Pension Issue News Clippings July 2, 2015 –August 18, 2015 Audience: Client Advisory Committee – September 2, 2015

Media Source Title of Article/Date Page

The Atlantic, Education The Myth of a Teacher’s ‘Summer Vacation’ 1-2 July 2, 2015

Governing Better, Faster, Can California Find a Way Out of Its Pension Calamity? 3-4 Cheaper blog July 8, 2015

Education Week, Teacher Are Pension-System Changes Unfair to New Teachers? 5-6 Week blog July 9, 2015

USA Today, Money How a Pension Can Cost You at Social Security Time 7-8 July 15, 2015

The Sacramento Bee, CalSTRS Investments Earn 4.8 Percent Profit 9 Business & Real Estate July 17, 2015

The Bakersfield Steyer and de Leon: A Friendship That May Change the State 10-13 Californian, News July 19, 2015

The Wall Street Journal, STATES, CITIES TO ASK SEC TO BEEF UP 14-15 Markets DISCLOSURES FOR PRIVATE-EQUITY FIRMS July 21, 2015

Bloomberg Business, News The Retirement Expert Who Got Death Threats for Her Ideas 16-19 August 5, 2015

Lodi News-Sentinel, ‘Big Oil’ Is Not to Blame for California’s Gas Woes 20-21 Opinion August 11, 2015

Los Angeles Times, Count the Bad Ideas in California’s Pension Overhaul Initiative 22-24 Business Column August 15, 2015

OC Register, Watchdog Watchdog: Proposed Ballot Measure Could Save Money on 25-26 Column Pensions, But at What Cost? August 17, 2015

Los Angeles Times, Op-Ed Bill McKibben: Being Carbon-Foolish Cost CalPERS 27-28 Commentary and CalSTRS $5 Billion August 18, 2015

Our Mission: Securing the Financial Future and Sustaining the Trust of California’s Educators CAC Media Clippings September 2, 2015

The Myth of a Teacher’s ‘Summer Vacation’* (The Atlantic, Education) 07-02-15 The “last day of school” is a misnomer. BY: Liz Riggs *NOTE: Both Jason Richwine, of the Heritage Foundation, and Andrew Biggs, of the American Enterprise Institute are mentioned.

In a freshly painted fifth-grade classroom, Natalie Klem sits with a group of teachers planning an orientation for next year’s incoming class at Lead Prep Southeast in Nashville. It’s the beginning of July, and she’d had her “last day” of school just over a month earlier.

“I can’t remember the last summer I didn’t work,” says Klem, who’s been teaching math for six years in public schools, both traditional and charter. Klem typically tries to spend most of June completely disconnected; she avoids answering emails, developing plans for the upcoming year, and spending any time on campus.

“But that’s not what actually happens most of the time,” she says.

Teaching entails a schedule unlike that of most other careers. Ostensibly, the typical teacher in the United States works 180 or so days annually, which comes with an average starting salary of a little over $36,000. But that excludes the work that he or she probably does throughout the summer, after school hours, and on the weekends. That 180-day policy is also a measure of the amount of time students—not necessarily teachers—must be in school. It doesn’t take into account professional-development time, parent-teacher conferences, and “in-service” skills- training days, for example.

Because of the low starting salary, teaching is considered a poorly paid profession compared to other careers involving similar background and education requirements, such as registered nurses or accountants. Arne Duncan, the U.S. education secretary, has said that public-school teachers are “desperately underpaid,” and has advocated for doubling their starting pay.

“Most teachers do need the extra money and they do work in the summer,” says Richard Ingersoll, a professor at the University of Pennsylvania’s graduate education school whose research focuses on the teaching force; he cites data suggesting the majority of them even get actual summer jobs. According to Ingersoll, the average teacher’s earnings (including any money earned through summer work) are still lower than that of other professionals even when accounting for time off. And several studies have shown that low salaries are a top reason teachers leave the profession.

