Boosting benefits in good economic times was shortsighted.
December 21, 2008
By JOHN M.W. MOORLACH
Our governor has signed budgets with annual expenditure increases greater than those of his predecessor. So it is disingenuous for him to be critical of the Legislature now. For more than four years he has been guilty of pushing problems out into the future. Gov. Schwarzenegger, please do not lecture us now about requiring a balanced budget, requesting spending caps or being horrified at the lack of a "rainy day" fund. You're a classic finger-pointer, with most fingers pointing back in your direction.
The same is true of Rob Feckner, president of the California Public Employees' Retirement System. This schoolteacher lectured that "every time the stock market suffers a major setback, those who don't fully understand how government pensions work begin sounding alarm bells that it will absolutely drive up the cost of government pensions."
Mr. Feckner also suffers from a severe credibility gap. CalPERS has done quite well over the past 20 years, averaging annual investment returns of nearly 10 percent.
What Mr. Feckner failed to mention is that nearly a decade ago CalPERS was fully funded. Consequently, with the great yields that he touts, CalPERS should be more than fully funded. The reason it is not is the second small concern that he failed to mention: Ten years ago he supported formula enhancements that increased benefits by some 50 percent.
Changing retirement formulas in the middle of the game is a recipe for disaster. It shows a severe case of not fully understanding how government pensions work. They are not there to be plundered and pillaged.
When Mr. Feckner states that "market downturns are followed by recoveries," he is correct. The opposite also is true: Market upturns are followed by corrections. Instead of using the overfunding from banner years and protecting the taxpayers during the next down cycle, he increased benefits to the tax-eaters, of which he is one. I guess blatant conflicts of interest make it difficult to tell the entire story.