The governor’s plan is similar to the idea of pension-obligation bonds. That’s when a government borrows money to pay down escalating pension debts, in the hopes “that the bond proceeds, when invested with pension assets in higher-yielding asset classes, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds,” according to an explanation from the Government Finance Officers Association.

The governor’s plan, by contrast, would borrow money from the Surplus Money Investment Fund, a low-interest (around 1 percent) account where the state holds money to pay for short-term expenses. It would then make a supplemental $6 billion payment to the California Public Employees’ Retirement System (CalPERS), which currently predicts a rate of return of 7 percent (even though last fiscal year it received only 0.61 percent). If the CalPERS fund performs as predicted, it will allow the state to save $11 billion in pension liabilities over two decades.

“Absent additional action to address these growing liabilities, paying off retirement liabilities will require an increasing percentage of the state budget. For example, the state’s contributions to CalPERS are on track to nearly double from $5.8 billion ($3.4 billion General Fund) in 2017‑18 to $9.2 billion ($5.3 billion General Fund) in 2023‑24,” according to the May budget revision’s summary. This is purportedly a painless way to pay down growing pension debts.

The idea got a boost from one of California’s best-known pension reformers, Sen. John Moorlach, an Orange County Republican who recently introduced a package of pension reform bills in the Senate. They were all killed by majority Democrats. Nevertheless, Moorlach wrote, in a column for Fox & Hounds that he wishes the governor’s prepayment plan had “a little more sizzle to make it an even more interesting opportunity.”

“Governor Brown should ask the board of CalPERS what type of incentive they will give the state for the prepayment,” he wrote. “CalPERS will benefit from the large influx and should provide at least a 3.75 percent reduction on the actuarially calculated required contribution.” That’s unlikely to happen, of course, but Moorlach wrote that he likes the Brown proposal and thinks the governor should move forward with it.

The idea follows the lead of the Orange County city of Newport Beach, explained Ed Mendel, in his May 29 Calpensions article. The city is paying down its pension debt to CalPERS as quickly as possible, helping it avoid the possible fate of other cities. Mendel quotes Modesto’s acting city manager, who told the Modesto Bee “he is hearing that many cities are facing bankruptcy over rising pension costs.” In the case of looming fiscal trouble, most say slashing at debt is a good idea.

But not everyone is so favorably disposed toward the governor’s plan. David Crane, a Stanford University lecturer and president of Govern for California, argues in a column that the plan is terrible precedent that transfers more pension costs from the beneficiaries of the pension system to the state’s taxpayers. When the state makes pension promises to employees, he wrote, both the state and the employees make contributions into the system, which he refers to as “normal costs.”

By contrast, when agencies increase benefit levels or stock-market earnings go down, the pension funds face those “unfunded liabilities,” which are the unfunded promises they’ve already made to current retirees and employees. CalPERS currently is 74 percent funded, which means that 26 percent of those promises are unfunded. “In contrast to joint sharing of normal cost, employees don’t share in the cost of unfunded liabilities,” he wrote. “One hundred percent of that cost falls on citizens, whose services get crowded out and taxes get raised to pay off the liabilities.”

Borrowing these taxpayer funds to pay off the pension debt, he explains, would just let CalPERS continue to set these shared “normal costs” at an unfairly low rate. Furthermore, Crane notes that this special fund is funded entirely by taxpayers, so he fears the state will borrow from other special funds. The state could claim that these monies are going to pay for public services, when in reality they are being siphoned off for pensions.

As Gov. Arnold Schwarzenegger’s pension adviser, Crane wrote that he helped the former governor “engineer ‘Deficit Reduction Bonds’ as a way to address the deficit he acquired upon taking office.” But he now regrets the move: “Those borrowings didn’t solve anything. They just covered up the problem, with interest to boost.”