Still, research on the adequacy of teacher pay is adequate has gotten mixed results. Jason Richwine, of the Heritage Foundation, and Andrew Biggs, of the American Enterprise Institute, have argued that teachers are overpaid—or, at least, aren’t justified in complaining about their salaries—citing that a teacher’s salary amounts to about $1.50 for every $1 that they could earn in a private-sector job and that their skill sets are more limited than that of the average worker.

Another one of the main reasons cited by Richwine and Biggs, among other critics, is that teachers enjoy a big break each summer.

It’s true that, relative to employees private-sector careers, teachers in America tend to work fewer days. According to a U.S. News and World Report op-ed arguing against higher teacher salaries, the average private-sector employee works 260 days a year, while the average

CAC Media Clippings September 2, 2015 appears to be slightly less than that for public-sector employees. But educators like Klem tend to agree that having an extended break from classroom instruction (as opposed to paid time off here and there) makes the challenges of the job more manageable. And that break from instruction doesn’t always mean a summer vacation of idle R and R.

For the most part, the charter school at which Klem currently works follows Tennesse’s traditional public-school calendar, only adding a few extra days at the beginning of the fall to include the time teachers spend in professional development before students arrive. But again, that calendar doesn’t factor in the summer hours. Klem says she’s spending the rest of her summer this year attending meetings, developing school curriculum, helping train new teachers, and contacting families of her students, among other tasks. Past summers, she says, have been equally busy: graduate-school coursework to complete her master’s degree (which isn’t required but can mean higher pay), classroom organization or relocation, and so on. While some of these responsibilities come with a stipend, teachers say they’re relatively negligible given how much time they take—no more than $1,000.

The relationship between summer vacation and compensation is complicated. According to Ingersoll, the original school calendar was based off of that used for agriculture so that kids could help on the farm. The logic was that teachers only worked the amount of time that kids were in school, so it theoretically made sense to pay them less than if they were a full-time worker. But, with the modern economy, proof that teachers work much more than their work year accounts for, and the push in many school districts toward extended days and years, the teacher-compensation question has become increasingly complex.

Regardless, it’s a well-known reality among teachers that even though they’re expected to put in extra time and energy throughout the school year, their salary is what it is. Alex Turvy, for example, sees summer time off and his salary at the New Orleans KIPP school at which he teaches as disconnected elements that are hardly within his control. “It’s sort of fixed,” he said when asked about his pay, doubting that many teachers would be pushed to perform any better than they are now if their wages were higher. According to Turvy, his colleagues are “motivated by wanting to do right by their students.” In fact, he said he doesn’t even think about his pay when it comes to his summer vacation—a period he considers as his time to recharge, reflect, and step back. Indeed, burnout is a widespread concern in the teaching industry, and a common reason why teachers leave the classroom.

Meanwhile, teaching salaries are often tied to contract pay schedules with little to no room for negotiation. The majority of districts will use a “salary grid” or a “uniform salary schedule” that establishes salaries based on number of service years and level of education as the sole factors determining pay. Rarely do a teacher’s specialization or qualitative performance in the classroom factor into salary. “It’s a no brainer,” said Dr. Ingersoll, commenting on how teacher salaries work. “Quality and performance aren’t taken into account … [But] we all know some teachers are far better than others, we all know some teachers work harder than others, and of course it’s unfortunate that these differences aren’t recognized in the salaries.” Yet even despite new efforts at reforming teacher-pay systems, it’s unclear how the typical teacher summer will, if at all, evolve. Ultimately, few teachers are optimistic that anything will change. “At the end of the day,” Klem said, “you definitely don’t do teaching for the money and I realize that.”

CAC Media Clippings September 2, 2015

Can California Find a Way Out of Its Pension Calamity? (Governing; Better, Faster, Cheaper blog) 07-08-15 BY: Charles Chieppo

The latest reform effort wouldn't solve the problem, but it at least would help keep it from getting worse

The longer you wait to solve a problem, the more painful the fix becomes. Californians are being reminded of that simple truth as their leaders attempt to grapple with the state's snowballing public pension woes.

