In Sacramento, Gov. Jerry Brown won passage of a pension reform measure in September 2012. While many thought it didn’t go nearly far enough, its approval showed an acceptance of a new conventional wisdom: that benefits were unnecessarily generous. In San Diego and San Jose, city voters overwhelmingly approved much more sweeping reforms.

But there is a hugely disruptive wild card in the pension debate that is rarely recognized. It is the growing consensus among longevity experts — a large number of whom are based in California — that they are nearing breakthroughs on several fronts that promise to dramatically expand how long humans live.

According to data released in 2009, the California Public Employees’ Retirement System expects public employees with a current age of 55 to live to be 81.4 if male and 85 if female. These actuarial assumptions are built into how much public agencies are expected to set aside for all employees, including new hires in their 20s.

Experts’ life-expectancy predictions far higher than CalPERS

The Golden State’s best-known anti-aging experts — Dr. Aubrey de Grey and Dr. Walter M. Bortz II  — are on the short list of the world’s leading authorities on the topic. Their analyses of anti-aging efforts build off sharply different approaches; de Grey is controversial and Bortz conventional. But both their assumptions suggest CalPERS’ actuarial assessment of its long-term funding needs is comically optimistic.

De Grey, a native of England, oversees the SENS Research Foundation, a nonprofit organization based in Mountain View. SENS stands for Strategies for Engineered Negligible Senescence. His focus has been on the idea that the aging process can be “cured,” allowing humans to live far longer thanks to “regenerative medicine” that stops the deterioration of the body. Initially scorned by many gerontologists, de Grey’s views are taken more seriously with each passing year. He believes that the average life expectancy of Americans who are now alive is likely to be the early 90s, and that in 25 years time, it could be far longer as “regenerative medicine” becomes practical.

Bortz, a native of Philadelphia, is a professor at Stanford University School of Medicine. His research has demonstrated the importance of physical exercise to “robust aging” — living long with full mental and physical faculties. Bortz sees vast progress ahead in gaining an understanding of human metabolism and its relation to longevity. He believes average life expectancy of Americans could reach 100 in coming decades.

California a world leader on longevity research

But de Grey and Bortz are only part of a wide array of longevity researchers in California, supported by a variety of public, nonprofit and private institutions.

The California Institute for Regenerative Medicine — the state stem-cell agency financed by a 2004 bond — has backed dozens of ambitious age-related research projects, and agency officials are particularly excited about prospects for delaying the onset of Alzheimer’s disease, which often reduces life expectancy by six years or more.

Stanford and UCLA each have a Center on Longevity. UC San Francisco is home to some of the most promising longevity research in the world.

The J. Craig Venter Institute in San Diego — founded and run by the scientist who in 2001 became the first to complete sequencing and analysis of the human genome — by itself could change the world. Venter is pioneering the development of synthetic genes, which have stunning potential to remake life as we know it.

There’s also Google’s new “moon shot” — a project called Calico that has as its goal nothing less than “solving death.” It’s expected to be based in Silicon Valley.

A list of California-based longevity research with transformational possibilities could go on at some length. But the point of providing this background isn’t to offer testament to the Golden State’s enduring strengths in the sciences. It’s to lay the groundwork for thinking about what life in our state might be like in a quarter-century if life expectancy does balloon to 100.

The Golden State version of ‘Elysium’

Having a defined-benefit government pension when you live on average until you are 81 or 85 is already an immensely lucrative and reassuring fact of life for public employees. But having such a pension when you live until 100 is a gilded gift, one that makes past complaints about government employees being a special protected class seem simply inadequate.

Barring a change in benefits or a dramatic increase in the minimum retirement age, public employees would enjoy an advantage so pronounced that it would be somewhat akin to that owned by the privileged elite who live in a satellite colony rotating around a decaying Earth in the science-fiction film “Elysium.”

Of course, a huge gain in life expectancy would affect public policy in many other ways as well. Funding for Social Security and Medicare already looks imperiled because of the retirements of millions of baby boomers and the declining birth rate. If life expectancy increased to 100, it is impossible to conceive of a federal budget in anything even vaguely resembling its present form.

The main hope of averting fiscal disaster then might be what economics writer Matt Yglesias and some futurists call the emergence of a “post-scarcity” world — one in which combinations of technology have sharply reduced the cost of material goods.

