Coal ban would boost tax cost of pensions

Coal ban would boost tax cost of pensions

coal plant wikimediaCalifornia public pensions already have a big problem with adequate funding. The nonpartisan state Legislative Analyst pegs the pensions’ unfunded liabilities at $340 billion.

It should be obvious what the investment strategy should be for the California Public Employees System, the California State Teachers Retirement System and other mammoth funds: maximize fund values through the most prudent and profitable investments.

Because if investments are not prudent and profitable, then the lower fund values will have to be made up by either increasing the cost to taxpayers, who ultimately are on the hook for the funds’ payouts to retirees; or by cutting retiree benefits.

That’s the background for new state Senate President Pro Tem Kevin De Leon’s proposal to ban coal from retirement investment portfolios. According to the Bee, De Leon said, “Coal is a dirty fossil fuel. I think that our values should reflect, you know, who we are as the state of California.”

But if coal is the best return on CalPERS and CalSTRS investment dollars; and these funds are forced to invest in something else; then the funds’ return on investment will be lower than it could have been. Which brings up the scenario above: taxpayers will have to pay more, or retirement benefits will have to be cut — or both.

Do state employees and retirees see this?

18 comments

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  1. Ronald Stein
    Ronald Stein 19 December, 2014, 10:00

    State employees and retirees do not see or care about the quality of the investments, as the “crusade” against fossil fuels is more important to them. Unless they plan on converting back to being a caveman hiking in Yosemite, barefoot and naked, virtually everything they see, touch, and use in their daily lives is derived from the benefits of our use of one or more of the fossil fuels; oil, coal and gas.

    Fiscal irresponsibility protects the jobs of bureaucrats who use their power in ways that harm those who work for a living. The inmates are running the Asylum. Another great hit on taxpayers who work for a living.

    Fossil fuels have dramatically improved our ability to make our environment healthier and safer from natural and man-made threats. Fossil fuel energy, by enabling us to cheaply build and run wondrous machines that give us the mobility to choose any particular climate and the ability to increase the livability of the climate, has made us masters of climate.

    The increasing use of fossil fuel energy has been the foundation of the industrialization of civilization. As the use of fossil fuels has been accelerating over the decades and will continue throughout the developed and the developing countries worldwide, supporting every infrastructure and every industry, the use of antipollution technology has dramatically DECREASED the major pollutants that come from fossil fuels.

    Reply this comment
    • bob
      bob 19 December, 2014, 18:25

      State employees and retirees do not see or care about the quality of the investments, as the “crusade” against fossil fuels is more important to them.

      They don’t care about the quality of investments because they know that no matter how bad the returns are the politicians can just rape the taxpayers even more.

      Reply this comment
  2. bob
    bob 19 December, 2014, 18:23

    “…or by cutting retiree benefits.”

    Yeah, right. Like the politicians will do that! That’s hilarious. You’re a real card, John.

    And besides John, there is no problem with pension funding! Just ask Doglass, he’ll tell ya all about it. But if there is Doglass tells us the taxpayer will be on the hook, no benefit cuts. And we all know he is always right. And if you disagree you’ll have to take it up with Sawhorse. So there!

    Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 19 December, 2014, 19:11

    This is a beater subject. Just stirs emotions and insults toward the fair and balanced posters….

    Reality….hold your ankles….pay your taxes….drink some eggnog with Capt Morgan….eat Mom’s cookies….

    Wala

    All ok!

    Reply this comment
  4. SkippingDog
    SkippingDog 19 December, 2014, 20:48

    Banning investment in coal energy might well be the most financially prudent option, at least according to Bloomberg:

    http://www.bloomberg.com/news/2014-09-21/china-coal-peak-imminent-makes-coal-risky-investment-study.html

    Reply this comment
    • Donkey
      Donkey 19 December, 2014, 20:56

      Skdog you know nothing about creating wealth, stay in your RAGWUS world of sucking off the taxpayers and let the adults discuss the real world of energy. Right now Opec and Russia are funding clowns with your mindset to cut down American energy production by stopping fracking operations in the US and reducing coal production, but then why would an uninformed feeder like you know how business rolls. 🙂

      Reply this comment
      • SkippingDog
        SkippingDog 19 December, 2014, 21:00

        How does that explain the continuing overproduction of OPEC members, Donk? They can’t even agree on cuts among themselves.

        Reply this comment
        • Donkey
          Donkey 20 December, 2014, 06:43

          Simple rational thought process Skdog, Opec is trying to undercut American production costs and thus close down many of the smaller private producers in the US. You don’t seem to understand that the reason a barrel of oil is going down is because small producers have perfected the use of fracking and increased their production at little cost to themselves. Opec hates it, the eco-freaks hate it, and the fifth column RAGWUS feeders in government hate it too for some twisted reason I am sure, probably has to do with the lowered cost at the pump not translating into increased sales taxes. 🙂

          Reply this comment
          • SkippingDog
            SkippingDog 20 December, 2014, 12:04

            As usual, Donk, your explanation makes no sense. OPEC doesn’t do itself any favors with predatory pricing, since the technology to extract oil sands will continue to exist, regardless of its immediate economic utility. The OPEC members are fighting among themselves about reductions in their production, but they can’t individually afford to cut back that far. Every OPEC member goes into net deficit when prices fall below $60 or so per barrel, with many having an even higher break-even point.

            http://graphics.wsj.com/oil-producers-break-even-prices/

          • Donkey
            Donkey 20 December, 2014, 21:16

            Skdog, I put forth one of the reasons oil is being flooded on the market, there are probably others, i.e. the US is trying to destabilize Venezuela or Russia, maybe both, but rest assured many Opec members can not long survive the lowered price per barrel without major damage to their economies. 🙂

          • Donkey
            Donkey 20 December, 2014, 21:23

            As to your other point on Opec not agreeing among themselves, just take a look the graph you provided. Some members and non-members have higher costs per barrel and are being hurt badly by the market glut. 🙂

          • SkippingDog
            SkippingDog 21 December, 2014, 16:03

            Nice that you agree with me for a change.

          • Donkey
            Donkey 29 December, 2014, 17:31

            Oh no Skdog, the day I agree with you we will both be wrong!! 🙂

  5. SkippingDog
    SkippingDog 19 December, 2014, 20:58

    Then there’s the basic fact that CalPERS holds just slightly more than $5 million in coal investments, or approximately one-six-hundredth of its investment portfolio. Hardly something to get wound up about if some politician wants to make a political statement with such a ban. Now would probably be a good time to take that $5 million and reinvest it in Exxon or BP while the market is low.

    http://coalinvestingnews.com/18114-calpers-potentially-divesting-coal-assets-over-done-alliance-resource-partners-arlp-btu-aci-wlt-anr-united-states.html

    Reply this comment
  6. Bob Smith
    Bob Smith 20 December, 2014, 02:51

    Why should CalPers care? If returns are too low the taxpayers make up the slack, if high they justifier further retroactive pension formula increases. That’s why CalPers has such a relatively risky portfolio. Either way public pension recipients win.

    Reply this comment

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