVerde III, a former trustee of the city laborers’ pension fund, stood to receive three pensions for the same time period totaling nearly $500,000 a year, the investigation found. The Tribune said he took leave of absence in 1998 from a job with the city’s water management department, which paid $44,000 a year, to work full time for the local.”
Here’s the second part, which is not surprising given the first part:
“Chicago and Illinois are facing financial trouble, in part due to pension shortfalls. On Tuesday, state Sen. Mark Kirk released a report on Illinois’ debt that said it had the worst credit rating of any state and that its debt was rising. Kirk said the state was nearly insolvent and said he doubted there would be any help from Washington.”