But if praying for a “post-scarcity” world is the best that most private-sector workers can do in contemplating how they’ll fare in a California with life expectancy of 100, that’s a striking contrast to the outlook of government workers. They can look forward to three or four decades of retired life at 75 percent to 90 percent of their final pay. The rest of us? We can pray our reverse mortgages prop up our lifestyles for a while before we’re forced to mooch off our children or to move into a new urban phenomenon: slums for the elderly.

“Elysium” writer-director Neill Blomkamp has said that income disparities he witnessed in California and Mexico helped inspire him in coming up with the story for his dystopia, a heavy-handed homage to the Occupy movement.

The version of “Elysium” we could be headed for may have California roots of a different sort. The haves vs. have-nots scenario of our future may not be the 1 percent vs. the 99 percent.

It will be the 10 percent or so of public employees who have defined-benefit pensions that last longer than their entire careers vs. the rest of us.

By WAYNE LUSVARDI

People are upset.

The Los Angeles Times reported that the new chairman California stem cell research center, Jonathan Thomas — an investment banker — will draw a salary of more than $400,000 per year.  Current Chairman Alan Trounson also makes a salary of $490,000.

About 98 percent of more than 150 online comments to the story were outraged at the news.

The stem cell research center — euphemistically called the California Institute for Regenerative Medicine (CIRM) to give it a private-sounding name — was originally authorized under Proposition 71 in 2004 with $6 billion in bonds, including interest. The California stem cell institute has already requested another $6 billion in voter-approved bonds when its funds run out in 2014.

Many of the online newspaper commentators who stated they originally voted for public funding of stem cell research in 2004 vowed that they would not be burned twice and would not vote for it again.

Apparently the commentators did not realize that the father of Prop. 71 and its outgoing chairman of the board — Robert Klein II — already has created two arguably unnecessary and gratuitous state bureaucracies: the California Housing Finance Agency (CHFA) and the California Institute for Regenerative Medicine (CIRM), both of which depend on bond proceeds.  Those who oppose any more government bonds for state-sponsored stem cell research have already been taken to the cleaners twice.  They just don’t realize it.

Klein has been a master of influencing California’s voter initiative system, public opinion, and backstage political wheeling and dealing to create public agencies ex nihilo — Latin for “out of nothing.” California is a state where whole bureaucracies can be created without the approval of the Legislature or governor. Once created, like all bureaucracies, they have a life of their own and are almost impossible to phase out even if their organizational mission no longer exists.

As economist Milton Friedman once quipped, “Nothing is so permanent as a temporary government agency.”

Klein has not only fathered two state bureaucracies in California, he has served since 2004 as the chairman of the board of the stem cell research financing agency with a $150,000 a year salary for half-time work.  He learned how to game the political system to launch the stem-cell agency from his experience in founding the Housing Finance Agency, whose function is for the public sector to capture low-income housing finance away from the private sector.

CHFA Origins and History

The California Housing Finance Agency (CHFA) came into being in 1973 after the Nixon administration ended public housing subsidies and replaced them with block grants. Klein and associate Michael J. BeVier influenced the state Legislature to create the California Housing Finance Agency to subsidize low-income housing developments with tax-exempt bonds. In 1979, BeVier wrote about their exploits in a book titled, “Politics Backstage: Inside the California Legislature.”

In order to avoid any conflicts of interest, Klein reportedly never used CHFA bond monies in his own real estate projects.

In September 1973 — the year the CHFA was formed — market interest rates on a 30-year fully amortized mortgages reached 8.82 percent.  By October 1981, the interest rates had reached 18.45 percent after the 1979 Energy Crisis, the Iranian Hostage Crisis, President Jimmy Carter’s continuation of of price controls on gasoline and natural gas and rampant inflation. Offering a tax-exempt rate on a 19 percent mortgage for low-income housing was useless.

But by October 2003, the 30-year mortgage rate had dropped to 4.23 percent, and together with subprime loans, made low-income housing bond financing effectively superfluous.  At one point during the Real Estate Bubble of the mid-2000s, the effective interest rate on low-income mortgages had reached below zero and Fannie Mae was essentially giving away free money.

