Last night, I attended a meeting of the Los Angeles County Democratic Party’s Resolutions Committee to speak on behalf of a resolution I wrote. The resolution calls for the University of California and California State University endowments, and institutional investors California Public Employees Retirement Systems and California State Teachers’ Retirement System to divest from fossil fuels within five years.

And I wore clean underwear to the meeting. Just to spite Fox News.

The reasons behind the resolution are simple. Climate change caused by burning of fossil fuels is the greatest challenge facing the next few generations of humanity. Efforts to legislate solutions have often been stalled by fossil-fueled politicians; hence, a movement has sprung up to divest institutional funds from fossil fuel companies, popularized by Bill McKibben in his Rolling Stone piece on global warming’s terrifying new math.

The “warm” argument for divestment points out the morality. It’s not primarily an economic strategy, but a moral and political one. Just like in the struggle for civil rights or the fight to end Apartheid in South Africa, the more we can make climate change a deeply moral issue, the more we will push society towards action. Fossil fuel divestment, explicitly modeled on the successful anti-apartheid movement, has been endorsed by Nelson Mandela. If it’s wrong to wreck the planet, than it’s also wrong to profit from that wreckage. At the same time, divestment builds political power by forcing our nation’s most prominent institutions and individuals (many of whom sit on college boards) to choose a side. Divestment sparks a big discussion and gets prominent media attention, moving the case for action forward.

The “cold” argument for supporting divestment recognizes that smart institutions will get out of the carbon bubble before it bursts. Investors are now beginning the long ugly process of grappling with the fact that the unburnable carbon in fossil fuels will create stranded assets, i.e., assets worth less on the market than on a balance sheet. One estimate has 55% of investors’ portfolios exposed to risk. Standard & Poors warns of oil firms’ credit downgrades. The Motley Fool sees fossil fuels as modern asbestos stocks.

And getting on the fossil fuel divestment bandwagon is smart politics. The Fossil Free website shows over 250 colleges and universities have movements calling for their endowments to divest from fossil fuels. Give them a reason to enthuse about Democratic Party action.

Of course, Fox News doesn’t like the fossil free movement. A Fox News host claimed that those of us who want to divest from fossil fuels don’t want clean underwear. My retort, via Twitter: “hey @FoxNews – I wear clean silk lingerie and I support #fossilfree divestment. But no one who believes the BS you spew will ever see it.”

Since Ventura County became the first Democratic party in the nation to call for fossil fuel divestment last week, we’ve been joined by other Democratic clubs in California. If you’re interested in doing the same, here’s a template resolution:

WHEREAS, almost every government in the world has agreed that any warming above a 2°C (3.6°F) rise would be unsafe. We have already raised the temperature 0.8°C (1.4°F), which has caused far more damage than most scientists expected – a third of summer sea ice in the Arctic is gone, the oceans are 30 percent more acidic, and since warm air holds more water vapor than cold, consequences of inaction will result in devastating floods and drought;

WHEREAS, scientists estimate that humans can release roughly 565 more gigatons of carbon dioxide into the atmosphere and still have some reasonable hope of staying below two degrees, while proven coal, oil, and gas reserves equal about 2,795 gigatons of CO2, or five times the amount we can release to maintain 2 degrees of warming;

and WHEREAS, California’s institutions of higher education and pension funds should encourage only those investments that allow students and retirees to live healthy lives without the impact of a warming planet, and thus campaigns to divest from fossil fuels have begun at campuses within both the University of California and California State University systems;

THEREFORE, BE IT RESOLVED, that the (your county) Democratic Party calls upon the University of California and California State University endowments, and CALPERS and CALSTRS institutional funds to immediately stop new investments in fossil fuel companies, to take steps to divest all holdings from the top 200 fossil fuel companies as determined by the Carbon Tracker list within five years, and to release updates available to the public, detailing progress made toward full divestment;

BE IT FURTHER RESOLVED that the Democratic Party send a copy of this resolution to the Governor of the State of California, Board of Regents of the University of California, Chancellor of the California State University system, and officials at CalPERS and CalSTRS, asking support for divestment from fossil fuels.

