patrick.net

Teachers and public employees are being scapegoated for problems caused by Wall Street, and pensions are being used as a wedge issue to divide working class Americans. Why the attack on public employee pensions? Who really benefits by their elimination? The answer is Wall Street. The elimination of public pension systems would be a huge boon for financial planners and companies that stand to invest that money while making profit off of the fees they can charge each individual.

http://www.cta.org/Issues-and-Action/Retirement/Retirement.aspx

There is a huge gaping hole in this reasoning. Why? CalSTRS itself invests in the very same investment vehicles that those with private 401K invest in.

The only difference is that the beneficiaries of CalSTRS are guaranteed a 7.75% return, since governments have to kick in more if the investments don't pan out. (And they haven't)

The investment return rate lowered to 7.75 percent...

http://www.calstrs.com/newsroom/2010/news120210.aspx

Back to CTA:

All Californians should have a safe and secure retirement. The real problem is not that teachers, firefighters and other public servants have pensions ("defined benefit plans"), the problem is that private sector workers do not. That's because the private sector systemically eliminated defined benefit pension plans in favor of risky 401(k) plans - reducing costs to corporate America at the expense of the American worker. Instead of attacking teachers over the retirement benefits that they have earned, we should be having discussions about how to create better retirement options for everyone

Risky 401K plans? I just pointed out that the risks associated with the investments of CalPERS are no less than the risks associated with 401K plans. The only reason CalSTRS benefits are not risky is because taxpayers pick up the difference if the investments don't pan out.

Does the CTA really believe a pension system that invests in risky investments, but is taxpayer guaranteed, is a viable retirement system for "All Californians"? I sure hope not, because it most certainly is NOT viable.

If every Californian were on a pension system like CalSTRS, then the system would not have an underfunding of just $42B like CalSTRS, but more on the order of $1.2 trillion. We would have to levy an extra 3-4% tax on all workers for the next few decades to make up for the shortfall - roughly an extra $3K taxes per year for a couple making $80K. All of which would be borne by the current generation of workers while those in or nearing retirement enjoy all the guaranteed benefits.

Not to mention CalSTRS seeks to BEAT THE MARKET. If everybody were on this system, it would be very difficult to beat them market, since they would BE a large part of the market.

The even bigger CalPERS is in worse shape that CalSTRS.

I've got no problem with defined benefit pensions being part of the mix of benefits. I've a got HUGE problem with disingenuous talking points, and a class of workers than has guaranteed themselves market beating returns through the political process. And I'm ticked off they they won't even acknowledge this as a valid complaint.