Monday, June 04, 2007

Chris Reed Misses the Point on Teachers' Pensions

Last week, we got some good news regarding the pension fund for our state's teachers. In 2004, the long-term deficit was projected to be $24.2 billion. Today, the long-term deficit is projected to be $19.6 billion. It's not quite as good as we want it, but it's getting better.

So how did our favorite right-wing commentator who always misses the point respond? Oh, Chris Reed just looks for a way to tie this to "the public employee unions' master-puppet relationship with Democratic lawmakers". Huh?

(Cross-posted at Calitics)

So what exactly is Chris Reed angry about? I guess this:

Last June, three state Senate Democrats -- Don Perata, Debra Bowen and Gil Cedillo -- killed the governor's nomination of David Crane, a smart, well-regarded San Francisco financier, to the California State Teachers Retirement System board. Crane's sin? "The three Democrats on the five-member Senate (Rules Committee) agreed that Crane seemed too concerned about the burden of pension shortfalls on taxpayers," according to a published report.

Perata, Bowen and Cedillo's open declaration of allegiance to the California Teachers Association over Californians in general showed anew that public employee unions have a master-puppet relationship with Democratic lawmakers -- and that taxpayers are being and will continue to be brutalized as a result.

Wait, so how exactly did the Democratic lawmakers act as "puppets" to the "masters" at the public employee unions? And what's so horrifying about the state teachers' pension fund? Take a look at this article from The Sacramento Bee last week, and try to explain the "crisis".

Surging stock markets and three straight years of strong investment returns have pared billions from a long-term pension shortfall plaguing the California State Teachers' Retirement System in recent years, but it's not enough.

The state, school districts and teachers still will be forced to dig deeper into their pocketbooks to erase a projected $19.6 billion gap over the next three decades, according to a new report for the nation's second-largest public fund. [...]

The CalSTRS analysis, prepared by the actuarial consulting firm Milliman, shows the giant fund's financial outlook improved slightly at the end of fiscal year 2006 as the nation's second-largest public fund continued to rack up double-digit percentage annual investment gains, including a 13.2 percent return in '06.

The results have cut the long-term deficit to $19.6 billion, compared with $20.6 billion in 2005. That's an improvement from a $24.2 billion funding gap in 2004.

Milliman said CalSTRS, with nearly 800,000 members, has enough assets to cover 87 percent of its pension obligations decades from now -- up from an 82 percent rate in 2003. By comparison, the average for 125 state retirement systems is 88 percent, according to a 2007 report by Wilshire Consulting.

OK, so now the pension fund has enough assets to cover 87% of our teachers' pension needs for the next few decades. We're not quite fully funded yet, but we're getting better. And apparently, there's already a proposal to fill this gap. Again, from Sac Bee:

The consultant's report said CalSTRS needs a 3.3 percent boost in annual pension contributions to wipe out the deficit. Currently, school districts pay 8.25 percent of payroll toward teacher pensions, while the state puts in 2 percent and teachers contribute 8 percent of their pay.

In December, trustees backed a legislative measure to increase contribution rates in 2009 while leaving benefits intact. The proposal calls for raising the teachers' rate to 8.5 percent while gradually increasing the state's portion to a maximum of 3.25 percent. The school district contribution would slowly rise and be capped at 13 percent.

OK, so what's the big deal? The teachers pay a little more. The school districts pay a little more. The state pays a little more. And in the end, the pension fund is fully funded. Under the current proposal by the pension fund trustees, everyone chips in a little more (including the teachers themselves) to ensure that our teachers can afford to stay alive after they retire.

So how did Chris Reed respond?

The story noted that CalSTRS still had a projected long-term $20 billion shortfall in paying for the pension benefits of retired teachers. How did the CalSTRS board propose to deal with this huge unfunded liability? Not by trimming benefits, an approach it flatly rejected. By waterboarding taxpayers.

And what does he want to do about this? Go back to whining about one of Arnold's good buddies from SF not making the pension trustee board. Oh yes, and if one really wants to talk about "master-puppet relationships", look at this. David Crane is a venture capitalist who served on Arnold's transition team in 2003. And Arnold placed him on his "Commission for Jobs and Economic Growth". And he's part of Arnold's inner circle as an economic adviser. And even though David Crane calls himself a "Democrat", he boasts of his admiration of Milton Friedman.

And Chris Reed is really surprised that Senate Democrats won't nominate someone adamantly opposes "non-market deals" and who calls public pension benefits for workers who serve the public "special privileges"? Give me a break!

So once again, Chris Reed misses the point. The teachers' pension fund isn't quite doing as well as we'd like it to, but it's doing better than it had been just five years ago. And now, the pension trustee board has proposed a solution to the remaining problem. However, Chris Reed doesn't like a solution. So now, he's criticizing the State Senate Democrats for rejecting a radical Friedmanite (who despite being a "Democrat", is VERY CLOSE to Arnold) to serve on the pension board. Can someone please explain Chris Reed's distorted "logic" to me?

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