The State Worker

Chronicling civil-service life for California state workers

September 7, 2012
Column Extra: Internal memo cautioned economic slump would boost pension costs

120907 MARTY MORGENSTERN.JPGWith just 400 to 450 words for our weekly State Worker column, much of what we learn each week never sees print. Column Extras give you some of the notes, the quotes and the observations that inform what's published.

As we researched California's public pension history for our Thursday State Worker column, CalPERS' media relations office passed along a 1999 memo from then-Department of Personnel Administration Director Marty Morgenstern. The note to managers -- who would no doubt field questions from rank-and-file employees about why the state didn't just implement the increases -- explained why Morgenstern wanted to bargain them. He was particularly concerned about obligating the state pension system to life-time pension promises to employees based on fabulous-but-fickle CalPERS investment returns at the time:

You may be asked, "Why not the entire CalPERS package, isn't the Board paying for it?" The answer is no. CalPERS' earnings do help, but the State must still contribute millions of dollars each year to CalPERS to pay for our pensions. It is true that the State contribution has gone down of late. The biggest reasons ... low inflation, a good economy and the fact that CalPERS returns on investment have been greater than expected. Yet there is no guarantee that our economy will continue to grow at the same rate. More importantly, perhaps, we do not believe it is prudent to assume that CalPERS will continue to earn record-high investment returns. Like buying a home with a variable rate mortgage that has no cap, the risk would be too great.

The document embedded below includes Morgenstern's full memo and the Legislative Analyst's December 1999 take on the pension increases authorized in Senate Bill 400.

1999 Morgenstern Pension Memo

PHOTO: Marty Morgenstern / Sacramento Bee 2001 file, Randy Pench

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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


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