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14 September 2008


nate Beason

I am waiting for a legislator in Sacramento to table a suggestion changing the CALPERS system. Paying many government retirees 90-95% of their preretirement income is not right.

I look forward to the day when a legislator steps up to the plate and changes the system from a defined benefit to a defined contribution. Expect lots of flack from the cops, firemen, educators and municipal employees.

There is a compromise here. Grandfather those already in the CALPERS defined benefit program. Require newly hired government employees to enroll in a defined contribution program. This would also mean newly hired employees would have to contribute to the social security system through FICA deduction.

Tough row to hoe, but defined benefit programs, especially at the 90-95% preretirement payout is doomed.

Mikey McD

Our "leaders" in Sacramento have failed in the defined benefit fight. THE FACT IS THAT UNIONS ARE TOO POWERFUL. See this post:

Taxpayers and the Governator vs. Labor Unions

A great editorial by Daniel Weintraub at the Sacramento Bee illustrates problems within our "democracy." State officials agree that their is a statewide Unfunded Liabilities crisis (money has not been put where the state's mouth is...the state has not adequately funded the pensions promised to public employees). His editorial can be read here: http://www.sacbee.com/110/story/646042.html . It seems that the labor Unions run the show. And you thought taxpayers ran the show? Kudos to Daniel for a candid and informative piece.

It is perceived as impossible to battle employee unions and get re-elected.


The unions were once powerful at Bethlehem Steel, Consolidated Freightways, Delta Airlines, Kaiser and Singer to name just a few.

At least those formerly employed by the above companies were able to get a portion of their promised benefits from the Pension Benefit Guarantee Corporation under the rules of ERISA.

With very few exceptions, California government employees within CALPERS are not covered under ERISA guidelines. The exception being a handful of employee groups or unions, usually small school districts, who elected to manage their own pension plans outside of CALPERS.

CALPERS is like a mini Soc. Sec. Administration. They dole out pension, medical, widows/children benefits and disability.

With no pension organization to back CALPERS' $264 billion in present and future liabilities, when they go bust I seriously doubt any state or federal government entity will step in to help.

CALPERS demise may be hastened given todays investment cloud and depending on where CALPERS has invested their liquid funds.

Mikey McD

Don't underestimate the ability of CA to tax, tax, tax enough to bailout CalPERS for CA State employees.

Most are ignorant that the "local" agencies (cities and counties) that contract with CalPERS are liable for the promises made to employees. Said another way, with respect to local municipalities (Vallejo, Grass Valley, or Nevada County for example) CalPERS is not liable for the mis-management of their funds assets. CalPERS is only a conduit or administration body, with no risk (no liability) to the CalPERS member. When CalPERS fails to earn their 7.75% net of fees expected rate of return the local governments are liable for the losses.

Mikey McD

With respect to CalPERS there are two distinct issues:
1- CalPERS for CA State employees (this system is unfunded in the billions). The State can Tax to bailout CalPERS FOR STATE EMPLOYEES.
2- Municipalities contract with CalPERS to act as admin and asset managers. Again, CalPERS does not have ANY risk in this relationship. CalPERS is paid 1% to managed the actuaries and investment portfolio to the best of their ability. Each local entity that contracts with CalPERS accepts the risks inherent in the Defined Benefit plan. Think of CalPERS as nothing more than a messenger to local agencies.

City of Grass Valley has unfunded liabilities that are 40% of their annual operating budget! Nevada Counties UL is 25% of their annual budget. Our "leaders" (Fed, State, Local) turn blind eyes to this crisis, 'cause they are concerned with re-election, not fiscal responsibility. Just pass it down the line! You and I would be in jail if we pulled such stunts in the private sector. We can trust the government, just ask the Native Americans.

Mikey McD

For more information on Unfunded Liabilities see the following link:

Scott Obermuller

As a 34 year worker for our glorious state government, I find a lot of the comments somewhat humorous. I'm not sure about law enforcement workers, but I can assure you that when I started my employment in 1974 we had no choice about paying social security. If they are going to change the system, they should be given the choice to opt out of SS as should all workers. CALPERS is most definitely not like SS. It may have to be restructured or bailed out at some point, but at least they have actual assets and returns, unlike our criminal federal Ponzi scheme. I would readily agree that there have been bad decisions made lately concerning benefits, but this is not the doings of the state workers or CALPERS. State workers traditionally traded monthly pay for more generous retirement benefits. As the public has benefited from having not had to pay prevailing wages to the state workers all these years, I find it fascinating that now that the predicted bill has come due, some in the public want to change the rules of the game. Another reason I wanted to work for the state was that there would be no union to bother with. That lasted until the final hour of Moonbeam's term of office and now I am the unwilling vassal of an increasingly socialist bunch of thugs. The union's ideas and demands are contrary to a properly run government, but those of us who will not join are still required to pay our "fair share" but are denied the right to vote. The unions are working for an ever-expanding work force in state and local government - no matter the economy, as it provides them with an automatic and increasing source of income. As I look at the demographics of California and the abysmal educational system, I really have no hope for a properly funded and administrated government. It is a mirror of what is happening nationally, but as the state and local govts. have no way to print money, they will not be able to go far down the deficit road. I am reminded of what pilots say of a bad landing - "He ran out of altitude, airspeed and ideas" Ouch!

Mikey McD

Scott O, I mirror your thoughts on the Unions (socialist thugs). They are a cancer to this country. But, cancer can only survive as long as the host lives. Is it too much to assume that the union employees see the ills their memberships create?

A belief held by many in the private sector:
State employees are among the best paid employees in America (salary, health, pension, vacation, tenure, sick days, vehicles, stress days, traditional 8-5 work day with breaks, etc). Those in the private sector that are compensated well, accept much more risk; they have more "skin in the game."

The number of employees working for phone companies, grocery stores, school districts and municipalities that don't want to be union members is astounding.

Is there any hope for us in a union run system?

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