State and local governments are understandably in a bind. They have “few ways to slow the rapidly climbing cost, among them: cut staff and services, lower pensions for new hires, get unionized employees to pay more for their pensions or cut salaries …,” explained Mendel. He noted the key obstacle limiting the ability of governments to cut pension accruals in the future is something called the “California Rule,” which is making its way to the state Supreme Court.

For some, then, shuffling funds around to prepay a little pension debt seems like a cost-free no-brainer to likely limit the growth of the debts. But to others, it’s just a shell game that evades the more politically dangerous course of tackling the size of those benefits head on – and running into powerful resistance from the state’s public-employee unions.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

As one of 13 CalPERS board members, J.J. Jelincic presumably has some authority. But last June and July, he filed Public Records Act requests to force CalPERS to give him weekly reports from its federal lobbyists, much like any member of the public.

 

CalPERS tripled its federal lobbying force last year from one all-purpose firm, the Lussier Group, to three separate lobbying representatives for retirement policy, investment and market regulation, and health care issues.

 

Jelincic wanted to see what CalPERS was getting for its increased spending. So he asked for the weekly reports from the lobbyists, as specified in their contracts. But the rest of the board had decided monthly reports, also specified in the contracts, are enough, and Jelincic’s informal request was denied.

 

The unusual Public Records Act requests by a board member helped trigger a CalPERS governance committee discussion last month of “board member behavior” that was clearly aimed at Jelincic.  … In addition to filing the Public Records Act requests, Jelincic was criticized by other board members for “disparaging” staff in public and taking more than his fair share of time at board meetings by asking questions.

Board targets only member who challenges staff

CalPERS’ actions got two much more savage takedowns at Naked Capitalism, a popular niche website dedicated to exposing improper and unethical behavior by large financial institutions and corporations and the government agencies which regulate them. Susan Webber, a 35-year veteran of Wall Street and high finance, writes for the site under the name Yves Smith. Among her allegations:

• CalPERS board routinely tries to hide basic information about what its doing, apparently at the behest of its staff, which doesn’t like outside scrutiny.
• CalPERS ignores state laws on taking testimony at its meetings and uses security guards to intimidate individuals who ask difficult or multiple questions.
• CalPERS is trying to break Jelincic’s will by hassling him. Some specifics from Webber:

[Some video of last month’s] Governance Committee meeting clearly shows that the board, aided and abetted by [fiduciary counsel Robert] Klausner, is in the process of establishing a procedure for implementing trumped-up sanctions against Jelincic, presumably so as to facilitate an opponent unseating him in his next election. But Jelincic’s term isn’t up until 2018, so from their perspective they are stuck with an apostate in their ranks for an uncomfortably long amount of time. Part of their strategy appears to harass him into compliance with the posture the rest of the board, that of ceding authority to staff and conducting board meetings that are largely ceremonial. …

 

The board ganging up against Jelincic comes straight out of The Peter Principle. One of its corollaries was “hierarchical exfoliation,” in which organizations expel both poor performers and notable outperformers, the latter because they make everyone else look bad. Jelincic, the lone board member willing to do his job, must be tarred and feathered for his crime of showing the rest of the board up. …

 

[It] is particularly unseemly that the board member who has been the most aggressive in pushing the illegal notion that CalPERS can and should sanction Jelincic over filing Public Records Act requests is Priya Mathur, who has been fined repeatedly for violating state ethics laws.

Jelincic has history as CalPERS maverick

This isn’t the first time Jelincic has tangled with other board members and top CalPERS officials. The Sacramento Bee reported in April on one contretemps, involving limits put on his voting to avoid conflicts of interest because his full-time job is as a CalPERS investment officer.

In 2011, Jelincic was officially reprimanded for alleged sexual harassment of co-workers in CalPERS’ investment office. But he denied the allegations and called the sanctions “politically motivated.”

But Jelincic’s campaign biography and website doesn’t focus on his maverick ways. Instead, they emphasize his history as a union leader, including time as president of the California State Employees Association. Strong union support helped him first win his seat on the CalPERS board in 2009.