As of late last year, California's 130 public pension systems had a combined unfunded liability of an estimated $198 billion. In 2003, the figure was $6.3 billion. That's an increase of more than 3,100 percent in just over a decade.

In the latest effort to turn those shocking numbers around, a bipartisan group of California pension reform advocates is trying to get an initiative called the Voter Empowerment Act onto the ballot. It would amend the state constitution to require voter approval for defined-benefit pensions for new public employees, any enhancements to current employees' pensions, and establishment of any pensions in which government subsidizes more than half of a public employee's retirement benefit.

Its sponsors include the mayors of San Bernardino and Vallejo, two cities that have declared bankruptcy due in part to overwhelming pension obligations. If supporters can gather enough signatures, the measure would go on the 2016 statewide ballot. If passed, it would take effect in 2019.

The new initiative effort comes after courts have struck down recent attempts to address the pension problem. Last year, voters in Ventura County collected thousands of signatures for a measure that would have allowed the county to opt out of the current defined-benefit system and replace it with a 401(k)-type system, but a county judge ruled that residents couldn't vote to leave a pension system created by the state.

In 2012, San Jose voters overwhelmingly approved a measure that would have given city employees a choice between a less-generous pension or staying in the current system but contributing a larger portion of their salaries toward paying down the pension debt. A Santa Clara County Superior Court Judge overturned that measure for violating the "vested rights" of public employees.

By applying mostly to new employees, the Voter Empowerment Act is designed to get around the so-called "California rule," which grew out of court cases dating back to 1955 and is followed by a handful of other states. The California rule provides not only that public employees have the right to the amount of the pensions that they have already earned but that they also have the right to continue earning pensions based on rules that are at least as generous. The only provision of the Voter Empowerment Act that would impact current workers is the requirement that voters approve any pension enhancements.

While there is nothing in the ballot proposal that addresses California's current unfunded pension liability, it would go a long way toward preventing that number from continuing to grow.

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That's clearly preferable to the status quo. But there's a reason why the Founding Fathers decided the United States should be a representative rather than direct democracy. Any pension referenda would likely result in fed-up taxpayers venting their frustrations at the ballot box rather than any thoughtful decisions about public pensions.

The best result would be if the Voter Empowerment Act pushes the state's leaders to do what they should have done years ago: Craft a political solution to California's pension problems that stops the bleeding, begins to pay down liabilities and sets the pension systems on a path to sustainability.

That won't be easy, both because of the prohibition against impacting the pensions of current employees and the fact that it would require elected officials to take the heat for tough decisions they make now when the benefits of those decisions wouldn't be felt for many years. None of the alternatives is appealing, but it's becoming increasingly clear that they're all better than continuing along the current unsustainable path.

CAC Media Clippings September 2, 2015

Are Pension-System Changes Unfair to New Teachers? (Education Week, Teacher Week blog) 07-09-15 BY: Stephen Sawchuk

To what extent have lawmakers altered teacher retirement systems in recent years in ways that unfairly impact new teachers?

In "Eating Their Young: How Cuts to State Pension Plans Fall on New Workers" Chad Aldeman and Leslie Kan of Bellwether Education Partners, a Washington consulting firm, try to provide answers to that question. They examine trends in various factors that impact the level of benefits and when teachers can obtain them. They also make one broad point: The systems should be changed to give teachers more power over their retirement and to make the systems more attractive and fair to new teachers in particular.

First, let's look at four variables affecting state retirement systems that get highlighted in the report. Vesting years represents the number of years teachers must work before receiving the minimum pension benefits. The benefit formula multiplier applies to the years of service—the higher the multiplier, the higher the total retirement benefit. Normal retirement age is the minimum age for when teachers can collect retirement benefits. And the contribution rate represents the share of teachers' salaries going to their retirement benefits.

