Monday, February 28, 2011
The Bee has video:
Sunday, February 27, 2011
Saturday, February 26, 2011
From: Tracy Dudman, UCLA Capital Programs
Subject: Residential Conference Center Informational Meeting
After careful review of the comment letters received during the Notice of Preparation period for the UCLA Residential Conference Center (“the Project”), the University has gained invaluable input on the environmental issues that will be addressed in the Draft Environmental Impact Report (“Draft EIR”). The University has received extensive and detailed comments from the internal UCLA community, the local residential community, and the local business community and the University thanks all of these constituencies and other respondents for their interest in the Project.
Given the volume of responses received to date, the University has decided to move forward with the preparation of the Draft EIR, without convening the informal meeting the University had tentatively planned for late February. At this time, the University has no new information to present to the public regarding the design of the Project; however, we remain open to receiving comment letters regarding environmental issues, mitigation measures, and alternatives during preparation of the Draft EIR. The University is committed to fully analyzing all environmental issues in the Draft EIR, in compliance with the California Environmental Quality Act and University policy.
We anticipate that the Draft EIR will be available for a 45-day public review period beginning in May 2011. During the 45-day review period, UCLA will host a Public Hearing to discuss the Project and provide a public venue to receive verbal and written comments on the Draft EIR. If you have any questions or comments regarding the foregoing, please contact Tracy Dudman at firstname.lastname@example.org or send written comments to:
Tracy Dudman, Senior Planner, UCLA Capital Programs, 1060 Veteran Avenue, Los Angeles, CA 90095
There appear to be two advantages to the Republicans of an opinion that suggests a simple majority would do the trick. First, none of their members would have to go along with the Democrats in putting tax extensions before the voters. Second, if the Democrats actually took the simple majority route, it could be challenged in court, possibly blocking the tax extensions from actually getting on the ballot, at least in the time-frame needed. In short, an opinion suggesting a simple majority gives the Republicans cover for the argument that the Democrats can do what they like and by not cooperating the Republicans aren't being obstructionists. Second, since - as a practical matter - a 2/3 vote is likely to be needed, they have increased their bargaining power with the Democrats. With an opinion saying that a simple majority is all that is needed, the downside risk of non-cooperation is removed.
Legal beagles can read the legislative counsel's opinion, which was produced in response to a request by the Republicans. The opinion is here: http://www.scribd.com/doc/49571488/LegCounsel#
As a non-legal beagle, what I see is a complex legal opinion running ten pages that concludes a simple majority could amend a voter initiative "if the proposal changes the scope or effect of the initiative statute." (Page 10 of the opinion) Exactly, what that means in this specific case is not clear. But it is good enough for the strategy above.
From today's Sacramento Bee:
Republicans saw the legislative counsel's opinion as proof that Democrats can solve the budget situation on their own if they wish, taxes and all.
"If it stands up legally, it shows Democrats could put tax hikes on the ballot without Republican votes," said (Senate Republican leader Bob Dutton's) spokeswoman Jann Taber. "If they're courting us for votes, they're looking for political cover."
And with that, I will leave the law to others:
Friday, February 25, 2011
Most of the testimony was in fact aimed at legislative Republicans who have made no-tax-increase pledges. A video of the testimony from the Sacramento Bee is below. The references to dispensations and vows refer both to the pledges and the governor's Jesuit background.
Despite the humor, the clock is running. Although early on, there was some talk about ways around the 2/3 rule, i.e., putting the proposals on the ballot by a simple majority vote, that idea seems to have disappeared. Even if it could be done, legal challenges might delay any ballot that was based on a simple majority vote beyond June, making the strategy impractical.
A deadline in early March has been quoted for getting the 2/3 vote needed to put the proposals on the ballot. Such deadlines typically have been somewhat elastic in the past. However, there are administrative constraints regarding printing and distributing ballots.