Subsidized financing for new construction of low-income housing is a contradiction. Affordable low-income housing is typically old, obsolescent, and located far from amenities such as shopping centers and light rail stations. That is what makes it affordable.  But in California, affordable housing has been redefined as a dwelling that is new, with gyms, spas and pools — and which is located in a mixed-use development with an adjacent supermarket and rail transit station.  Redevelopment and bond financing have mostly contributed to low-income housing becoming luxury housing.

Nonetheless, like all bureaucracies that have long ago lost their original missions, the CHFA continued to provide below-market interest rate financing to low income housing developers.  By 2011, the CHFA was staying out of the bond market altogether for fear that buyers would not buy the bonds.   But the agency still had an overhead of more than a quarter billion dollars per year ($255 million).

Stem Cell Institute History

The rationale used by Robert Klein in 2004 to get Prop. 71 approved by voters was ingenious.  Then-President George W. Bush had issued an executive order to ban the use of new embryonic stem cells in medical research funded by the federal government. (Although federal funding for old embryonic stem cell lines was allowed. And private and state-funded research was not affected.)

Much of the California opposition to Bush for the Iraq War was cleverly redirected into repudiating him by voting for stem cell research for miracle cures promised for paralysis, cancer, and heart disease.  But what it actually did was shoot the state budget and the medically needy in the foot.

In 2009, a Little Hoover Commission report scrutinized Klein’s organizational structure and administration of the stem cell institute. In particular, the Commission was critical that the job qualifications Klein wrote for the position of chairman of the board were essentially reflected in his own resume.  The Hoover Commission commented that Klein often overstepped the boundaries between policy setting as chairman and day-to-day administration, which should have been separated.

The Hoover Commission also became worried that the stem cell agency could become “leaderless” in the event of his departure, which is precisely what happened last year when Klein had to step down under pressure from critics.

Reportedly, Klein was accused of arranging for a crony to succeed him in a proverbial backstage deal.  Eventually, Klein was allowed to stay another six months and now an apparent successor has been found, albeit for a whopping $400,000 salary.

Another point of contention by the Hoover Commission was that the membership of the oversight committee of the stem cell financing agency included those who benefitted from agency grants and loans. The Hoover Commission was concerned that the oversight committee was full of “self dealing.”

Today, the major rationales for why government-funded stem cell research was once thought to be needed have unsurprisingly mostly disappeared:

* Medical researchers discovered that stem cells could be harvested from many different types of human cells, thus rendering the use of embryonic stem cells for research unnecessary, vindicating Bush.

* President Bush’s executive order banning federal funding of stem cell research using human embryos was overturned by President Barack Obama in 2009.

* There is no need for a redundant state financing mechanism for stem cell research to private venture funding and grants from the National Institutes of Health.  The private International Stem Cell Corporation is on track to emerge as one of the first profitable stem cell companies, mainly due to vanity skin care products sold to wealthy customers, although breakthrough skin-burn products have also been notable.

* California’s Medi-Cal program has been deeply cut, resulting in the state funding redundant stem cell research while Medi-Cal patients can’t get kidney dialysis and chemotherapy treatments.

Stem cells can’t cure bureaucratic opportunism.  Bureaucracies such as the March of Dimes continue to exist long after the Salk vaccine eliminated polio.  Such is the case with bond financing for low-income housing and stem cell research.

Infrastructure Financing Districts

State Assemblyman Tom Ammiano, D-San Francisco, has recently proposed Assembly Bill 664, which would authorize dropping the long-standing requirement for voter approval of bonds for Infrastructure Financing Districts (IFDs).

Like Robert Klein, Ammiano uses populist propaganda to sell his proposed legislation to the public.  He asks, “Why should the state general fund subsidize the America’s Cup IFD bonds?”

This is a trick question, because IFD bonds aren’t backed by property taxes outside the project area.  Nor do they rob funds from public schools.  IFDs are revenue bonds backed by the collateral of the land and improvements in the infrastructure district and by revenue stream it is anticipated to generate.  However, revenue bonds are more risky than general obligation bonds and could ruin the credit rating of a city or state.

But if history is any guide to the future, the gullible California public will evidently continue to vote for feelgood voter initiatives and legislation that creates autonomous self-dealing and superfluous bureaucracies funded by bonds. Despite protestations that they may have been fooled once but won’t be twice, California voters have already been fooled more than twice and continue to fall for the propaganda of bond hucksters.