Last week, after a three-year court battle, the police and fire unions finally accepted a compromise that preserves most of the reforms backed by voters. The San Jose Mercury-News has some key details:

[The] city viewed Measure B as a way to control skyrocketing retirement costs that had more than tripled after benefit increases in the late 1990s and devoured funds for services. The measure called for current employees to pay more into their pensions, eliminated bonus checks for retirees, established scaled-back benefits for new workers and stricter disability provisions.

 

The proposed settlement would roughly maintain most parts of the measure already enacted, such as eliminating bonus checks for retirees and scaled-back pensions for new hires while abandoning provisions blocked by a trial judge’s 2013 ruling or which the council had not enacted, such as higher pension contributions from workers and some disability changes.

Concession opposed by many retirees

The fact that San Jose negotiators won unions’ acceptance of the end to so-called “13th checks” to pensioners in years in which pension fund returns were high is a major development on the pension reform front. In San Jose and many other local governments with such policies, current workers and retirees had argued that this amounted to a vested benefit that couldn’t be revoked — even if it were never collectively bargained.

CalPensions’ Ed Mendel wrote about the practice in 2013 and noted that what may nowadays seem illogical and unsustainable — giving retirees more money when a pension fund portfolio does well, but not giving them less money when that investment portfolio has a bad year — is a hangover from a past California where officials couldn’t fathom the idea of hugely underfunded pensions someday being a major problem.

Declaring earnings excess or surplus might have been a backdoor way to give employees more money and employers short-term budget relief, knowing from the outset future generations were likely to get a larger pension bill.

 

But whatever the cause, treating investment earnings as an excess or surplus, in ways large and small, has skimmed off money that could have been invested, adding to pension debt rather than lowering it.

One reason why some retiree groups held out hope that “13th checks” might win court muster was because they were not explicitly banned going forward by Gov. Jerry Brown in the 2012 pension reform law he shepherded to passage. The argument was this amounted to a de facto concession to these checks being a vested right.

But as the conclusion to the San Jose litigation indicates, police and fire union lawyers apparently no longer believed they had a case to sustain the “13th checks.”

Where the “13th checks” keep coming

In San Diego, meanwhile, the practice lives on. City officials — including many who played key roles in the crafting and adoption of a pension reform ballot initiative that passed on the same day as San Jose in 2012 — believe the right is vested. This is from a November 2013 Union-Tribune story.

A holiday season bonus is back for San Diego city employee pensioners, in the form of a “13th check” for the year that averages $720 per retiree.

 

The extra cash will be paid out to some 7,700 people next week, totaling $5.5 million, even though the system’s long-term shortfall in meeting pension obligations is $2.3 billion.

 

The payments apply only to city workers hired before mid-2005 but have grown in recent years as more people hired before that have retired and lived longer. …

 

This year the system said it had realized investment earnings of $241.7 million, compared to certain costs of $150.7 million. That left a balance of $91 million sufficient to trigger the payment of the 13th check.

A recent change by the Governmental Accounting Standards Board, known simply by the acronym GASB, forces government bodies to be more transparent in reporting pension liabilities and long-term commitments for retiree heath care. Among the changes: the liabilities must be reported on the first page of financial reports instead of being buried in a footnote.

“Applying accounting standards can sometimes be complex, but identifying the right standards to apply should be straightforward,” GASB Chairman David A. Vaudt said of a slew of accounting changes.

While changes in accounting rules may not garner time on the evening news, accounting rules have been the primary method for forcing governments to address the rising cost of unfunded pension and health care liabilities. In 2007, the board began implementation of GASB 45, a change in accounting rules that, for the first time, forced government bodies to disclose their pension liabilities. That change was enough to put the issue of pension liabilities on the mainstream public radar.

California’s next major liability: Other Post-Employment Benefits

Although governments have been slow to address the problem of unfunded pension liabilities, the government accounting board nonetheless raised the profile of the issue. With its most recent changes, GASB is likely to drive a conversation about “other post-employment benefits.” Health care benefits are the biggest and most common post-employment perk, which can also include life insurance, disability coverage, legal assistance and other services.