Below, you can see how those variables have trended over the 30-year period from 1982 to 2012, according to the report, which in turn drew on data collected by the Wisconsin legislature:

But the impact of those and other changes, in particular those that reduce retirement benefits, don't fall on all teachers equally, Aldeman (an associate partner at Bellwether) and Kan (a pensions analyst) say. "When states reduce pension benefits, those cuts disproportionately fall on new and future teachers. While benefit increases tend to apply to all workers, benefit decreases typically only affect new workers," the report states. And the reductions in overall benefits, not surprisingly, have spiked since the Great Recession—since 2008, the report says, more than 20 states increased the minimum retirement age for teachers.

From 1982 to 2012, the average retirement benefit for teachers with 10 years of service has dropped significantly. A teacher hired in 1982 would on average accrue benefits worth about $16,400 after 10 years service, while a teacher hired in 2012 would after a decade of work accrue benefits worth only about $12,000, a decline of 27 percent (the figures are adjusted for

CAC Media Clippings September 2, 2015 inflation). There's been a decline for teachers with 20 years of service as well, but by a much small percentage. And there's been an increase for teachers with 35 years of service over those three decades.

Over several decades, teachers hired in 2012 can expect to see tens of thousands of dollars less in benefits than teachers hired in 1982, according to the report.

Teachers' benefits don't have to be tied to "how long they've been with their employer," Aldeman told me in an interview, adding that current systems also don't make much sense because, among other things, "We have state legislators choosing when the best time for teachers to retire is." So what are possible changes to fix this structural inequity in retirement plans? Aldeman told me that it would be helpful for retirement systems to create more decision points along teachers' career trajectory that allow them more options and control over their retirement, while decreasing the overall importance of years in service.

For example, he said, teachers could choose to invest in cash-balance accounts that provide a more linear increase of retirement benefits, instead of using traditional pension plans that often take many years to begin providing exponential growth in benefits.

It's worth noting that this push to overhaul teacher retirement plans has been underway for some time. For example, Chalkbeat Colorado reported on an event hosted by the Colorado Pension Project last year at which representatives from Bellwether, along with TNTP (then called The New Teacher Project) and the National Council on Teacher Quality, argued that the state's retirement system needed an overhaul. In a 2012 report, NCTQ made a similar point when, in an analysis of recent changes to teacher retirement systems, the group found for the most part that "states are making up their pension shortfall on the backs of their teachers, especially new teachers."

The Colorado Pension Project itself has come under scrutiny for its broader motives. In a Denver Post column last year, John MacPherson, a Colorado Coalition for Retirement Security board member, blasted the Colorado Pension Project for, among other things, trying to upend a state retirement system that he said had strong returns and low fees. MacPherson also takes on the various groups at the Pension Project event for their links to the Laura and John Arnold Foundation, which he criticizes for trying to cut pension systems for teachers.

Aldeman said state legislators, having created inflexible systems that they must patch up when economic times get tough, should be getting the major flak from those concern about retirement benefit systems' health and fairness, not teachers.

"In most states, they've been the ones that have been the most regular contributors," Aldeman said of teachers.

CAC Media Clippings September 2, 2015

How a pension can cost you at Social Security time (USA Today, Money) 07-15-15 BY: Robert Powell, Special to USA TODAY

Q: I was a teacher for 30 years and contributed to the Chicago and Illinois teacher pension programs. I also worked summers in college and while teaching, and have fulfilled my 40 quarters. I retired from teaching in 1994 and now receive a pension from both the state of Illinois and the city of Chicago.

I applied for Social Security when I turned 62. At that time I was told I would only receive a small percentage of my "full" Social Security payments because I had pension payments from other government entities — the Chicago and Illinois pension systems.

But in talking to other retired teachers who are also eligible for — and receive — Social Security payments, none say they have restricted payments. All say they receive full payment of their Social Security. Was I given a bum steer way back when, or does Uncle Sam legitimately reduce Social Security payments for people receiving pensions from government entities? Walter Bock, Sun City West, Ariz.

