Over at CalPensions.com, Ed Mendel tracks , well, state pensions, and he has an interesting story today about the potential for Jerry Brown “half move” toward an individual 401K style plan rather than the pensions that have helped move millions of Californians into the middle class.

Gov. Brown is proposing that the state give CalPERS $1.5 million to identify and study alternatives for a “hybrid” retirement plan, a cost-cutting combination of pensions and 401(k)-style individual investment plans.

The item in the governor’s revised state budget plan last week is a reminder that the “12-point pension reform plan” he proposed last March listed a “hybrid option” as one of five points still under development.

Brown issued the reform plan after a breakdown in talks with a handful of Republican legislators, who must provide at least four of the votes needed to extend an expiring tax increase.

The Republicans are said to be seeking pension reform along with a state spending limit and business-friendly regulatory changes. A news release in March said Brown intends to “introduce these pension reforms with or without Republican support.”

Back in 1978, Jerry probably missed a bit of writing on the wall with Prop 13, and so perhaps he is tryinig to be a bit more proactive this time aroung.  In general that is a good thing, as this issue really resonates for some reason.  Perhaps it is because the retirement account nightmares of the last few years of millions of middle class families, and that we have completely failed to articulate the value of pensions and the long term security they offer.  Wall Street has done a really, really good job of telling people that private investments (you know, through them taking a big cut)p are far better.  Of course, the numbers don’t really bear that out, but Wall Street has better marketing people than CalPERS does.

I cetainly understand the Governor’s intetnion of pushing this “reform”, but is certainly worrying when we are talking about dismantling, perhaps just a few bricks at a time, one of the strongest pension systems developed in the US or anywhere else.

In an earlier post called Wisconsin Comes to Costa Mesa, I wrote that “Costa Mesa is at the bloody tip of the spear in California Republicans’ war against public employees.”

I meant that metaphorically.

Today it became literal as one of the 213 laid-off employees leaped to his death from the 5th floor roof of Costa Mesa City Hall.

Employees are stunned, yet nobody is surprised.

Costa Mesa’s pension crisis was phony. Its budget crisis was vastly overblown.

But Jim Righeimer, a ruthless Republican ideologue trying to position himself for higher office, was trying to show that he was the real OC anti-employee, anti-pension, anti-union crusader. Riggy took advantage of a vacant seat to name one of his cronies, Steve Mensinger, to the City Council, and the two of them have pushed to outsource employees in 18 city departments. Two other weak-minded Republican Council members followed along.

They didn’t do any studies about cost effectiveness. They didn’t show their work. They just appointed a two-person committee that arbitrarily came up with a list of departments that might benefit from outsourcing, then rammed it through in a single Council meeting.

And because they were required to give six months’ notice to any employee they were to lay off, they arbitrarily issued pink slips to 213 employees on Thursday, March 17th.

It wasn’t just the fact of the pink slips.

Riggy is an arrogant bully, as is Mensinger. Instead of serving as part-time Council members, they have taken up residence in City Hally, threatening and bullying workers on a daily basis, arrogating power to themselves, and justifying their pompous pronouncements with a relentless series of lies and half-truths.

They’re not very different from some of the Assembly members from the OC. Don Wagner and Allan Mansoor are cut from the same cloth. Righeimer was a one-time roommate of Congressman Dana Rohrabacher, as well as his campaign manager. He shares an office suite with lobbyist and former Assembly leader Scott Baugh.

Tempers are high.

The Orange County Register,reports.

Councilmen Jim Righeimer and Stephen Mensinger were threatened by a city employee at the scene, who ran toward the councilmen before being restrained by three coworkers. Another city employee said “You’re not welcome here,” referring to the councilmen.

Peter Naghavi, director of public works, was seen crying and consoling other city employees.

Nick Berardino, general manager of the Orange County Employees Association, was seen cursing out city CEO Tom Hatch in the lobby of City Hall.

“You cannot give out notices wholesale like that in this economy,” Berardino said. “That’s what’s going to happen.”