From an accounting perspective, it’s easier to budget for pension liabilities than other post-employment benefits. Due to court rulings, governments have little authority to reduce or change promised pensions. That makes it a liability with a present-day obligation.

In contrast, other post-employment benefits do not have the same legal protections as pensions. As Bloomberg noted earlier this year, “The Supreme Court unanimously decided that retiree health benefits are not necessarily guaranteed.” That case involved private sector workers. In theory, the Court’s ruling could also extend to the public sector.

“Consequently, some governments may be able to change the benefits or employees’ eligibility to receive benefits, or even stop providing benefits altogether, whenever they wish,” GASB explains in a newly published fact sheet. “These facts raise questions about whether OPEB is a liability that should be reported in the financial statements.”

Although the new accounting standards force governments to disclose the liabilities, it does not require governments to set aside funds or budget for the future. “How a government actually pays for OPEB is a policy decision made by government officials,” the board explains.

“These newly published OPEB standards will give financial statement users a much more complete picture of how much state and local governments have promised in retiree benefits—and how much those promises actually cost,” Vaudt, who serves as chairman of the government accounting standards board, said in a press release. “Together with the Board’s recent pension standards, these standards will provide consistent and comprehensive guidance for the full suite of postemployment benefits that governments provide to their employees.”

Rising cost of unfunded health care liabilities

Ed Mendel, who covers the state’s pension issues at CalPensions.com, points out that the rising unfunded liabilities arising from promised retiree health care benefits is skyrocketing. Since 2007, the retiree health care liability for state workers has increased by $24.2 billion. Retiree health care benefits provided to state workers now exceeds $72 billion – more than the state’s unfunded pension liability.

“State worker retiree health care has been one of the fastest-growing state expenses: $1.9 billion next fiscal year, up fourfold from $458 million in 2001,” notes Mendel, one of the state’s top journalists covering pensions. “It’s also one of the most generous benefits, requiring no contribution from most state workers.”

Governor Jerry Brown

This year, Governor Jerry Brown raised the issue of retiree health care benefits with his January budget proposal. As Mendel notes, the governor is looking to move the state away from “pay-as-you-go” funding in favor of pre-funding future health care benefits. By paying in advance, governments are able to reap the benefits of investing the funds and earning more money through appreciation and interest.

“If we don’t rein things in, then down the road there will be drastic cuts, just like there were over the last 10 years,” Brown said earlier this year. “It’s either stop and start or steady as you go.”

The governor’s proposal could be a double-edged sword for the state’s long-term budget picture. By negotiating changes to retiree health care benefits, some analysts believe it increases the chances that courts will protect the benefit as an irrevocable contractual obligation.

But even at a time when school funding has reached an all-time high, districts are apprehensive at having to spend so much more on pensions. This month, their strategy has become clear: establish separate, specific state funding for districts to cover their increased contributions. Ed Mendel of Calpensions.com has more:

… a coalition of school districts, including the giant Los Angeles Unified School District, is proposing a separate budget item for the CalSTRS rate increase within the Proposition 98 school-funding guarantee.

The change would not require the state to spend more money on schools. But the coalition thinks a separate budget item could ensure that funding for the CalSTRS rate increase, as it’s phased in over seven years, “will grow at a predictable rate” for all school districts.

As it stands now, school districts would have to pay for the CalSTRS rate increase with money from a new K-12 funding plan adopted two years ago, the Local Control Funding Formula.

No carve-out from Proposition 98

There had been speculation that the CTA and CFT would seek to have pension funding separated out from Proposition 98 spending — money the state is required to give schools under a 1988 ballot measure that guarantees about 40 percent of revenue goes to K-14 campuses. But that’s difficult under Prop. 98’s dense, specific language.

