2011 San Francisco pension fix not panning out

San Francisco wikimediaThe pension reform measure that San Francisco voters passed in 2011 isn’t yielding the savings that city leaders expected, and for several reasons — one of which should worry all pension-paying institutions. That reason: Retirees are living significantly longer than old assumptions.

In 2011, the hope was that Proposition C, by changing pension formulas for new hires and capping some payments, would lead to city pension spending peaking in 2014. Instead, these costs are still growing, and are easily the single biggest factor in the $99 million hole projected in San Francisco’s 2016-17 budget.

The news of the projected deficit has triggered shock in San Francisco. The local economy is booming as never before, thanks to the rapid growth of local tech companies, and the assumption was that abundant revenue could let city leaders pursue ambitious plans, such as sharply adding to proposed transportation infrastructure upgrades.

Matier & Ross have details in their San Francisco Chronicle column:

Numbers crunchers say the pension payout for retired government workers could grow to $380 million a year from the city’s general fund by 2019. That’s $113 million more than was projected just last year. … Of the $99 million deficit that the city will have to eliminate by the start of the fiscal year July 1, $42 million is attributable to more going out in pensions than the city is taking in from the fund’s investments. …

 

Retirees are living longer than expected — and investments are coming in with only a 4 percent return versus the 7.5 percent that actuaries had predicted.

 

Plus, the city lost a lawsuit filed by retirees, invalidating the portion of Prop. C that did away with an automatic 1.5 percent increase in years when the system wasn’t fully funded.

Revised actuarial study ‘good news and bad news’

In October 2014, the Society of Actuaries issued its first updated predictions on Americans’ longevity since 2000.  The study triggered sharp concern among private pension plans and was featured in the Wall Street Journal. Its key finding, as reported by Modern Health Care:

Men at retirement age are now expected to live to 86.6 and women to 88.8, an increase of two years and two-and-a-half years, respectively, since the last actuarial adjustments were made in 2000. While hospital officials have made some revisions over the intervening decade-and-a-half, many systems are only now coming into line with the latest projections.

 

These changing demographics have increased pension obligations by 4 percent to 8 percent over that time period, the Society of Actuaries estimates. “It’s one of those bad-news, good-news things,” said Gregg Nevola, vice president for total rewards at North Shore-Long Island Jewish Health System, where the cost of promised pension benefits increased about 16 percent last year to roughly $2 billion. “The bad news is we’re all living longer. The good news is we’re all living longer,” Nevola said.

But government pension agencies, at least in California, haven’t reacted with the alarm seen in the private sector. In an April interview with PlanSponsor, a website devoted to government pension plans, Richard Costigan — chair of the CalPERS Finance and Administration Committee — never even mentioned that retirees living longer adds to CalPERS’ longtime obligations and increases its unfunded liabilities. Instead, he depicted the development as something that could be addressed with technical tweaks:

“As the fund matures, and the retired population grows, it’s important that the rates reflect the changing demographics of our members. … Pension plans require stable funding, and the new rates incorporate the Board’s actions over the last several years that will reduce rate volatility in the long term.”

22 comments

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  1. Ronald
    Ronald 13 December, 2015, 08:36

    The international business world is intelligent enough to know that defined benefits are financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone. When public sector contracts are negotiated by public sector employees that hammer out a contract with defined benefits that forces under duress a third party, the taxpayers, to cough up the necessary dough, then it’s truly a case of the inmates running the Asylum as well-connected public sector unions overpower the poorly represented taxpayers. Any challenges to that “racket” would be heard before judges who have pension and benefit package they want to protect. Again, seems like a racketeering cover-up right before our public eyes.

    Legally, we may be obligated to pay those DEFINED benefit pension plans, but their unsustainability is killing the budget and discouraging new job creation as the entrepreneurs’’ taxes and fees are contributing to paying for those defined entitlements that are not available in the private sector.

    Stealing from the young who silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

    The unfunded differences are taxed to younger and future generations – to be paid in the future, by unknown subsets of them, through higher outright taxes, reduced benefits, debt defaults, or inflation. The situation is intractable because most of those being burdened are not voters (most are not even alive) and cannot be part of a constituency for reform.

    “Defined benefit” programs are lucrative to the recipients, but unsustainable as they are funded by investments that do not get defined rates of returns. Currently there are more than 12,000 people receiving pensions over $100,000 from CALPERS. When the CALPERS investments perform poorly, the consumer picks up the tab for those defined guaranteed pensions.

    Reply this comment
  2. desmond
    desmond 13 December, 2015, 09:13

    Remember, my generation rejects convention, euthanizing public sector pension recipients is a common sense reform. Public sector pension payouts are equivalent to mass shootings.
    The pension violence(payouts) is a danger to us all.