It might be noted that the governor also indicated that if the tax extensions were rejected by voters, he would then propose a cuts-only budget.
Finally, earlier posts on this blog refer to public pension recommendations by the Little Hoover Commission. If a deal is reached, there could be a pension proposition in the mix. And, as has also been noted in prior blog entries, such a proposition - if passed - could override the Regents' action on the UC pension that was taken last December.
The full story is at http://www.sacbee.com/2011/02/25/3429319/browns-countdown-day-47-governor.html
Recently the AAUP filed an amicus brief in support of the ownership rights of thousands of faculty researchers and inventors to their inventive work. The joint amicus brief, filed in collaboration with the Institute of Electrical and Electronics Engineers (IEEE) and IP Advocate, a nonprofit advocacy group, was submitted to the U.S. Supreme Court in the Stanford v. Roche patent case.
This complex case involves arguments about who owns the patent rights to inventions developed in academia and funded, fully or partially, through federal government grants. Originally filed as a patent infringement lawsuit by Stanford University against Roche Molecular Systems, Inc., the case has evolved into a broader battle over the patents rights of faculty members to their inventive work. In support of its patent infringement claims, Stanford University has asked the Supreme Court to interpret the federal Bayh-Dole Act as automatically taking ownership rights away from inventing faculty members and vesting that ownership interest in the members’ college or university whenever federal research funds are involved. The AAUP, IEEE, and IP Advocate believe that this interpretation would contradict existing patent law and is counter to the process of patent assignment that has worked successfully under the Bayh-Dole Act during the thirty years of its existence.
The Bayh-Dole Act became law in 1980 and was intended to address concerns about government funding agencies’ inability to efficiently transition publicly funded research from development to application. Thirty years later, we have seen great improvement in moving academic inventions from the research to application phase to enable public use. In our joint brief, the AAUP, IEEE, and IP Advocate praise the purpose of the Bayh-Dole Act and argue that it is unnecessary and potentially harmful for the act to be reinterpreted to take ownership rights from faculty researchers. The brief emphasizes that the act does not alter the basic ownership rights granted by law to faculty inventors (which faculty may then assign to their college or university by contract).
In addressing the relationship between faculty and their colleges and universities, the joint brief strongly rejects an argument made by Stanford and other universities and higher education associations that faculty researchers are employees who have been hired to invent and therefore are not entitled to ownership of the products of their inventive research. As the AAUP’s 1915 Declaration of Principles on Academic Freedom and Academic Tenure states, faculty “are the appointees, but not in any proper sense the employees of [the university trustees].” Historically and legally, academic researchers and inventors are, and always have been, much more than mere employees to their institutions. To espouse otherwise flies in the face of longstanding academic practice and poses a grave risk to society’s interest in a thriving culture of discovery and creation.
The AAUP brief is at http://lyris.eresources.com:81/t/5297964/4061665/2223/0/
If you have an invention, you don’t want it to say
Thursday, February 24, 2011
Below is a quote about UC:
"The University of California system also maintains its own retirement plan, independent of the parameters set by the state for other pension plans. The state does not contribute directly to the UC pension program. For 20 years, the UC pension plan was funded entirely by investment returns, a tradition that ended in 2010, when employees and the
university resumed making contributions into the pension fund to address the plan’s swelling unfunded liability."
With needed reforms, defined-benefit pensions can remain a core component of public employee retirement plans. The problem, however, cannot be solved without addressing the pension liabilities of current employees. The state and local governments need the authority to restructure future, unearned retirement benefits for their employees. The Legislature should pass legislation giving this explicit authority to state and local government agencies. While this legislation may entail the courts having to revisit prior court decisions, failure to seek this authority will prevent the Legislature from having the tools it needs to address the magnitude of the pension shortfall facing state and local governments.