I’m very pleased to report that the Los Angeles County resolutions committee passed my fossil fuel divestment resolution unanimously – one committee member stated “You had me at the first ‘whereas’ clause.” It’ll go on to the full party meeting next week, where I’m told that it’ll probably be approved on a routine basis. And I’ll wear clean underwear in support…but won’t post pix to prove it.

75 years ago, the last time California was in an economic crisis this dire, one of the groups that suffered the most was the elderly. Too old to work, with no jobs available even if they could, with savings wiped out in the collapse of the banking system and with no pensions whatsoever, poverty among the elderly reached epidemic proportions, burdening their children and grandchildren with the cost of care.

So a Long Beach doctor named Francis Townsend proposed to do something about it, and through a grassroots movement built a nationwide mass base for the Townsend Plan – which we now know as Social Security.

The 1930s saw us react to crisis by ensuring the elderly had enough to live in their old age, freeing the rest of society for productive work. FDR also promoted stable pensions, ensuring that honest work would be rewarded.

Now, in this economic crisis, conservatives want to destroy pensions. Instead of protecting and bolstering the elderly, they want to attack them, rob them of the pensions they worked hard to earn, and steal what remains of their economic security.

Former San Diego Union-Tribune reporter Ed Mendel started an anti-pensions blog, CalPensions, designed to promote the attack on two cornerstones of financial security for the aged – Cal-PERS and CalSTRS. And if that wasn’t enough, a former Yacht Party assemblyman, Keith Richman, plans to circulate an initiative to eliminate government pensions and replace them with 401(k)s .

Yes, 401(k) accounts, the same that lost between 20% and 40% of their value in 2008. They really believe this is a good idea? Of course they do. Conservatives are driven now by the desire to destroy what remains of the New Deal and the prosperity it created. They see pensions – the fruits of a lifetime of hard work – as illegitimate, a target for destruction.

From a fiscal perspective alone this is a bad move. The city of Pacific Grove, located next to Carmel and Pebble Beach, voted in November 2008 to investigate leaving Cal-PERS and moving city workers to a 401(k), convinced by conservatives that public workers were at the core of the city’s fiscal problems.

The preliminary report, issued earlier this month, showed that it would actually cost PG more money to leave Cal-PERS than to stay. This in a city with a large number of retired workers, which styles itself as “America’s Last Hometown” – a town where, apparently, the teacher and the fireman shouldn’t be able to enjoy a financially secure old age.

There’s no doubt that we need to deal with pensions that have lost value. But instead of doing away with them and consigning the elderly to poverty for their remaining years, it would make sense of us to pursue reforms intended to stabilize pensions and reinforce economic security for all Californians.

Conservatives are convinced that the solution to our state’s crisis is to make the most vulnerable suffer, whether they’re disabled or on a pension. It’s our job as progressives to make sure they do not succeed.

Last week, we got some good news regarding the pension fund for our state’s teachers. In 2004, the long-term deficit was projected to be $24.2 billion. Today, the long-term deficit is projected to be $19.6 billion. It’s not quite as good as we want it, but it’s getting better.

So how did our favorite right-wing commentator who always misses the point respond? Oh, Chris Reed just looks for a way to tie this to “the public employee unions’ master-puppet relationship with Democratic lawmakers“. Huh?

Follow me after the flip for more…

So what exactly is Chris Reed angry about? I guess this:

Last June, three state Senate Democrats — Don Perata, Debra Bowen and Gil Cedillo — killed the governor’s nomination of David Crane, a smart, well-regarded San Francisco financier, to the California State Teachers Retirement System board. Crane’s sin? “The three Democrats on the five-member Senate (Rules Committee) agreed that Crane seemed too concerned about the burden of pension shortfalls on taxpayers,” according to a published report.