A: You weren't give a bum steer. You're just paying the price, so to speak, of having a public pension.

According to Kurt Czarnowski, a principal with Czarnowski Consulting in Norfolk, Mass., there are two provisions of the Social Security Act that affect folks, like you, who receive a public pension based on work that was not covered under the Social Security system.

The first is the Windfall Elimination Provision (WEP), and the second is called Government Pension Offset (GPO).

The WEP affects someone who receives a public pension, but who, like you, also has worked under the Social Security system long enough to accumulate 40 Social Security quarters/credits. "The good news is that anyone who has accumulated 40 credits will absolutely collect 'something' each month from Social Security," says Czarnowski. "The bad news, though, is that, in all likelihood, this 'something' will not be as high as it would have been had the person not been collecting that public pension."

This, he says, is because the WEP requires the Social Security Administration (SSA) to use a different, and admittedly less generous, formula to calculate the amount of the person's benefit.

Now, under the WEP, the more time that someone has worked under Social Security, the less of an impact the public pension has on the calculation of the benefit, says Czarnowski. "In fact, if someone has accumulated 30 years of 'substantial earnings' under Social Security, he/she will receive a full monthly benefit in addition to the public pension."

This, says Czarnowski, may very well be what you encountered in talking with other retired teachers. "His colleagues may have accumulated 30 years of substantial earnings, so that they are exempt from the WEP," he says.

The Government Pension Offset (GPO for short) affects anyone who collects that public pension but is looking to collect monthly Social Security benefits based on the work and

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earnings of his/her spouse, that is as a spouse, divorced spouse or widow(er), says Czarnowski.

GPO requires Social Security to reduce any spousal, divorced spousal or survivor benefit by two-thirds of the amount of the person's public pension. Thus, if two-thirds of someone's public pension is more than what he/she could collect from a spouse, then there are no spousal, divorced spousal or survivor benefits due.

Of note, not all teachers and other public employees are affected by the WEP and/or GPO. "They only come in to play when the public pension is based on work which was not covered under Social Security," says Czarnowski.

Learn more about WEP and GPO at http://www.socialsecurity.gov/planners/retire/gpo-wep.html.

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch.

CAC Media Clippings September 2, 2015

CalSTRS investments earn 4.8 percent profit (The Sacramento Bee, Business & Real Estate) 07-17-15 BY: Dale Kasler *Note CalSTRS Staff Quoted

The red-hot financial markets have cooled in the past year, and California’s pension funds are paying the price.

CalSTRS said Friday it earned 4.8 percent profit on its investment portfolio in the just-ended fiscal year, its lowest gain in three years. The results fell short of the teachers’ pension fund’s target of 7.5 percent, and come as CalSTRS is still working to get back on its feet financially after the 2008 crash. CalSTRS earned 18.7 percent a year earlier.

The CalSTRS investment figures were released four days after CalPERS reported similarly weak results of 2.4 percent. The two pension funds’ difficult year could strengthen political arguments for those seeking a statewide ballot initiative to overhaul the public pension systems.

The market crash of 2008 left CalSTRS significantly underfunded and prompted the Legislature last year to approve a financial rescue package designed to gradually erase the funding gap. School districts, the state and teachers themselves will pay billions more each year to shore up the finances of the California State Teachers’ Retirement System.

CalSTRS reported in April that it is 68.5 percent funded. While it has enough cash to meet its pension needs for the foreseeable future, it has only 68.5 cents for every dollar of long-term obligations.

Despite the disappointing investment results, CalSTRS said there was no reason to panic. “Thinking beyond the short term is the cornerstone to the success of a large, mature pension system like CalSTRS, and the current year’s performance will not adversely impact the long- term financial health of the system,” said CalSTRS Chief Executive Jack Ehnes in a prepared statement. “Coupling realistic long-term investment returns with the gradual, sensible and fair funding plan enacted by the governor and the Legislature last year best serves our member- educators.”