The situation is dire, and the menu of proposed changes that include increasing contributions and introducing a second tier of benefits for new employees will not be enough to reduce unfunded liabilities to manageable levels, particularly for county and city pension plans. The only way to manage the growing size of California governments’ growing liabilities is to address the cost of future, unearned benefits to current employees, which at current levels is unsustainable. Employers in the private sector have the ability and the authority to change future, unaccrued benefits for current employees. California public employers require the ability to do the same, to both protect the integrity of California’s public pension systems as well as the broader public good…
Hybrid model. A new “hybrid” model for public employee retirement should be made available to state and local agencies to reinforce the principles of retirement security and shared responsibility. The model, being tested in Orange County for miscellaneous workers, combines a lower defined-benefit pension with an employer-matched 401(k)-style plan. The 401(k) element is risk-managed to protect employee investments from market volatility in order to generate an adequate retirement income…
Uniformity. The state also must establish standards for more uniform and reasonable pensions. The public outrage over the “spiking” of benefits to provide a larger retirement income cannot continue to be ignored, nor can the increasing number of six-figure pensions for some managers and high-wage earners. The gaming and abuses of the pension system must end. To restore public confidence in the public pension system, the state must impose a cap in the $80,000 to $90,000 range on the salary used to determine pension benefits, or alternatively, a cap on pensionable income. Under such an arrangement, compensation above the cap would be factored into contributions toward an employee’s 401(k)-style plan.
… Set a tight definition of final compensation, computed on base pay only, over a five-year average to prevent and discourage pension “spiking.” …
The Legislature must prohibit employees and employers from taking contribution “holidays,” except under rare circumstances.
The Legislature must require employees and employers to annually adjust pension contributions based on an equal sharing of the normal costs of the plan.
All proposed pension increases must be submitted to voters in their respective jurisdictions.
The Legislature must require all public pension systems to include in their annual financial reports the present value of liabilities of individual pension funds, using a sensitivity analysis of high, medium and low discount rates.
The full report is at http://www.lhc.ca.gov/studies/204/Report204.pdf
UPDATE: CalPERS responded at http://www.calpers.ca.gov/index.jsp?bc=/about/press/pr-2011/feb/pension-report-statement.xml
The State Worker: New debate looms on public pensions
Feb. 24, 2011, Jon Ortiz
Get ready for a new round of debate over public pensions that could shape California's intensifying budget talks and even wind up putting some sort of rollback on the legislative agenda. The bipartisan Little Hoover Commission plans to release a report today on California's public pensions, complete with suggested changes.
...The commission's pension recommendations have been tightly held secrets that will be tweaked almost to the moment they're published online this afternoon. But Republicans expect it will prescribe some tough medicine that will affirm their push for cutting the state's employer pension costs...
Wednesday, February 23, 2011
Chancellor: UC Berkeley morphing into federal university (excerpts)
February 23, 2011 | Louis Freedberg | Californiawatch.org
As it gets more funding from the federal government, and less from Sacramento, UC Berkeley is effectively morphing from a state university into a federal university, according to Chancellor Robert Birgeneau. In an interview yesterday, Birgeneau said the transformation will "require us to think through what our role is both in the state and nationally." He first made the compelling case for applying the "federal" label to California's most famous public university at a conference organized by the Travers Program in Ethics and Accountability on the Berkeley campus earlier this month.
…Birgeneau said Berkeley finds itself in the position of many other state universities that also have seen dramatic declines in state support. When he talked recently with University of Michigan President Mary Sue Coleman about UC's predicament, she told him, "Welcome to the club." Among the questions raised by the shift in funding, said Birgeneau, is "how much autonomy should individual campuses have" if the state only provides a small portion of its income. Another question is "What should the balance be of in-state and out-of-state students?" Berkeley has substantially boosted the number of non-Californians it admits, benefiting from the higher tuition they pay. As a result, nearly 20 percent of undergraduates admitted to UC Berkeley this year were either out-of-state or international students.