Perata, Bowen and Cedillo’s open declaration of allegiance to the California Teachers Association over Californians in general showed anew that public employee unions have a master-puppet relationship with Democratic lawmakers — and that taxpayers are being and will continue to be brutalized as a result.

Wait, so how exactly did the Democratic lawmakers act as “puppets” to the “masters” at the public employee unions? And what’s so horrifying about the state teachers’ pension fund? Take a look at this article from The Sacramento Bee last week, and try to explain the “crisis”.

Surging stock markets and three straight years of strong investment returns have pared billions from a long-term pension shortfall plaguing the California State Teachers’ Retirement System in recent years, but it’s not enough.

The state, school districts and teachers still will be forced to dig deeper into their pocketbooks to erase a projected $19.6 billion gap over the next three decades, according to a new report for the nation’s second-largest public fund. […]

The CalSTRS analysis, prepared by the actuarial consulting firm Milliman, shows the giant fund’s financial outlook improved slightly at the end of fiscal year 2006 as the nation’s second-largest public fund continued to rack up double-digit percentage annual investment gains, including a 13.2 percent return in ’06.

The results have cut the long-term deficit to $19.6 billion, compared with $20.6 billion in 2005. That’s an improvement from a $24.2 billion funding gap in 2004.

Milliman said CalSTRS, with nearly 800,000 members, has enough assets to cover 87 percent of its pension obligations decades from now — up from an 82 percent rate in 2003. By comparison, the average for 125 state retirement systems is 88 percent, according to a 2007 report by Wilshire Consulting.

OK, so now the pension fund has enough assets to cover 87% of our teachers’ pension needs for the next few decades. We’re not quite fully funded yet, but we’re getting better. And apparently, there’s already a proposal to fill this gap. Again, from Sac Bee:

The consultant’s report said CalSTRS needs a 3.3 percent boost in annual pension contributions to wipe out the deficit. Currently, school districts pay 8.25 percent of payroll toward teacher pensions, while the state puts in 2 percent and teachers contribute 8 percent of their pay.

In December, trustees backed a legislative measure to increase contribution rates in 2009 while leaving benefits intact. The proposal calls for raising the teachers’ rate to 8.5 percent while gradually increasing the state’s portion to a maximum of 3.25 percent. The school district contribution would slowly rise and be capped at 13 percent.

OK, so what’s the big deal? The teachers pay a little more. The school districts pay a little more. The state pays a little more. And in the end, the pension fund is fully funded. Under the current proposal by the pension fund trustees, everyone chips in a little more (including the teachers themselves) to ensure that our teachers can afford to stay alive after they retire.

So how did Chris Reed respond?

The story noted that CalSTRS still had a projected long-term $20 billion shortfall in paying for the pension benefits of retired teachers. How did the CalSTRS board propose to deal with this huge unfunded liability? Not by trimming benefits, an approach it flatly rejected. By waterboarding taxpayers.

And what does he want to do about this? Go back to whining about one of Arnold’s good buddies from SF not making the pension trustee board. Oh yes, and if one really wants to talk about “master-puppet relationships”, look at this. David Crane is a venture capitalist who served on Arnold’s transition team in 2003. And Arnold placed him on his “Commission for Jobs and Economic Growth“. And he’s part of Arnold’s inner circle as an economic adviser. And even though David Crane calls himself a “Democrat”, he boasts of his admiration of Milton Friedman.

And Chris Reed is really surprised that Senate Democrats won’t nominate someone adamantly opposes “non-market deals” and who calls public pension benefits for workers who serve the public “special privileges”? Give me a break!

So once again, Chris Reed misses the point. The teachers’ pension fund isn’t quite doing as well as we’d like it to, but it’s doing better than it had been just five years ago. And now, the pension trustee board has proposed a solution to the remaining problem. However, Chris Reed doesn’t like a solution. So now, he’s criticizing the State Senate Democrats for rejecting a radical Friedmanite (who despite being a “Democrat”, is VERY CLOSE to Arnold) to serve on the pension board. Can someone please explain Chris Reed’s distorted “logic” to me?