Instead, the education establishment expects to use the flexibility and extra dollars provided by the Local Control Funding Formula to pay for the higher pension costs. But that’s not what the change in how schools are funded was supposed to be about, according to its champion, Gov. Jerry Brown. The governor’s website contains a 800-word account of the signing of the LCFF law on July 1, 2013. It depicts the funding change as being solely about getting more help to struggling English-learners, the state’s “neediest students.”

Brown’s quote in the account:

“Today, I’m signing a bill that is truly revolutionary. We are bringing government closer to the people, to the classroom where real decisions are made and directing the money where the need and the challenge is greatest. This is a good day for California, it’s a good day for school kids and it’s a good day for our future.”

Then-Senate President Darrell Steinberg’s quote:

“Our disadvantaged students deserve more resources to overcome the extra obstacles they face, and this formula does just that. At the same time, we’re investing more resources in all of our students, and building on proven programs of career technical education and partnership academies to keep our students engaged and give them better preparation for college and careers. This dramatic shift in funding allows our schools to target investment where it’s needed most. By empowering our students for success, we pave the way for a stronger California.”

It’s another sign of how daunting pension reform is in California. Ed Mendel of Calpensions.com has the details:

A retiree group won a big victory last month. Reversing a superior court ruling, an appeals court overturned part of a voter-approved San Francisco pension reform in 2011 that ended higher payments to retirees when investments have “excess earnings.” …

Retirees, scattered and no longer union members, might seem unlikely to be formidable, particularly when battling a cost-cutting pension reform backed by all 11 county supervisors, business and labor groups, and 69 percent of San Francisco voters in 2011.

The reform, Proposition C, was the milder establishment alternative to deeper pension cuts in Proposition D by Jeff Adachi, one of the 16 candidates for mayor on the San Francisco ballot that year, including the incumbent and winner, Mayor Ed Lee.

“The epitome of greed,” Gary Delagnes, president of the San Francisco Police Officers Association, told SF Weekly in 2012 when the retiree group began its legal challenge.

“Vested benefits” theory protects flawed concept

The court decision shows that judges take the concept of “vested benefits” very seriously. Unlike in the private sector, once a government union is promised benefits, those benefits can’t later be reduced. When this legal axiom is combined with the state Public Employment Relations Board’s hostility to ballot measures on pension issues, the difficulty that taxpayers face in trying to scale back government pensions looks extraordinary.

But the San Francisco case is particularly noteworthy because it involves the single category of pension benefit that actuaries, accountants and good-government advocates find most indefensible. Giving government pensioners extra money when pension funds have strong years only makes mathematical sense if the pensioners get less when pension funds have bad years. No local government in California has such a policy.

“Excess earnings” benefits are never seen at big pension agencies with strong staffs like CalSTRS or CalPERS; it’s understood that they’re just not sustainable in the long run.

But in cities like San Francisco, San Diego and Fresno, and counties like Alameda and Mendocino, the actuarial, common-sense arguments were overwhelmed by political clout and expedience.

Here’s a link to a study commissioned by the Schwarzenegger administration that outlined the many costly quirks in local governments’ pension policies. It was highly critical of “excess earnings” bonuses.

First came Los Angeles Superior Court Judge Rolf True’s ruling that teacher tenure laws are unconstitutional and “shock the conscience” because they protect incompetent teachers and funnel them to the schools in poor minority communities that most need the best teachers.

Now U.S. Bankruptcy Judge Christopher Klein has struck another blow for sanity by rejecting CalPERS’ argument that the city of Stockton can’t cut the pensions of city employees and retirees as it tries to get out of bankruptcy. CalPERS’ claim that state laws somehow trump federal laws has always seemed strange. Klein’s comments Wednesday certainly reflected that view. This is from Ed Mendel at calpensions.com:

Part of his analysis yesterday that CalPERS pensions are not state “governmental or political powers” protected under federal bankruptcy law is that while state workers are in CalPERS by statute, cities choose to join CalPERS.

Klein said California cities have the option of forming their own pension systems, joining a county pension system, hiring a private pension provider or withdrawing from CalPERS, if they can afford to do so.

