A group whose funding sources are cloudy - the California Foundation for Fiscal Responsibility - plans a grand unveiling today of a study on pension funding in California. The report below indicates it covers California's 5 biggest pension funds. After CalPERS and CalSTRS, UCRP is the 3rd largest at the state level.As numerous posts on this blog have indicated, ballot initiatives aimed at capping pensions could affect UC and override the Regents' action on the UC pension taken last December. UC could be swept into some statewide initiative even if it is not a central target of the study.
From the LA Times 5-5-11:
Pension benefits for hundreds of thousands of state workers would be reduced 25% to 40% under two proposals that have become the focal points for what could become a costly and bruising ballot fight over retirement funding.
In a new financial analysis estimating the cutbacks, the nonprofit California Foundation for Fiscal Responsibility warned that rising costs of public employee pensions and retiree healthcare could overwhelm the ability of taxpayers to fund many basic health, welfare and public safety services.
"Public employees are getting far more benefits than those in the private sector," said Marcia Fritz, the foundation's president, adding that voters are "fed up." "The upshot," she said, "is going to be a huge fight" — an initiative contest that will be followed closely nationwide.
According to the study, to be released Thursday, California's five biggest pension funds are in precarious financial conditions. Last year, they had only enough money to cover 61% to 74% of their obligations to current employees...
Full article at http://www.latimes.com/business/la-fi-pension-overhaul-20110505,0,7054972.story
On the funding of the group producing the study:
An unknown out-of-state foundation has become a substantial backer of an ambitious nonprofit group that is positioning itself at the center of the state's debate over public pensions.
Democratic consultant Marcia Fritz, who runs the nonprofit Californians for Fiscal Responsibility, first mentioned at a San Francisco forum last month that the group had received a substantial contribution from an out-of-state foundation. She said the money will be used to research several competing pension plans that are being proposed this year...
Fritz confirmed to California Watch that she does not intend to reveal the identity of the anonymous donor but said the funding came from a foundation, not an individual, and that her group won it in open competition. The group plans to use the funding to present research reports and create Web-based tools evaluating the competing reform plans...
Full article at http://californiawatch.org/dailyreport/secret-out-state-donor-powering-pension-reform-group-9534
Update: Public sector unions have mounted a reverse campaign on pensions, e.g., http://dontscapegoatus.com/ and http://www.sacbee.com/2011/05/05/3602892/state-worker-with-pensions-under.html
UC's special needs can easily get lost in the cross-fire. UCOP and the Regents need to get involve sooner rather than later on this issue.
Further Update: calpensions.com reports the following on the soon-to-be-released study:
The study was done by Capital Matrix Consulting (Mike Genest, Brad Williams and Jay Peters) for the California Foundation for Fiscal Responsibility (Marcia Fritz) under a $150,000 grant from an undisclosed out-of-state source.
[Editor's note: Genest was Finance Director under Gov. Schwarzenegger. Williams was with the Legislative Analyst's Office.]
Full article at http://calpensions.com/2011/05/05/public-vs-private-pension-study-the-gap-widens/
Still Further Update: The official press release for the study oddly suggests interested to get in touch with the LAO. Below is the release text. Scroll down for the relevant text in bold:
Study Compares Public, Private Employee Compensation and Retirement Costs
May 5, 2011
FOR RELEASE: May 5, 2011
CONTACT: Marcia Fritz
916.966.9366 begin_of_the_skype_highlighting 916.966.9366 end_of_the_skype_highlighting
Marcia@FixPensionsFirst.com
Retirement Costs Inflate State, Local Budgets
CHP, Prison Guard Benefits Often Worth $2 Million per Officer
Teachers pay more for pensions, collect less than most public employee
SACRAMENTO – State and local government employees in California earn similar salaries as their counterparts in the private sector, but generous retirement benefits push total compensation costs significantly higher than what California’s largest companies spend, according to a study released today.
California’s largest employers typically spend less than one-third what state taxpayers spend on employee pensions and retiree health benefits. A state employee earning $60,000 annually will accumulate pension and retiree health benefits valued at $19,000 a year. A comparably paid employee of a large California company will receive retirement benefits worth less than $6,000.
