By Steve Smith/California Labor Federation
It’s official. San Jose Mayor Chuck Reed, a career politician with backing from a Texas billionaire and former Enron trader, has filed a ballot measure to strip away retirement security from current teachers, firefighters, sanitation workers and other public servants.
According to the Sacramento Bee:
“The Pension Reform Act of 2014” would alter California’s constitution to allow state and local government employers to cut pensions for current workers.
Essentially, this means politicians would have the power to unilaterally slash the retirement of current workers, breaking a promise made to those workers when they were hired. Many of those public workers affected don’t receive Social Security. They have a modest pension that averages around $26,000 per year. They’re not responsible for the financial mess created by the Wall St. collapse, yet politicians like Reed are all too quick to scapegoat them — and out-of-state billionaires like former Enron executive John Arnold are all too happy to exploit them for profit.
This initiative isn’t about giving cities “flexibility,” as Reed and his cronies contend. It’s about blaming the teachers who inspire and motivate our children for a mess that politicians and Wall Street hedge fund managers created. Reed’s flawed initiative won’t bring fiscal stability to troubled cities, but it would drive a lot of talented, dedicated people away from serving our communities. And it unfairly breaks a promise to current workers who often have no other source of retirement.
Reed’s ploy, though, is likely to wither when held up to the light of public scrutiny. Californians don’t like out-of-state special interests like Arnold setting policy for us, nor do we appreciate career politicians with their own agendas pushing flawed proposals.
Californians for Retirement Security Chair Dave Low:
Californians have constantly shown their distaste for measures put on the ballot by Texas interests and secret out-of-state contributors, and we expect this flawed proposal to be no different.
This attack on workers must be beaten back. We simply can’t allow opportunists like Reed and billionaires like Arnold to gut the retirement of California workers. Stay tuned to Labor’s Edge for more developments and ways to get involved.
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Why I love Public Pensions
Frank McCoy’s retirement after eight years as Oceanside police chief comes with a steep price: taxpayers will owe him an annual pension of more than $170,000, based on the 51-year-old’s 29 years as a cop. Factoring in automatic 2 percent annual increases, McCoy is on track to one day make more as a former cop than he ever did on the force.
Generous pensions cities and counties throughout California granted employees during the late 1990s and early 2000s, particularly to public safety workers, many of whom are able to retire at 50 with a pension of 3 percent of their highest base pay for every year they worked.
More than 12,000 retired government workers in California receive annual pensions in excess of $100,000. Thirty-five of them used to work for Oceanside, including McCoy’s predecessor, Michael Poehlman, who, according to data compiled by the state employee retirement system, is getting an annual pension of more than $150,000. After “retiring” from Oceanside he accepted a new job as police chief of Reno, which he held for five years before retiring again in 2010.
You need to love them too
So that’s why they feel they have to mug the average Calif. Pensioner making $30K annually?
That’s why we need pension reform to stop the “average worker” AND the taxpayer from getting mugged. Detroit may be an extreme case of fiscal incontinence. But its bankruptcy highlights a long-term problem faced by many American cities and states; how to fund generous pension and health-care promises that are no longer affordable.
The day I see a pension reform proposal without the fingerprints of the Koch Brothers or the hedge fund trader types with a vested financial interest in 401K style manipulation is the day I’ll support “reform”.
All this talk of retirees with lavish pensions is merely a smokescreen for highway robbery.
The day you don’t see pension reform is the day you’ll see municipalities enter Federal bankruptcy court and retirees taking a haircut. That includes the average Calif. Pensioner making $30K annually.
Don’t believe me? Google news articles for public pensions and most results will discuss the unfunded pension liabilities and shady accounting methods that are not allowed in the private sector. Imagining that there is a conspiracy behind every corner and doing nothing will not make the public pension problem go away. Change will happen……better to control the change than to let the change control you.
Right now public unions paint any pension reform as “evil”. That leaves it to a Federal judge to make the tough decisions that profligate politicians cannot make.
That’s why California and San Diego need a public bank. Wall Street has set its sights on gullible pension fund managers, and is in the process of draining pension funds for their own benefit using one stratagem or another. Pension fund managers feel they have to play the Wall Street derivatives game gambling in the casino to make half way decent gains in the money under their management. With a public bank, gains in pension funds could be made the old fashioned way – on interest alone which is far less risky and which no Wall Street bank is paying these days. Instead the pension funds are forced into the casino where they have lost billions creating the pension crisis which is now nearly universal. Going back to gains predicated on interest, which a public bank could pay (instead of channeling all interest bearing funds into corporate profits) would alleviate the need to gamble (and lose) to more knowledgeable Wall Street tycoons.
It’s California Public Employees’ Retirement System (CalPERS) role to administer health and retirement benefits on behalf of more than 3,000 public school, local agency and State employers. CalPERS is a State Owned Enterprise (SOE) but if they employ gullible pension fund managers who feel they have to play the Wall Street derivatives game gambling in the casino to make half way decent gains in the money under their management; I don’t have much faith that another SOE (public bank) would not succumb to the same problem. It would be better to reform CalPERS
A public bank would be chartered not to play the Wall Street derivatives game. Since it would not have to maximize profits as required by law for an investor owned corporation, it could realize decent gains from the spread between interest paid on deposits and interest received from loans. Also exorbitant CEO salaries and executive compensation would be out of the question.
The California Public Employees’ Retirement System, or CalPERS, is the nation’s largest pension fund for government workers. CalSTRS is the pension fund that provides retirement benefits for California’s teachers. Together these funds have $400 billion in assets, a huge pot of money which they have been farming out to Wall Street in the hopes of growing this prodigious sum even more.
Loans would be made to CA businesses and deposits taken from Californians. For a San Diego public bank, the same would be true within San Diego County. Student loans would be made within the same respective jurisdictions.
All right. If the public bank charter was written so that they could not “play the Wall Street derivatives game” that should stop them from becoming another CalPERS or CalSTRS.
But I’m not sure that a CA public bank could earn a high enough rate of return to fully fund the growing (baby boomer) inflation adjusted benefit pay out. Student loans and loans made to CA businesses will need to earn a rate of return to fund pension benefits. On the flip side the deposits from Californians will need to pay competitive interest.
The public bank charter should also include a requirement that taxpayer funds will not make up for any shortfall. A public bank should stand alone based on the money it earns and the money it pays out.
Only time will tell.
John:
How would a public bank work? What would the fund be invested in and how would a rate of return be computed? Are the fund used to purchase US Treasury Bills?
Miguel,
Check out my series on public banking on this website or read Ellen Brown’s book: “The Public Bank Solution: From Austerity to Prosperity.”
As I see it, the bank would take in deposits and make loans. The difference is it would not be beholden to Wall Street or to investors to maximize profits. Therefore, if it chose to it could give out much more favorable student loans for one thing, make loans to local businesses etc.
Sorry IO don’t have more time to respond. Good luck!
In contrast to most commercial banks, Bank of North Dakota (BND), a public bank, is not a member of the Federal Deposit Insurance Corporation (FDIC). All BND deposits are guaranteed by the full faith and credit of the State of North Dakota.
Hummmm…if California were to create a public bank, then individuals will have to choose if they want to deposit their funds into a CA public bank; I can accept that. Each person should invest their funds wherever they chose. It’s up to them to perform their own due diligence and invest knowing the risk and the rewards.