    Reply this comment
  3. Donkey
    Donkey 13 December, 2015, 19:29

    What will the RAGWUS feeders do when there are 100,000 useless tools receiving $100,000 plus pensions in the near future!! With an additional 2 million getting $50,000 to $90,000 every year!! 🙂

    Reply this comment
  4. S Moderation Douglas
    S Moderation Douglas 14 December, 2015, 05:51

    What is RUGWIS?

    Reply this comment
    • Ulysses Uhaul
      Ulysses Uhaul 14 December, 2015, 08:13

      Ragwenetti is an ancient cult founded by Ragwenettus a distant cousin of Beowolf and brother in law of Caligia on Nero’s side.

      The believe in power to the plutocrats, partying, big bonfires for colosseum barbecues.

      In modern times they seek gusheee pensions, expense accounts and roasting the so called doomers in public elections!

      Reply this comment
      • ricky65
        ricky65 14 December, 2015, 08:33

        To S&M: I once axed the Donk that very question a while back.
        I believe he stated it was: “Robert-Allen-Gubmint-Worker-Union-Scum”.
        Actually you mispelled it in your question but the “I” works too . Just use ‘Idiot” scum instead.
        If you’re not sure what to make of this strange Donkey term, just think Ulysses, Red Ted, or even NTHEOC or similar and you’ll get the drift.

        Reply this comment
        • Rex the Wonder Dog!
          Rex the Wonder Dog! 14 December, 2015, 10:39

          The R stands for Rizzo, from City of Bell.

          The S probably stands for Scum, or Steals, as in Teddy Steals.

          Reply this comment
          • ricky65
            ricky65 14 December, 2015, 13:36

            Hey you’re right Rex.
            I googled it and found the Donk’s reply back to me on this forum in 2012.
            Here it is:
            “Ricky65, the RAGWUS is a pejorative term for the people that run the bureaucracies of our corrupt government.

            R = Robert Rizzo
            A = and
            G = Government
            W = Worker
            U = Union
            S = Scam.”

          • Donkey
            Donkey 16 December, 2015, 14:04

            Rex has it right, and ricky65 pegged the acronym. The RAGWUS was created when the powers of evil joined with public employee unions to steal all they can from the private sector taxpayers With the secret connections inside of the back rooms of every bureaucracy the RAGWUS schemes, it will be quite fun watching them cry and flail when the scam comes crashing down. 🙂

          • Ted. Mentor to the doomed....
            Ted. Mentor to the doomed.... 21 December, 2015, 21:50

            OMG I love it when we actually force the board morons to spell it out again!!!!!!!!!!!!!!!

            OMG I think we have made them do this about 50 times over the years!!!!! God I love this troll spinning hobby!!!!!!!!!!!

      • Ted. Mentor to the doomed....
        Ted. Mentor to the doomed.... 21 December, 2015, 21:47

        VERY good U Haul!!!!!!!!!!!!!!! lmao

        Reply this comment
    • Bill Bennet
      Bill Bennet 15 December, 2015, 08:32

      I agree— what does ragwis mean????

      Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 14 December, 2015, 14:23

    Rickaloooooo

    I did a search on the Poodle in Alexandria, Egypt archives. Poodle always wore cheep garden gloves, those green army socks, a filthy jungle pith helmut and prissy multipocket khaki shorts from JC Penny when hunting for notable relatives…..He found, in deed, RAGWUS.

    Notation:

    Ragweenetus existed and scribed extensively about Poodle’ s sketchy tatooed, chained enslaved relatives and married first through third cousins…..Ragwee named his scribbles in a collected tome: RAGWUS

    Reply this comment
    • ricky65
      ricky65 15 December, 2015, 08:33

      Uly-
      Thanks for adding to my knowledge of how the mysterious Ragwusian theory was born.
      Like many philosophies, it apparently it has its roots in the ancient world.
      The question still remains though. Did Muttly ever find the tomb of Ragwus?

      Reply this comment
  6. Tough Love
    Tough Love 14 December, 2015, 16:01

    Quoting ….

    “In an April interview with PlanSponsor, a website devoted to government pension plans, Richard Costigan — chair of the CalPERS Finance and Administration Committee — never even mentioned that retirees living longer adds to CalPERS’ longtime obligations and increases its unfunded liabilities. Instead, he depicted the development as something that could be addressed with technical tweaks:

    “As the fund matures, and the retired population grows, it’s important that the rates reflect the changing demographics of our members. … Pension plans require stable funding, and the new rates incorporate the Board’s actions over the last several years that will reduce rate volatility in the long term.””

    Typical gobbledygook from another self-interested Public Sector manager always misleading and denying as to the TRUE cost of theses ludicrously generous Defined Benefit pensions.
    ——————–

    Taxpayers ….REFUSE to fund this thievery !

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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