He concluded that benefits not prescribed by state law are not “governmental or political” powers protected by the federal bankruptcy law, but instead are unprotected “business powers.”

Klein said a CalPERS-sponsored state law preventing cities from rejecting their CalPERS contracts in bankruptcy is “flat-out invalid” under the constitutional “supremacy clause” giving federal law priority over state law.

The judge said another CalPERS-sponsored state law that gives CalPERS a lien on all city assets, except wages, when they declare insolvency is an invalid attempt by the state Legislature to “edit” the federal bankruptcy law.

Judge: “Why should I take [CalPERS claim] seriously?

The New York Times treated this ruling as a major national story and made a point that California coverage did not: “Judge Klein’s ruling went beyond anything that Stockton was seeking.” More from the NYT:

Calpers had argued that if Stockton stopped making payments and dropped out of the state pension system, the lien would let it claim $1.6 billion of its assets. But Judge Klein said those statutory powers were suspended once a California city received federal bankruptcy protection.

“Why should I take that lien seriously?” he asked a lawyer for Calpers, Michael Gearin. …

“The bankruptcy code provides that the lien can be avoided and be treated as an unsecured claim,” Judge Klein said.

Judge Klein also said that Stockton had many options other than Calpers for retirement benefits: a private provider, like an insurance company; a multiemployer pension plan affiliated with a union; one of California’s county-run pension plans; or it could even offer no pensions at all.

“There are lots of permutations and combinations out there with respect to the art of the possible,” he said, adding that nothing in the law required any city to give its business to Calpers. “The whole world is out there.”

Conservatives, libertarians and believers in small government have long viewed the courts with suspicion. That’s especially so in California, where conservative ballot propositions have often been scrapped or enfeebled by courts but liberal ballot measures rarely seem to get picked apart.

But Judge Treu and Judge Klein go against that narrative — and offer hope that a new balance of power is coming in a state dominated for too long by public employee unions.

]]> https://calwatchdog.com/2014/10/02/stockton-ruling-like-vergara-ruling-shakes-ca-status-quo/feed/ 20 68689 https://calwatchdog.com/2013/12/04/state-finances-lao-report-on-calstrs-demolishes-laos-happy-talk/ https://calwatchdog.com/2013/12/04/state-finances-lao-report-on-calstrs-demolishes-laos-happy-talk/#comments Wed, 04 Dec 2013 13:00:58 +0000 http://calwatchdog.com/?p=54185 I’m still struggling to make sense of Legislative Analyst Mac Taylor’s bizarrely upbeat report last month on state finances that predicted budget surpluses for years to come — but barely mentioned the state’s huge unfunded liabilities for retiree pensions and health care.

Instead of calling for the governor and the Legislature to sharply increase its annual payments to the funds responsible for these liabilities, Taylor called for relatively slight increases phased in for years — increases that are far short of what an actuary would recommend.

It’s as if a family declared its finances to be in great shape so long as one ignored the $500,000 in credit-card debts.

What makes the LAO’s current insanity so tough to figure out? The fact that at other times, the LAO makes powerful arguments that completely counter the budget assertions Taylor offered last month.

LAO: CalSTRS’ debt much worse than Brown’s ‘wall of debt’

For one example, this is from Ed Mendel’s piece on Calpensions.com in March of this year:

“The nonpartisan Legislative Analyst’s Office yesterday recommended that the Legislature adopt a plan to fully fund CalSTRS in 30 years — an estimated cost of $4.5 billion a year, a hefty addition to current annual contributions totaling $5.7 billion. …

“… after years of ignoring a growing CalSTRS debt … the Assembly and Senate public employee retirement committees held a joint hearing yesterday on proposed solutions requested by a Senate resolution last year.

“Ryan Miller of the Legislative Analyst’s Office told the committee that the unfunded liability of the California StateTeachers Retirement System, a century old this year, ‘may be the state’s most difficult fiscal challenge.’