…Birgeneau said he had not fully fleshed out his concept of what it means to be an increasingly federally supported university. But, he said, "the reality is that with the progressive disinvestment in higher education by the state, the state is becoming a tertiary player."
Full article at http://californiawatch.org/dailyreport/chancellor-uc-berkeley-morphing-federal-university-8816
Note that UCLA, largely because of its med school, receives a larger fraction of funding from the feds than Berkeley.
UPDATE: The Sacramento Bee publishes a supportive editorial at http://www.sacbee.com/2011/02/24/3425961/future-of-uc-hinges-on-choices.html
Money & Company blog, LA Times
Governor pulls two teachers pension fund appointees (excerpt)
February 22, 2011
Gov. Jerry Brown has pulled back two controversial, last-minute appointments made by then-Gov. Arnold Schwarzenegger to a state teachers pension board.
On Dec. 31, Republican Schwarzenegger named Steven Kram, 54, of Los Angeles and Cameron Percy, 26, to the California State Teachers' Retirement System, a $150-billion pension system.
Kram is president and chief executive of Content Partners, a Los Angeles firm that buys films in the secondary market from other investors. Content Partners' co-chairman, Paul Wachter, is Schwarzenegger's financial advisor.
Percy, a recent graduate student at Stanford University's Department of Economics and Public Policy Program, helped write a controversial study commissioned by Schwarzenegger's office. The research estimated that the state's three biggest public pension funds were $400 million short of the amounts needed to meet future obligations to retirees...
Gov. Brown's office declined to say why he pulled Kram and Percy. "These appointees served at the pleasure of the governor, and their services were no longer required," spokesman Evan Westrup said...
-- Marc Lifsher
Full article at http://latimesblogs.latimes.com/money_co/2011/02/governor-pulls-two-teachers-pension-appointees.html
Although the governor did not explain his action, he left this video:
Insider Higher Ed has further developments today. The full story with links to relevant documents is at http://www.insidehighered.com/news/2011/02/23/qt#252043
Excerpt: The president of the University of Wisconsin System, along with the president and vice president of the Board of Regents, on Tuesday sent Biddy Martin, chancellor of the Madison campus, a public rebuke for promoting a plan that they say would separate Madison from the rest of the system. The regents also called an emergency meeting for Friday to discuss the issue. Martin has been pushing (in public, and generally with support from the system) for more autonomy for Madison from various state regulations. But she also has been discussing with Governor Scott Walker, a Republican, a plan that would create more formal independence from the system…
Will it happen here? Futurology is not always accurate:
Tuesday, February 22, 2011
Introduced by Senator Tom Harman (R-Huntington Beach)
February 18, 2011
An act to add and repeal Section 7503.1 of the Government Code, relating to public retirement systems. Legislative counsel’s digest:
SB 689, as introduced, Harman. Public retirement systems. Existing law requires all state and local public retirement systems to prepare an annual report in accordance with generally accepted accounting principles. The bill would, until January 1, 2016, require all state and local public retirement systems to file an annual report with the Legislature, the Department of Finance, and the Legislative Analyst’s Office that would include specified information about any retired member who receives a pension of $100,000 or more annually. The bill would express a legislative finding and declaration that to ensure the security of the University of California funds, including retirement funds, it is necessary for this act to apply to the University of California. The bill would also express a legislative finding and declaration that to ensure the statewide integrity of local government, to cultivate an attractive business climate, and to improve the sufficiency of local public safety services, the disclosure of generous pensions paid to public retirees is an issue of statewide concern and not a municipal affair, and that therefore, all cities, including charter cities, would be subject to the provisions of the bill.
More info and the full text of the bill is available at http://blogs.sacbee.com/the_state_worker/2011/02/tom-harman-introduces-pension-bill.html
At that link, you can find pro and arguments concerning the project. Added info is that an Ad Hoc Committee to Save the Faculty Center has petitioned the Faculty Center to hold a vote of the membership on the question:
Should the Faculty Center be torn down and be replaced by a Convention Center/Hotel and Faculty Club? Yes or No?
