Next Victim of CalPERS: Marin County

This is what is going to happen to the rich people of Marin County—the pension system will work hard to make them poor or Texans.

“CalPERS, CalSTRS and MCERA have recently reduced their still too high discount rates. Lowered investment assumptions require additional pension contributions, which means more money out of your pocket.

There is a direct link between those decreased assumption rates and the staggering tax, rate and fee increases that we experience regularly.

Increases in bridge tolls, school tax measures, Marin Municipal Water District rates, UC tuition, parcel taxes and bonds are in large part due to the increase in required pension contributions.

The regressive state gasoline tax revenue will be used to fund $100,000-plus “rich” annual pensions for public employees.”

This is what they are facing in 2018—watch the money grubbing bond measures, tax increases.

CalPERS is an economic illiterate’s delight—incompetent, corrupt and mismanaged. Plus it is a great excuse to raise taxes.

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

Marin Voice: We are paying the price for lack of public pension reform

By Bob Bunnell, Marin IJ,  10/2/17

Most large public agencies have risk management departments. They either don’t understand defined-benefit pension plans or choose to ignore the huge risks of public pensions that have been designed with absolutely no regard for cost containment.

We are just starting to see the results of this complete and total ignorance of basic defined benefit pension principles.

These include required taxpayer contributions increasing by huge amounts each year, public entities such as the county making additional taxpayer contributions above what is required to reduce unfunded liabilities, and tax increases everywhere to provide the needed revenue for the seemingly endless contribution appetite of virtually all public pension plans.

The Tax Reform Act of 2006 addressed private union and single-employer defined-benefit pension issues and provided a framework for the sustainability of private pension plans. Public pension officials have failed to address pension reform in any meaningful way.

Following are some of the main reasons for the huge risks of the public pension system:

  • Final salary plans. The private union pension plans that I administer are career-average plans — participants accrue a benefit each year that is added to their prior benefit accruals. If a participant has a large increase in benefit accruals at the end of his or her career, it affects his benefit accruals for those years only, not his or her whole benefit.

Final-salary public plans, where the participant’s whole benefit is based on his or her highest three-year-average compensation, can create huge increases in benefits and huge unfunded liabilities for participants at the end of their careers. Final-salary pension plans are extremely risky from a cost standpoint.

  • Aggressive assumptions. Public plans have used assumptions that are far too aggressive. This creates negotiated benefits far too high and if those assumptions are not met, then there should be a means other than just increasing taxpayer contributions to address the inevitable resulting unfunded liabilities.

Legislators have failed to address this issue and the results are huge increases in taxpayer contributions. Our local public officials have failed to endorse any meaningful pension reform.

  • Benefit increases. Compounding both of the above was the complete irresponsibility of our public officials in the early 2000s to grant benefit increases, probably illegally, in the range of 30 percent to 40 percent to all participants.

So, let me get this straight, use aggressive investment return assumptions and then spend all of the gains from the stock market run-up in the ’90s and expect taxpayers to make these plans whole when the future unfunded liabilities inevitably happen?

The lack of fiscal responsibility and disregard for risk is incredible.

Let’s look at the Marin County Employees Retirement Association. The county pension has many pensioners with over $100,000 annual pensions and these are “rich” pensions. By “rich” I mean that they have annual cost-of-living increases and provide the surviving spouse with a 60 percent survivor annuity at no additional cost to the pensioner.

The taxpayer annual cost is 26 percent of payroll and the county contributed an additional $94 million last year to help reduce its pension unfunded liability.

The city of San Rafael has a 61 percent of payroll required taxpayer contribution and the Novato Fire District has a 48 percent of payroll required taxpayer contribution.

These taxpayer numbers are offensive. It is no wonder that, in spite of huge increases in property tax revenue, the county still needs additional money for basic services.

CalPERS, CalSTRS and MCERA have recently reduced their still too high discount rates. Lowered investment assumptions require additional pension contributions, which means more money out of your pocket.

There is a direct link between those decreased assumption rates and the staggering tax, rate and fee increases that we experience regularly.

Increases in bridge tolls, school tax measures, Marin Municipal Water District rates, UC tuition, parcel taxes and bonds are in large part due to the increase in required pension contributions.

The regressive state gasoline tax revenue will be used to fund $100,000-plus “rich” annual pensions for public employees.

It is unfair to taxpayers. We should hold all of our public officials and representatives accountable for this self-serving fiscal incompetence.

Bob Bunnell of Novato is a pension compliance manager for private companies that manage union pension plans. He is a member of Citizens for Sustainable Pension Plans, Marin’s public pension reform organization.

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.