The chief culprit in the latest investment results: the stock market, which posted modest gains. CalSTRS earned just 3.1 percent on its stocks in the 2014-15 fiscal year. Its biggest gainer was its real estate holdings, which earned 13.4 percent.

“It’s important to keep in mind that our investment horizon is 30 years and that any single year’s over- or under-performance will not make or break us,” said CalSTRS Chief Investment Officer Chris Ailman in a prepared statement. “The six-year bull market is admittedly long in the tooth, and since the majority of our assets are in stocks, our portfolio will reflect that larger reality.”

CalSTRS’ total portfolio comes to $191.4 billion.

CAC Media Clippings September 2, 2015

Steyer and de León: A friendship that may change the state (The Bakersfield Californian, News) 07-19-15 BY: Laurel Rosenhall, CALmatters

One of them grew up in the barrio of San Diego, the son of an immigrant maid who struggled to pay the rent. The other was raised in one of the nation’s most exclusive zip codes, the youngest son of a New York City lawyer.

Their lives diverged for decades. The boy who spent his childhood along the Mexican border dropped out of college and went to work advocating for immigrants and teacher unions. The kid from New York’s Upper East Side graduated from Yale and Stanford, and then started an investment firm in San Francisco.

Today, one is among California’s most powerful politicians, the other is a billionaire. And they have built a friendship that may shape the future of the state.

Kevin de León, leader of the California Senate, and Tom Steyer, a former hedge fund manager, have joined forces around their shared desire to fight global warming. After working together to pass an energy-efficiency ballot measure in 2012, they are teaming up this year to push for legislation that would reduce California’s greenhouse gas emissions and shift the economy away from oil and gas.

Both men are lifelong Democrats, but came to environmentalism later in life and from different starting points — de León, 48, from a focus on justice, Steyer, 58, from a belief in God.

“We share the same goals together,” said de León, D-Los Angeles. “And we continue to be supportive of each other because this is an issue we care deeply about.”

A PRINCELY SUM Steyer, a major donor to Democrats nationwide, is pouring money into the California Capitol, and de León is introducing bills that echo Steyer’s environmental agenda. This kind of coalescence is common in American politics, where campaign spending gives some advocates an outsized voice, said Jessica Levinson, a professor at Loyola Law School who sits on the Los Angeles Ethics Commission.

“This is the story of politicians and their benefactors,” she said. “It doesn’t mean that it’s nefarious... This is just the way it is. You get meetings and people pay attention because you can write checks that have a lot of zeros.”

Steyer has spent more than $39 million on California political campaigns in the last 15 years, the bulk of it on two climate-change related ballot measures. In the last year, however, his spending reveals a greater focus on who gets elected to the statehouse. In 2014, Steyer gave $1.3 million to Democrats’ legislative campaign efforts and gave the maximum allowable donation to Gov. Jerry Brown’s re-election campaign. An ally of organized labor, he donated $150,000 this year to a union-backed committee that tried unsuccessfully to sway a state Senate race.

Last year, Steyer’s nonprofit advocacy group, Next Gen Climate Action, registered to lobby in California. The group has run ads supporting de León’s Senate Bill 350, which calls on the state to cut petroleum use in half, increase the use of wind and solar power to create electricity, and

CAC Media Clippings September 2, 2015

boost energy efficiency in buildings. Steyer himself is lobbying for the legislation, too, both in public testimony and in private meetings with lawmakers.

He’s also working on other bodies of power. In June, he urged the state teachers’ retirement fund to consider shifting investments away from fossil fuels, and toward clean sources of power. A similar idea is housed in de León’s SB 185, which would require the state’s public retirement systems to divest from coal.

“I have talked to Kevin over the years about a bunch of things, but I think he deserves all the credit for coming up with those specific bills,” said Steyer. “We’ve talked about all the topics, but those are really his.”