Arguments for and against the proposed facility and a cover letter explaining the history of the proposed project and the current financial situation of the Faculty Center are included with the ballot. The mailing will take place this week.
To find prior blog posts on this matter, use the search engine for this blog and search for "faculty center."
You can take this video to mean either that you can fight city hall or that destruction is on the way:
Monday, February 21, 2011
Brown's Countdown, Day 43: State pension cuts pushed (excerpts)
Kevin Yamamura, Sacramento Bee, Feb. 21, 2011
Former Gov. Arnold Schwarzenegger hailed pension cuts last year as a major reform after Democrats and state worker unions agreed to concessions that ended a record-long budget stalemate. But Republican lawmakers are clamoring for more.
…GOP leaders have yet to offer a formal counterproposal to Gov. Jerry Brown's budget… however, some Republicans have suggested they might be willing to consider a five-year tax hike extension on the June ballot if pension changes are part of negotiations. In California, 70 percent of likely voters told the Public Policy Institute of California last January they would favor shifting new public employees from defined pension benefits to 401(k)-style plans.
…Several GOP lawmakers introduced pension bills last week, including Sen. Mimi Walters, R-Laguna Niguel, who proposed moving toward 401(k)-style accounts for future public-sector workers and preventing employees from buying service time to enhance their pensions.
…Brown expressed a willingness Friday to consider pension changes as part of budget talks. He said he'd look at defined contribution proposals, "but one of the concerns is that when you lop off significant numbers of employees from contributing to the defined benefit plan, you can cause some difficulties."
… Dan Pellissier, a former adviser to Schwarzenegger, said he believes a voter-approved constitutional amendment would be able to cut benefits for current employees going forward. His group's idea is to cap future state contributions toward employee pensions… “This is hot," he said. "The public is basically ready to vote for any reasonable pension proposal. So we believe it's important to make a difference while we can."==================================
And speaking of the Party of Lincoln, on a totally different matter for Presidents Day, you might enjoy:
Sunday, February 20, 2011
Saturday, February 19, 2011
Ernest Carroll Moore, shown above, was named as director of the Southern Branch of the University of California when it was created at the Vermont Avenue campus. A view of that campus appears below Moore's photo. Moore in fact headed the prior state normal school at that location which was converted into what became UCLA. He oversaw the move to the current Westwood site in the late 1920s. His title was eventually changed to "provost" and he served until 1936. Moore Hall at UCLA is named for him.
Friday, February 18, 2011
Thursday, February 17, 2011
One of the bullet points on her charts reads:
Shifting policy focus away from “How can we minimize the price students pay, no matter the cost to the state?” and toward “How can we make a quality postsecondary education affordable?”
Another suggestion involves varying tuition by program and reads:
Differential tuition by program, mode of instruction, credit status, student level, credit hours accumulated, cohort-based.
The charts for this presentation are at http://www.lao.ca.gov/handouts/education/2011/Higher_Education_Affordability_021511.pdf
A video of the hearing can be seen at http://www.calchannel.com/channel/viewvideo/2048
The LAO portion of the video is at 22:45 to 37:15. A chart on the share of tuition in undergraduate education costs presented by the LAO is below.
The article with links to various related items is at http://www.insidehighered.com/news/2011/02/17/qt#251537
Well, things will work out in the end - maybe...
The TV ad below is a good illustration of why Democrats are reluctant to enact the budget, even though it assumes voters will approve the governor's proposed tax extensions:
UPDATE: Despite campaigns such as represented by the video above, the legislature is reported to be giving preliminary approval to the Brown budget plan, with some modifications. See http://www.latimes.com/news/local/la-me-state-budget-20110219,0,877222.story
Wednesday, February 16, 2011
The chart below summarizes the gap:
LAO includes a cautionary note that forecasting is particularly difficult in the current period.