California’s 2011-12 state budget includes $6 billion for the major state retirement plans. The study compares only the employers’ cost of benefits; it does not include the value of contributions employees make to their retirement plans.
“If taxpayers spent what California’s top companies spend on employee retirement benefits, the state would have $3 billion more this year for schools, public safety and other essential services,” said Marcia Fritz, CPA, president of California Foundation for Fiscal Responsibility, which sponsored the study. “The rationale for generous public pensions used to be that public employees accept lower salaries, but that doesn’t withstand scrutiny any longer.”
“Governments can’t manage their budgets when they can’t adjust wages and benefits to changing economic conditions,” said Michael Genest, former state finance director and principal of Capitol Matrix, which authored the study. “This is a fundamental public policy question that California must resolve to regain control of its financial future.”
State retirement benefits are generous, but they are far more generous for some employees. Prison guards and California Highway Patrol officers can retire seven years earlier than teachers with benefits that are 77 percent higher. Prison guards and CHP officers also collect larger benefits than FBI agents and other federal law enforcement officers. A 53 year-old California public safety employee with 26 years service and an annual salary of $140,000 will be entitled to retirement benefits valued at $2.2 million, according to the financial analysis. A federal agent’s benefits would be worth $1.6 million.
“Teachers’ retirement plans were designed for teachers who retire after 30 years in the classroom,” Fritz said. “Today’s teachers are more likely to work ten years and leave to start a family or a new career. Some enter the teaching profession in the middle or later stages of their careers. A teacher who spends eight years in the classroom at a young age leaves with retirement benefits that are worth less than the teachers’ own contributions to his/her own plan. In the same period, a comparably paid local government employee has accumulated benefits worth $58,000.”
Brad Williams, former chief economist for the Legislative Analysts’ Office and principal author of the report said, “Salaries and benefits paid to local government employees are generally higher than the salaries and benefits paid to state government and private sector employees. There is also a striking difference in the value of retirement benefits provided to career employees. A local government employee who begins a career at age 27 with a $45,000 starting salary and receives normal wage increases can retire at age 57 with retirement benefits totaling almost $1.2 million. A similarly situated teacher will receive $500,000 and an employee of a large corporation less than $400,000.”
“Pension reform doesn’t mean retirees must lose benefits. Public employees will always keep what they’ve earned,” Fritz said. “But reform is desperately needed to reverse the course that has produced pension debt our grandchildren’s grandchildren will be paying for. A state constitutional amendment aligning public and private retirement benefits will save billions of dollars now and into the foreseeable future.”
###
Reporters are invited to contact Jason Sisney, director of state finance at the Legislative Analysts’ Office, who was provided with an advance copy of the report. Call him at 916.319.8361 or email Jason.Sisney@lao.ca.gov
Please visit www.FixPensionsFirst.org for:
Capital Matrix Study
Slide presentation
Research team bios
Government, academic and private studies
Public opinion polls, local election results
Recent news
$100,000 Pension Club
Latest reform proposals
Source: http://www.fixpensionsfirst.com/2011/05/study-compares-public-private-employee-compensation-and-retirement-costs/
More Update: A clarification regarding the LAO was subsequently sent out:
*** MEDIA ADVISORY ***
May 5, 2011 at Noon
Clarification: Questions from reporters suggest there may be confusion about CFFR’s recommendation to contact the LAO for a reaction to the report. CFFR did not mean to imply that the LAO played any role whatsoever in the development of the report. The LAO was provided with an advance copy in anticipation of media inquiries, and CFFR did not mean to imply any endorsement by the LAO of the report, its methodology
or its findings.
More Information: Visit www.FixPensionsFirst.org to find:
· Capitol Matrix financial analysis
. Today’s slide presentation
· Today’s news release
· Bios on the research team
· Government, academic, foundation studies on public pensions
· Latest news
· $100,000 Pension Club
· Latest pension reform proposals
Contact: Sarah@FixPensionsFirst.com
916.410.7506
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