The State Worker

Chronicling civil-service life for California state workers

June 22, 2011
CalPERS officials criticize pension enhancement decisions

A story in the New York Times quotes CalPERS board member Tony Oliveira and former fund chief actuary Ron Seeling on public employee pension enhancements approved more than a decade ago. The story also delves into the union's strategy a few years ago to bump up benefits for their members at the local level and the current debate over pension benefits.

No doubt that this story and its accompanying graphics will be grist for the pension debate mill. A few passages give a sense of the story's angle:

"We had no idea what we were doing," said Tony Oliveira, who as a supervisor in Kings County, in central California, voted to increase employees' benefits, and now is on the board of the state's enormous pension fund. "This was probably the worst public policy decision in the state's history. But everyone kept saying there was plenty of money. And no one wants to be responsible if all the cops quit to get paid more in the next town."

Ron Seeling warned them that serious problems could be looming.

It was 1999, and the California Public Employees' Retirement System, or Calpers, the large government agency that manages retirement benefits for more than 1.6 million public workers, retirees and their families, was lobbying the legislature to increase employees' benefits. Calpers's plan would lower the retirement age for some workers to 50 years, even as it raised pensions to as much as 90 percent of their salaries.

Lobbyists were arguing that the plan -- which would ultimately create the largest pension increase in the state's history -- wouldn't cost "a dime of additional taxpayer money."

But Mr. Seeling, the agency's chief actuary, knew that wasn't necessarily right. Sitting at his desk, poring over spreadsheets, he saw the truth. Calpers, at the time, was awash in cash and many cities believed that pensions were essentially self-funding if the stock market remained high. But if the market stumbled, he realized, Calpers's plan could cost taxpayers billions of dollars.

Mr. Seeling cautioned the Calpers board of the risks, but his worries were brushed aside. Calpers's job is to invest pension funds to get the best returns and administer benefits to retirees. But it has also been an advocate for public workers. Many board members, when Calpers was pushing its plan in 1999, were closely aligned with the people who benefited from increased pensions. Six of Calpers's 13 board members were elected by government retirees or workers, as required by state law. Another was a union official. Two others were politicians who had sought union endorsements and campaign contributions.

"Labor controlled too much of the board," Mr. Seeling, now retired himself, said in an interview. "It's been harmful to the state."

Click here to read "Public Unions Take On Boss to Win Big Pensions."

Hat tip to state worker and State Worker blog user E for flagging this story.

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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