The LAO's analysis is at http://www.lao.ca.gov/laoapp/budgetlist/PublicSearch.aspx?Yr=2011&KeyCol=381
Tuesday, February 15, 2011
Below is the text of the order:
WHEREAS, strong measures must be implemented to reduce costs and to regain and safeguard the trust of the people of California; and
WHEREAS, Executive Order B-1-11, issued on January 11, 2011, ordered state agencies and departments to review operational costs and to identify ways of reducing waste, redundancies and associated costs to create a more efficient and effective government, while protecting core services; and
WHEREAS, the Governor’s 2011-12 budget proposes a reduction of $363 million ($200 million from the General Fund) in state operation efficiencies and other savings; and
WHEREAS, restrictions on hiring are necessary to help achieve these savings; and
WHEREAS, these restrictions should be implemented in a manner that promotes true cost reductions, encourages better fiscal management by agencies and departments, protects the health, safety, and welfare of the State, and allows the State adequately and properly to serve the People of California,
NOW, THEREFORE, I, EDMUND G. BROWN JR., Governor of the State of California, by virtue of the power and authority vested in me by the Constitution and statutes of the State of California, do hereby issue this order to become effective immediately:
1. State agencies and departments are prohibited from filling vacant positions, regardless of the positions’ funding source, except as provided for herein. This prohibition applies to:
• Appointments of any persons not currently employed by the State, including permissive reinstatements, limited-term appointments, temporary-authorization appointments, training-and-development assignments, and retired-annuitant appointments.
• Increases in time base.
• Appointments of seasonal employees.
• Appointments of permanent intermittent employees.
• Interdepartmental transfers of current permanent or probationary employees.
2. Agency secretaries and department directors who do not report to an agency secretary are authorized to exempt the following appointments:
• Emergency appointments as specified in law.
• Mandatory reinstatements.
• Appointments of employees currently serving a temporary-authorization appointment in lieu of permanent appointment.
• Intradepartmental transfers of current permanent or probationary employees.
3. Agency secretaries and department directors who do not report to an agency secretary may request exemption for appointments that are essential to carry out the following responsibilities if the responsibilities cannot be fulfilled by existing staffing levels:
• Direct, hands-on services to clients in 24-hour care institutions.
• Emergency response and public safety defined as services and functions directly related to the preservation and protection of human life and safety; emergency and disaster response activities that are necessary to prevent, contain, or mitigate the effects of a disastrous event and minimize the loss of life or property.
• Revenue generation.
• Core functions of departments’ statutory missions.
• Essential functions that could otherwise only be fulfilled by paying existing employees more in overtime than the costs of the requested exemption. Requests for exemptions shall be submitted to the Governor’s Office for approval in accordance with forms and instructions that will be issued by the Department of Finance.
4. State agencies and departments are prohibited from initiating or increasing personal-services contracts to compensate for the effects of these hiring restrictions.
5. The Department of Finance will work with agencies and departments to develop targets for budgetary reductions in lieu of the hiring restrictions. Departments that achieve their target budget reductions, as determined by the Director of the Department of Finance, will be exempted from the provisions of this executive order.
6. IT IS REQUESTED that other entities of State government not under my direct executive authority implement similar limitations on their appointments to reduce State expenditures.
This Executive Order is not intended to create, and does not create, any rights or benefits, whether substantive or procedural, or enforceable at law or in equity, against the State of California or its agencies, departments, entities, officers, employees, or any other person.
I FURTHER DIRECT that as soon as hereafter possible, this Order shall be filed with the Office of the Secretary of State and that it be given widespread publicity and notice.
IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 14th day of February 2011 ___________________________________
EDMUND G. BROWN JR. Governor of California
When things are frozen, the ending is not always happy:
Monday, February 14, 2011
Below is an item excerpted from Capital Alert that describes the finding and notes the higher ed implications:
Legislative analyst identifies massive cuts if taxes fail
Capitol Alert, 2-14-11
If lawmakers pursue a cuts-only budget to solve the state's $26.6 billion deficit, they could eliminate class-size reduction, require that kindergarten students be 5 years old at enrollment and hike university tuition by another 7 to 10 percent, according to a new review by the nonpartisan Legislative Analyst's Office.
There's also a stark option for state workers: reduce pay by an additional 9.24 percent (equal to two furlough days) and reduce state contributions to employee health care by 30 percent.
The Feb. 10 letter responds to Sen. Mark Leno, D-San Francisco, who asked the Analyst's Office what the Legislature could do if voters or lawmakers reject tax revenues proposed by Gov. Jerry Brown. The LAO offered $13.5 billion in alternatives, presuming under Leno's request that the ballot taxes would not succeed and other revenue ideas like eliminating enterprise zones would fail.
Democrats were at odds as to whether to release the list, let alone pursue a vote on items suggested by the Legislative Analyst. Brown purposely chose not to outline an alternative budget should his five-year extension of tax hikes fail to make the ballot or be rejected by voters...
-- Impose a 90-unit cap on each student's taxpayer-subsidized credits ($250 million)
-- Increase community college fees from $26/unit to $66/unit ($170 million)
-- Eliminate state subsidy for intercollegiate athletics ($55 million)
-- Increase tuition another 7 percent for UC and 10 percent for CSU ($270 million)
-- Reduce CSU enrollment by 5 percent ($124 million)
-- Reduce personnel costs by 10 percent at UC and 5 percent at CSU ($408 million) ...
Update: Here is the full list of cuts for higher ed:
The LAO report is at http://blogs.sacbee.com/capitolalertlatest/LAOall.pdf
A special Valentine's Day viewing of a new exhibition at the Fowler Museum will be held Monday, Feb. 14. "Central Nigeria Unmasked: Arts of the Benue River Valley" unmasks the history of Central Nigeria by examining the dynamic interrelationships among its peoples and their ritual arts. You can see 150 wood sculptures, masks, ceramic vessels as well as elaborate bronze and iron regalia.
There will also be Valentine's Day treats in the courtyard served from 2-4 p.m.
And for those looking for (almost) eternal love, this blog offers:
In this post, two reports are summarized. One describes some recent developments in San Francisco regarding negotiations over its public pensions. The other is a report looking at the public pension nationwide.
San Francisco has been wrestling with its local pension issues, a process that includes a failed ballot initiative and now some ongoing negotiations with municipal unions. Below are excerpts from an article describing what has been occurring. If some agreement comes out of that process, it could set a pattern that would spread. The process is worth following because of its possible precedent-setting nature. Whatever might come out of the process would involve liberal Democrats and labor unions, clearly an influential combination when it comes to the legislature.
Pressures Build to Slash Costs of City Employees: If an agreement can be reached, it could set a precedent for other cities (excerpts)
Elizabeth Lesly Stevens, Bay Area Citizen, 2-12-11
Shortly after the November elections, an unusual band of labor leaders, along with Ben Rosenfield, the city controller, and Sean Elsbernd, the most fiscally conservative city supervisor, met in the posh offices of Warren Hellman, a San Francisco investor and philanthropist, with one goal in mind: Cutting a deal to slash the ballooning public employee costs weighing heavily on the city's financial crisis. Hellman (who is the chairman of The Bay Citizen but plays no role in editorial operations) became a hero to the city's labor unions last year when he disavowed his earlier support for the ballot measure that would have forced city employees to contribute more toward their benefit and pension costs.
A few weeks before the election, two labor leaders, accompanied by Joseph D. Driscoll, an old friend of Hellman's who is also a fire captain and a member of the city's pension fund board, persuaded Mr. Hellman that the city's unions could come up with a better plan to slash the city's pension and benefits costs, rather than have one foisted upon them. The ballot measure, Proposition B, which had been promoted by Jeff Adachi, the city's public defender, lost by a wide margin. And the emboldened unions and the City Hall politicians who had lobbied against it had won the tough task of coming up with an alternative solution.