An LA Times article continues to try to provide coverage with false balance, quoting Stewart Drown and Joe Nation, two of the apologists for the anti-pension jihad. Curiously, the LA Times continues to restate the discredited claim that Costa Mesa’s pension costs will rise from 15 million to 25 million in a few years.

It’s not a new model. It’s the same model that the Republican party is trying across the country of attempting to destroy organized labor and roll back the safety network.

And it’s killing people.

Here’s a local blog story on Riggy which is also a rant on the sad nature of the alternative OCWeekly, sister to the LA Weekly.

Back in February, OC Progressive wrote a bit about the Little Hoover Report.  Their suggestions on “reforming” the pensions system were so off-base and ill-informed, that Treasurer Lockyer said at the time that they were “long on rhetoric and short on thoughtful analysis.”  Well, he’s tried to put some of that analysis into the system, and into the commission’s suggestions about the system.  

Over the flip you’ll find the full 6-page letter about the Little Hoover reform suggestions, complete with Lockyer’s findings of flaws in the report.  I highly suggest you read it, he held no punches.

But the nub is this, the Little Hoover report is thinly sourced and poorly researched.  Its conclusions come more from the Koch Brothers handbook that is running around the mainstream media than any actual data.

LHC Pension Report Comments 03-11-11

The market results over the past few months have improved, but all is still not well at the big institutional investors.  And that includes California’s big pension funds:

Calpers is considering reducing the projected rate of return used by the giant pension fund to make investment decisions. A cut could force cash-strapped governments in California to pay millions more each year to cover their employee pension obligations.

Since 2003, the California Public Employees’ Retirement System has assumed that the value of its stocks, bonds and other holdings would increase by 7.75% a year. But the likelihood of an extended period of modest economic growth world-wide is fueling doubts inside Calpers that the pension fund can continue aiming so high.(Wall St Journal)

In the fiscal year ending last June, CalPERS was down 23%, while last calendar year improved, nudging to a 12% increase. While there are no hard numbers for the actual amount of additional contributions required, this could mean billions of dollars of additional contributions to CalPERS in order to keep the funds economically stable.

Of course, we know where this is ultimately headed. Arnold Schwarzenegger has already suggested that state employees simply need to reduce their pensions and/or go to a privatizing model.  While this might sound good to the general bloke on the street, consider two facts. First, state employees have already received a 15% pay cut in the form of the furlough days.  Second, state jobs pay less than market rate in the first place.

CalPERS needs to do what CalPERS needs to do, the pension fund needs to be stable. But, the ramifications of this action will be felt for a long time, and that fact should be thoroughly considered.

Today down in sunny Mission Bay along SF’s less scenic waterfront (and only a few steps from my gym), Sen. Leland Yee announced his plan for pension reform.  Currently UC’s pension plan is governed solely by the UC Regents, with no input from workers. WTF?

So, Sen. Yee plans to require joint governance with other higher ed. pension plans.  Given that UC’s pension has dramatically underperformed, perhaps not a bad idea.  Check out the press release over the flip…

UC Conflicts of Interest Prompt Call for Pension Governance Reform

Senator Yee introduces legislation to give workers equal vote on pensions

SAN FRANCISCO – As a result of recent revelations regarding conflicts of interest on the University of California (UC) pension plan and the fact that the once top-performing plan is now significantly underperforming its peers, Senator Leland Yee (D-San Francisco/San Mateo) has introduced legislation (SCR 52) calling for joint governance of the UC employee’s pension plan.

“The UC Retirement Plan is the only state public pension plan that does not give a voice to the workers,” said Yee.  “As a result, we have seen complete mismanagement of their retirement plans and serious questions regarding financial conflicts of interest.  Now 200,000 UC workers are unfairly being asked to foot the bill.”

Both California State University and community college workers have pension plans with joint governance, with both employee and employer representation on their boards.  At UC, the Regents currently have unilateral control over all pension decisions.