While Steyer’s spending is princely, it is dwarfed by the money his political enemies in the oil industry pour into California politics. The industry’s main advocacy group in Sacramento spent $8.9 million lobbying last year — far more than any other group. And a half-dozen leading oil companies last year poured $13.8 million into political campaigns in the state.

HITTING IT OFF The relationship between de León and Steyer began in 2011 when Steyer spoke to a Senate Democrats policy meeting in Sacramento. They exchanged cards, de León said, and “hit it off because we had the same goals: economic growth, job creation, and cleaning up our environment.”

Those were major themes in their joint campaign for Proposition 39 in 2012, which Steyer funded with $30 million. The measure made a change to California’s corporate tax formula that de León had been unable to get through the Legislature, and devoted the new money to energy efficiency upgrades in public schools.

De León, who finished college at age 36, said he had little interest in climate change early in his political career. He came to the issue after realizing that poor people suffer from “inequities in the environmental space.” His first bill as a legislator allocated bond money to build parks in underserved neighborhoods. Three years ago, de León carried a bill that requires spending 25 percent of the money generated by California’s cap and trade auctions to benefit disadvantaged communities.

This year, in appearances around the state, de León is working to make an issue usually associated with elite coastal communities relevant in working-class and Latino neighborhoods. At an event highlighting state funding for rooftop solar panels, he talked with Spanish-language media about the health benefits of drawing electricity from “el poder del sol.” And in a speech to Latino community organizers, he said his clean energy proposal would create “real jobs for our community.”

A defining moment in de León’s political evolution came in 1994, when he helped organize a massive Los Angeles protest against Proposition 187. The measure — ultimately ruled unconstitutional — blocked undocumented immigrants from public services, including health care and education. De León and his then-girlfriend marched with their baby daughter in a stroller.

Steyer, at that time, was running Farallon Capital Management in San Francisco. He and his wife had three children and another one on the way. Steyer says he opposed the anti-

CAC Media Clippings September 2, 2015 immigration ballot measure, but the focus of his attention then was on his business. Over time, he said, his concern about climate change grew with his Christian faith.

“I became more religious, and so I started to look at the world from the point of view of, ‘What are we doing in terms of stewarding creation for everyone in the world and for all living creatures?’” said Steyer, who routinely inks the sign of the cross on his hand with a ballpoint pen and has signed a pledge to donate more than half his wealth to charity.

CONFLICTING VIEWS The relationship between de León and Steyer is both professional and personal, said former Assembly Speaker Fabian Núñez, a lifelong friend of de León’s who carried California’s landmark climate change bill in 2006. But Steyer’s influence on his friend is minimal, Núñez said.

“There’s no question in my mind that Kevin would continue to pursue all of the various efforts around improving the environment and climate change,” even without Steyer’s advocacy, Núñez said.

“No question.”

Steyer’s political combatants in the oil industry see the relationship differently. They say de León’s policies will benefit Steyer financially because of his investments in clean energy companies.

“It is a concern that a hedge fund billionaire who made his fortune off fossil fuels is now promoting policies that he can profit from,” said Sabrina Lockhart, spokeswoman for an industry coalition called Californians for Energy Independence.

The group formed to oppose Steyer’s effort to levy a tax on oil extraction. Steyer laughed at his opponents’ argument, saying if he was out to make money he would have stayed at the hedge fund he quit to devote himself to climate activism. Besides, Steyer said, in anticipation of such criticism, he set up all his clean energy investments so that the profit can only go to charity.

“It can never go back to me or my family,” he said.

In recent years Steyer and de León have appeared together at various environmental and political events, where, Steyer says, they enjoy cracking jokes and talking sports. De León has been a guest at the San Francisco home where Steyer and his wife Kathryn Taylor have hosted President Barack Obama and presidential candidate Hillary Clinton.

“When we go back home today in 2015, we go back home to two very different lives and two very different houses,” said de León, who never married or bought a home.