…If the group can pull it off, however, it would be a notable, perhaps precedent-setting, achievement as governments across the country grapple with many of the same issues. “This is the public labor movement's Nixon-to-China moment,” said David Crane, a Proposition B backer who served as Gov. Arnold Schwarzenegger's special economic adviser and who now lectures on public policy at Stanford University. “They are the ones who should propose and make it all happen.” (Editor's Note: Crane was nominated to the Regents but has not been confirmed.)
Thomas P. O'Connor, president of the San Francisco firefighters union, said, “Everything is on the table, everything. We cannot put our heads in the sand anymore.”
…The issues are complicated. The laundry list of possible pension fixes the group is contemplating, for example, includes such bold measures as essentially capping pension payouts at $100,000 a year, stripping some retirees of their supplemental cost-of-living raises, and greatly increasing the amount that existing employees must contribute to the pension fund.
A list of eight possible reforms was completed at a meeting Wednesday, and it will take the controller's office several weeks to estimate savings for each idea.
The group has not yet begun to tackle changes to the health care system, which is considerably more complicated than the pension system.
…Because any proposal would almost certainly require a measure on the November ballot, crucial deadlines are on the horizon. Within two weeks, the city must meet and confer with its unions to discuss the changes, even though no one yet knows what will actually be proposed…Nationwide
An interesting study was just made available by the Center for Economic and Policy Research. I reproduce the executive summary below and provide a link to the full report.
There has been considerable attention given in recent months to the shortfalls faced by state and local pension funds. Using the current methodology of assessing pension obligations, the shortfalls sum to nearly $1 trillion. Some analysts have argued that by using what they consider to be a more accurate methodology, the shortfalls could be more than three times this size. Based on these projections, many political figures have argued the need to drastically reduce the generosity of public sector pensions, and possibly to default on pension obligations already incurred.
This paper shows:
•Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009. If pension funds had earned returns just equal to the interest rate on 30-year Treasury bonds in the three years since 2007, their assets would be more than $850 billion greater than they are today. This is by far the major cause of pension funding shortfalls. While there are certainly cases of pensions that had been under-funded even before the market plunge, prior years of under-funding is not the main reason that pensions face difficulties now. Another $80 billion of the shortfall is the result of the fact that states have cutback their contributions as a result of the downturn.
•The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing. This argument also fails to recognize the fact that over a long period, future stock returns are inversely related to current price-to-earnings (PE) ratios. If the current PE ratio is relatively low, as is now the case, then the assumption that the market will provide below average returns implies a further decline in the PE ratio, given the generally accepted growth projections for the economy. As a practical matter, the stock market has provided an average real return of more than 8 percent for 30-year periods when the PE ratio at the start was under 15 to 1. It is worth noting that if pension funds stop investing in equities, as some have advocated, this would imply higher taxes and/or lower benefits for public employees. It would also mean that other investors could expect to see higher future returns on their stock holdings.
•The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable. The total shortfall for the pension funds is less than 0.2 percent of projected gross state product over the next 30 years for most states. Even in the cases of the states with the largest shortfalls, the gap is less than 0.5 percent of projected state product. It is also worth noting that some of this shortfall has likely already disappeared as a result of the recent rise in the stock market. If this rise is not subsequently reversed, then a substantial portion of the funding shortfall has already been eliminated.
In sum, most states face pension shortfalls that are manageable, especially if the stock market does not face another sudden reversal. The major reason that shortfalls exist at all was the downturn in the stock market following the collapse of the housing bubble, not inadequate contributions to pension funds.
Full report at http://www.cepr.net/documents/publications/pensions-2011-02.pdf
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