The State Worker

CalPERS CEO says pension proposal full of problems

The glass tower at CalPERS headquarters in Sacramento
The glass tower at CalPERS headquarters in Sacramento Sacramento Bee file

A proposed ballot measure that would make future pension benefits subject to voter approval is fraught with legal and administrative peril, according to a letter from CalPERS’ chief executive officer, eliciting a response from one of the measure’s proponents that the assessment is a “lie.”

The measure filed by former San Diego councilman Carl DeMaio and former San Jose Mayor Chuck Reed would constitutionally require voter approval for future retirement-benefit increases. Employees hired on Jan. 2019 and later would not receive the kind of guaranteed pensions now common for public employees unless voters in each jurisdiction authorized continuing those plans.

While the measure would impact pension benefits, it also contains a provision that states it will not impact death or disability benefits.

But in a July 28 letter to Assemblyman Rob Bonta, D-Alameda, and obtained by The Sacramento Bee, fund executive Anne Stausboll said the measure could be interpreted as violating pension promises to current employees, might threaten CalPERS’ federal tax-exempt status and will create chaos by forcing employers to close their defined benefit programs to employees hired in 2019 and beyond.

And although the measure promises no impact on death and disability benefits, Stausboll wrote that eliminating traditional pensions would make providing such benefits “extremely impracticable.” The letter cites a 2011 CalPERS report that predicts closing defined benefit pensions in favor of 401(k)-style defined contribution plans would dry up money for death and disability payments and force government to purchase coverage at greater expense from insurance carriers.

Reached for comment Tuesday morning, DeMaio said Stausboll’s letter was “a lie, smoke and mirrors from a failed public pension system determined to preserve the status quo. CalPERS is out for its own survival, even at taxpayers’ expense.”

Countered Stausboll in a statement: “The assertions in the letter are based on well accepted current law and fact.”

CalPERS controls $301 billion in assets and administers the pension plans for nearly 3,100 school districts, state and local government agencies. Two-thirds of every dollar in the system comes from investments. The remainder comes from government employer and employee contributions.

As of June 2014, CalPERS had 77 cents in assets for every dollar of pension benefits promised, according the fund’s own figures. DeMaio and other pension-measure supporters say the figures are overly optimistic.

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