(Cross-posted from Working Californians)

The pension system for California’s teachers, firefighters, peace officers and others who serve the public is fundamentally sound, despite what you have been hearing from Arnold.  In many ways, this mirrors the battle over Social Security in 2005.  You have a Republican politician inventing a “crisis”, in an attempt to privatize a secure working system with a risky and untried plan.  In this case, they want to hike up the age of retirement and switch people over to inefficient 401k plans.  Arnold put together a commission to look at the problem.  They held their first meeting yesterday.

Dave Low, a representative of the California School Employees Association, told Fritz that his 58-year-old sister, a schoolteacher for more than 30 years, is fighting cancer and was recently forced to retire to deal with her illness. The proposal Fritz is backing, Low charged, would leave people like her with a reduced pension and no health benefits.

“This hits close to home,” he said.

Willie Pelote, a representative of the American Federation of State, County and Municipal Employees, his voice rising and falling like a preacher giving a sermon, followed Fritz to the lectern and told the panel not to mess with the status quo.

“You have a safe, secure system for working people,” Pelote said. “There is no crisis.”

(emphasis mine)

The Republicans may be blaming retirement costs on budgetary problems, but the reality is that the PERS and STRS systems are fundamentally strong and near full funding.  In January the Wall Street Journal said:

After years of steep under-funding, pension plans are now healthy, thanks to several years of double-digit investment gains and rising interest rates.

Simply put, PERS and STRS are excellent at earning gains for the retirement system and are much more efficient with money than private retirement funds.  The assets of the fund have almost doubled over the last decade and are at a record high of almost $230 billion.  While market volatility is a concern, CALPERS has instituted a smoothing formula, so that public employees can rely on more uniform pension payments whether stocks go up or down, unlike 401k plans.  On a percentage basis, CalPERS is allocated almost the same amount of public dollars that went into the system 25 years ago.

Funding levels are not perfect but we are at 90% of what we need to provide projected retirements necessary in the future.  That is higher than they were at before the stock boom of the 1990s.  We have a strong system, but there can always be improvements.  Public pensions can be made fairer and there is a package of bills, with labor support, that will provide greater predictability for employers, stabilize the system, eliminate abuse and crack down on those who would game an otherwise sound system.

Retiree health care is an issue that must be addressed, but it is the same problem that is facing all Californians.  Health care costs are increasing at astronomical levels and it is straining the system.  One must not conflate the retirement issue, with health benefits.  They are funded in two completely different ways.  Secure retirements are pre-funded, using employee, employer and pooled investment dollars.  The government has traditionally funded health benefits on a pay-as-you-go basis. 

We should start thinking about creating a new fund to put away money for retiree health care costs in the future.  This would allow the state to create a pooled, low cost, well-managed fund, like pension investments, to earn the vast majority of the money needed to meet projected expenses for retiree health care.  Secondly, but not any less important, we must fix the health care system as a whole, rather than eliminate health care for retired employees.

California already has a severe shortage of peace officers, teachers, and nurses.  Good pensions and benefits are key issues that allow us to recruit and retain the best possible public employees.  It is part of our social contract with these workers.  While they may earn more in the public sector, public employees are promised a secure retirement and benefits package.  We must not break that promise to our hard working teachers, nurses, firefighters, peace officers and others.

The governor’s commission has an opportunity to identify reforms that will provide greater stability and predictability for the well-earned and promised retirements of public employees.  Any attempts by the government and others in his party to invent a “crisis” will be vigorously opposed. 

There is no crisis.

This will be a short one. I know it’s a busy weekend. Go out and rustle up some votes!
Teasers: Field Poll on the infratstructure bonds, Arnold using another corporate slush fund, Prop 90 divisiveness, and more!