“The analyst said the CalSTRS unfunded liability is twice the size of what Gov. Brown calls ‘the wall of debt’ from years of budgetary borrowing. The governor’s proposed budget spends $56 billion on K-12 funding under the Proposition 98 guarantee.”

Let’s contrast that with what Mac Taylor said three weeks ago in Sacramento at a legislative hearing.

“’The state’s budgetary condition is stronger than at any point in the past decade. … The state’s structural deficit – in which ongoing spending commitments were greater than projected revenues – is no more.’”

Does LAO staffer have a bloody lip?

Huh? So paying the actuarial minimum for retirement benefits that are contractually guaranteed and protected by a welter of state laws isn’t a “spending commitment”?

What’s going on in Sacramento? Is there something in the Capitol water supply? Psilocybin, perhaps?

I wonder how the LAO staffer who correctly warned the Legislature about CalSTRS’ horrible finances in March deals with his boss’s denial and declining math skills. Does he have to bite his lip to keep quiet when Mac talks of budget surpluses as far as the eye can see? Does he chant “om” to maintain his mental equilibrium? Does he furtively scan the jobs.ca.gov site so he can get away from the Lunatic Analyst’s Office?

I’m not being completely facetious here at all. This was the official position of the LAO when the staff was doing the talking, not the boss:

“If the state’s current $1.4 billion annual contribution to CalSTRS were combined with the $4.5 billion additional contribution that may be necessary to achieve full funding in 30 years, the sum would exceed state spending on the University of California and California State University systems combined. The additional CalSTRS contribution alone would represent about one-half of state corrections spending.”

Now the LAO’s position has become “the state’s structural deficit … is no more.”

Wow. And a whole bunch of other less-family-friendly exclamations.

By Chris Reed

On Monday, the day that finally saw criminal charges filed over CalPERS’ brazen pay-to-play bribery scheme, there were signs that some Democratic state lawmakers finally are figuring out that believing California’s pension status quo is ridiculous isn’t just partisan right-wing posturing.

Ed Mendel, one of a handful of elite reporters on pension machinations, has the scoop at Capitol Weekly:

“Assemblyman Marc Levine, D-San Rafael, an upset victor last fall in a new election process, has introduced a bill containing Gov. Brown’s stalled proposal to restructure the CalPERS board, adding financial expertise and loosening labor control.

“The proposal to change the board, which needs voter approval because of a labor-backed initiative in 1992, would double the number of gubernatorial appointees to six, matching the number of labor representatives.

“’In the past, the lack of independence and financial sophistication on public retirement boards has contributed to unaffordable pension benefit increases,’ said the 12-point pension reform proposed by Brown in October 2011.

“The proposal said pension boards need members with ‘independence and sophistication’ to ensure that retirees receive promised benefits ‘without exposing taxpayers to large unfunded liabilities.’”

‘Unsophisticated’? Or union double agents?

Journalistic decorum requires Mendel to pretend the problem is a lack of sophistication on board members’ part, not the fact that they are union tools. Why is this problematic? More from Ed:

“CalPERS sponsored legislation, SB 400 in 1999, that gave state workers a major retroactive pension increase. A deep pension cut in 1991 was rolled back. Retirees received a 1 to 6 percent increase in their pensions.

“Highway Patrol pensions increased 50 percent, setting a costly bargaining benchmark for local police and firefighters that critics say is unsustainable. All of this, CalPERS erroneously said, would be paid for by investment earnings, not costing taxpayers ‘a dime.’”

Here’s a factoid that goes a long way to explain why California is so screwed up. Who is the president of the CalPERS’ Board of Administration?

Is it a UC Berkeley economist? A CEO of a thriving Califoria firm? A respected former statewide official considered an independent straight-shooter?

Nah.

It’s this guy.

“Mr. Feckner is the Past President of the California School Employees Association. He also serves as an Executive Vice President of the California Labor Federation.”

How insane that a guy with such preposterous and extreme conflicts of interest is CalPERS’ board chairman.

How … California.