Passing the pension buck – letter writer tries to ignore the “catch-up” payments, which are all on the taxpayers

3 Mar

Last week a regular letter writer responded to my last letter to the editor. He misquoted a figure, and then he falsely stated that most of CalPERS benefits are paid through investments.

I am concerned with an error in fact appearing in a letter in the Feb. 23 edition on your Opinion page. Juanita Sumner (who often writes good fact-based letters) is clearly mistaken. At the conclusion of her second paragraph she states that public employees pay (at the most) 27%* of their retirement benefit “leaving the rest … to be picked up by the taxpayers.”

(*NOTE – I didn’t say “27%”, I said 22.7%, and that’s the correct number. That’s a big difference with these numbers, pay attention. I’d also like to see ER Editor Mike Wolcott PROOFREAD SOMETHING once in awhile. This is how misinformation gets out there. )

At least 60% of every CalPERS retirement benefit dollar annuity paid (to about 633,000 retirees) at this point in time is paid from investment profits gained with the CalPERS fund (now at least $475B). This leaves local contracting agencies, like the city of Chico, or state taxpayers to pay, at the most, 27%. These percentages vary little from year to year, from fractions of 1% to a very few percentage points over the past several decades.

All public employees (yes, I am a retired one) have negotiated their contracts with administrators under the direction and supervision of elected public office holders. We get the government we deserve by who we elect. Each reader, citizen, registered voter should decide whether they elected the right folks.

It is obvious to me that special interest groups strongly influence who gets elected. In the case of the CalPERS complex, but not always transparent, workings those groups would include: political parties, labor unions, leagues or associations of cities, counties, school board administrators and probably a few others I can’t think of right now.

Abe Baily, Chico CA

I don’t think he’s a liar, I think he was misled, or more likely, misunderstood information he got from the CalPERS website. I know retirees, and they don’t understand any of it, they don’t know how close they are to losing everything with CalPERS. They mislead themselves about how unsustainable CalPERS is, and who really pays. Yes, as taxpayers, they pay – they have to drive the same streets we do, live in the same crappy town – but they are also on the very generous receiving end. So yeah, they really don’t want to know the truth. These crazy pensions are like heroin – as long as you get your monthly fix, you don’t care where it comes from, or think about whether it will come next month.

https://www.calpers.ca.gov/page/about/organization/facts-at-a-glance/asset-liability-management

There you have a presentation that is confusing, but if you pay attention, you see and hear what’s really going on. Look at the “CalPERS buck” – very misleading. The illustration tells us that 60 cents of every dollar paid to retirees comes from CalPERS investments, while CalPERS employers pay (an average?) of 29 cents and members, or retirees, pay 11 cents. Those employer and employee shares are close to reality, but what they don’t include, are the “extra” or “catch-up” payments made toward the deficit. That’s all on the taxpayers. (+the 29 cents!)

The deficit is created by unrealistic payments, unrealistic shares paid by members, and historically poor performance by CalPERS investments. While CalPERS made great gains this year – 21%! – there are a couple of problems. First of all, it’s a one-time gain made on the backs of people recovering from the COVID shutdown.

Second, it follows years of single digit performance. In fact, in 2016, the fund returned only .61% – that’s 61 cents on the dollar, kids. Up from 2009 when they tanked, going 24 points into the red.

With losses like that, year after year, CalPERS has racked up a deficit of over $150 million for Chico, up from $143 million just last year. That’s despite rising “pension stabilization” or “extra” or “catch-up payments” – last year, $11.5, $18 million projected by 2025. Staff and council instituted the Pension Stabilization Trust a few years ago, siphoning millions from every city fund, but the deficit just keeps going up?

How does that happen? Well, for another thing, Council just handed out a bunch of raises to cover any added share the employees have agreed to. It’s like digging your way out of a sand pit.

So, I had to respond to Baily. I don’t like the nasty tit-for-tat Wolcott likes to run in the letters section, but I’m not going to sit by while Baily spreads misinformation, using my name to do it. Sorry Abe, nothing personal. You old gas-bag.

Abe Baily is mistaken when he states “At least 60% of every CalPERS retirement benefit dollar annuity paid at this point in time is paid from investment profits gained with the CalPERS fund”.

Bailey misinterpreted that from the CalPERS website. Gains are up this year – a 21% return, attributed to COVID recovery. A one-time gain after years of abysmal performance. Meanwhile, CalPERS administrators admit, “Obviously these gains, we have a lot to thank from you (sic) our EMPLOYER community, cause your contributions, I recognize, have gone up a lot to help fund that improved funded status.” CalPERS demands more from employers every year.

Furthermore, there’s still the pension deficit, $150 million, up from $143 million just last year, created and perpetuated by a combination of unrealistic employee contributions and consistently poor performance by CalPERS investments. Every year the city must make “extra” or “catch-up” payments. Last year, Staff took $11.5 million out of city funds – money intended for services and infrastructure – and siphoned it into the Pension Stabilization Trust, which is restricted to those payments.  

Contrary to Baily’s belief, the taxpayers contribute the lion’s share, not only paying a share toward payroll, but picking up the entire deficit, with interest. At the cost of our roads, parks, and public safety services.

Employees should pay a larger payroll share, and should pay a share toward the deficit. Instead, Mark Orme suggests a sales tax increase, to replace funds siphoned into the PST.  

This is called, “passing the pension buck”.

Juanita Sumner, Chico CA

3 Responses to “Passing the pension buck – letter writer tries to ignore the “catch-up” payments, which are all on the taxpayers”

  1. The Dude March 4, 2022 at 8:23 pm #

    WOW! Another great post. Incredible journalism Juanita. You’re very gracious. This dude thought he would call you out, and the ER printed it. And neither come close to your understanding of the subject. I really don’t know why anyone even bothers with the ER, it’s just sad and pathetic at this point. They need to sale the building, if they even own it. For the life of me, I can’t understand why they need more than a laptop to operate.

    • Juanita Sumner March 5, 2022 at 5:21 am #

      Thanks Dude. I have to agree, we don’t have much journalism around here. Neither paper sends reporters to these meetings.

  2. bob March 5, 2022 at 8:42 pm #

    When it comes to reporting on city finances there is no journalism in this community. The media in this community simply act as scribes and regurgitates whatever the bureaucrats tell them. It is disgusting.

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