“Having jointly governed pension plans improves pension security by preventing conflicts of interest and providing better oversight of pension investments and benefits changes – all of which is greatly needed at UC,” said Lakesha Harrison, President, AFSCME Local 3299.  “We believe that the time for band-aid solutions is over. UC workers want full access to information and an equal say on decisions about our pension. We demand joint governance of our pension.”

Under joint governance, what happens with any fund surplus is agreed upon by the employee and employer trustees.  UC would not be able to propose items such as supplemental benefits for executives, as it has done in the past, unless trustees elected by workers and retirees agreed.

It was recently reported that two members of an investment advisory committee for the UC appear to have previously undisclosed connections to firms who won contracts to invest pieces of the university’s $43.4 billion pension plan.

According to the San Francisco Chronicle, one such member, John Hotchkis, retains a 1.1 percent interest in his former firm Hotchkis & Wiley Capital Management, which was chosen in July 2004 to manage more than $430 million in UC equity funds.  In addition, in 2005 a firm headed by Hotchkis’s daughter was chosen to manage $311 million in non-US equity funds.  Another member of the investment committee, David Fisher, is the chair of the board of Capital Guardian Trust Co., a company chosen to manage $377 million in fund assets.

UC claims that these connections do not constitute a conflict and has a proposal to relax, rather than tighten, existing governance policies on conflict of interest.

Last week, the East Bay Express newspaper extensively detailed how a number of recent changes at the pension fund have cost the university billions of dollars.  Once one of the top performing pension plans in the country, it now ranks among the nation’s worst performers.  Although the fund is still over 100 percent funded, for the first time in seventeen years, employees are being asked to pay money into the pension fund, between 5 to 8 percent of their paychecks.

For the past several years, the Regents have increasingly contracted with a number of high-priced pension consultants and money management firms, rather than stick to the decades-long and highly successful practice of using professional university financial staff to trade stocks themselves.

“Workers at UC are already extremely underpaid and now the Regents are expecting them to sacrifice an additional 8 percent of their salaries as a result of this poor management,” said Yee.  “That is simply unconscionable.”

The Regents have made many of these decisions behind closed doors, although lawsuits have since required minutes of these meetings to be publicly released.  In the secret meetings, regents discussed how they could minimize the impact of disclosing fund figures as not to coincide with the 2002 election.  In fact, when the regents were told the figures would not be made public until after the election, regent Norman Pattiz said, “That’s good” and a regent consultant Bruce Lehmann said, “Thank God the doors are closed.”

A report provided by the University shows that under the management of UC staff, the retirement fund earned an average of 15.6 percent per year during the 1990s, compared to only 13.5 percent for comparable multibillion dollar portfolios.  Since UC has contracted out many fund management duties to outside consultants, 86 percent of large US investment trusts outperformed the UC pension fund, according to a report by State Street, UC’s custodial bank.  During the 1990s, the fund spent approximately $5.5 million a year to buy and sell bonds and almost nothing to trade stocks.  In comparison, last year alone the university paid more than $22 million in commissions and paid private fund managers $32 million to trade stocks that were previously handled by existing UC staff.

“Had the UC Retirement Plan even performed as well as half of the comparable funds in the past five years, it would have an addition $3.3 billion,” said Yee.  “Recent decisions have led to billions in lost profits, millions in unnecessary fees, and thousands of employees stuck with the invoice.  We need new governance and oversight of these dollars and workers deserve an equal vote on their pensions.”

“The Regents have a choice: change to joint governance of the retirement plan or we will go to the ballot and ask the voters to make this change for them,” said Yee.

In addition to SCR 52, Senator Yee has authored SB 190, which among a number of reforms, requires advisory groups similar to the investment advisory committee to meet in public.  In addition, SB 190 will require all executive compensation packages to be voted on in an open session of a subcommittee and the full board.  The bill will also require full disclosure of the compensation package with accompanying rationale and public comment on the specific action item.