Where de León readily acknowledges differences between the friends, Steyer focuses on what they have in common.

“I don’t see this in any way as a strange friendship,” he said. “Kevin knows some stuff that I don’t know, which I’m very happy to understand. I know some stuff Kevin doesn’t know. And so I don’t view it as two different people; I think of it as two people who are worried about the same things, care about the same things, and are willing to work hard.”

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Which is exactly what they’re doing now.

CALmatters is a non-profit journalism venture dedicated to explaining California policies and politics.

CAC Media Clippings September 2, 2015

STATES, CITIES TO ASK SEC TO BEEF UP DISCLOSURES FOR PRIVATE-EQUITY FIRMS (The Wall Street Journal, Markets) 07-21-15 BY: Timothy Martin

About a dozen comptrollers, treasurers from around country sign letter to SEC demanding action

A group of states and cities said it intends to send a letter to the Securities and Exchange Commission late Tuesday asking for greater transparency and more frequent disclosures by private-equity funds.

Around a dozen comptrollers and treasurers from New York to California want the SEC to demand private-equity funds make disclosures of fees and expenses more frequently than they do now, according to a copy of the letter reviewed by The Wall Street Journal.

Clearer and more consistent disclosures will give large retirement systems “a stronger negotiating position, ultimately resulting in more efficient investment options,” according to the letter.

Scrutiny over the fees charged by private-equity funds has ramped up in recent years, as investors are increasingly questioning the value provided by outside money managers. The spotlight over private-equity costs has been particularly intense at public pensions, which invest taxpayer dollars, as retirement systems deal with budget gaps worsened by the 2008 financial crisis.

The SEC last year accused private-equity firms of charging “hidden fees” to investors in its funds and raising concerns over the lack of adequate disclosures. A SEC spokesman didn’t immediately respond to a request for comment about the new request from states and cities.

The list of signatures on a copy of the letter reviewed by The Wall Street Journal includes Thomas P. DiNapoli and Scott M. Stringer, the comptrollers of New York state and New York City, respectively. It also includes signatures from treasurers or comptrollers from Rhode Island, South Carolina and Washington, D.C.

“It’s time to take the detective work out of how private equity managers report their fees,” Mr. Stringer said in a statement.

Some large state retirement systems have admitted they don’t have a full grasp over the costs of their private-equity investments. The nation’s largest pension fund by assets, the California Public Employees’ Retirement System, said in April it couldn’t track all of the performance fees attributed to private-equity investments.

In response, Calpers, as the pension is known, said it would conduct a report to calculate those unknown fees by August. California State Treasurer John Chiang, a Calpers board member, said the Calpers staff is “working to identify the core problem in order to move towards greater transparency.”

Large state retirement systems had 10.1% of their assets invested in private equity last year, more than tripling their allocation since 2000, according to Wilshire Consulting, which tracks pension investments.

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Some buyout firms have agreed to deeper concessions with investors like public-pension plans for newer funds.

CAC Media Clippings September 2, 2015

The Retirement Expert Who Got Death Threats for Her Ideas (BloombergBusiness, News) 08-05-15 The New School's Teresa Ghilarducci on mandated savings, risk aversion, and avoiding fees BY: Carla Fried

Retirement policy wonks don't usually get hate mail. But in 2008, Teresa Ghilarducci, an economics professor at the New School for Social Research, proposed replacing 401(k) plans and their income tax break with a mandated government savings plan for all workers. The blowback was so intense that the school's chief of security gave her his cell phone number.

The plan called for mandatory savings of 5 percent of salary, with the government handling all investment decisions, guaranteeing a rate of return above inflation, and ultimately paying out the retirement money in a lifelong annuity. It's pretty radical. Conservatives hate it. She continues to advocate for it, though she won't comment on whether she has discussed it as one of the cadre of economists advising Hillary Clinton in her presidential bid.

Ghilarducci knows her own retirement plan is on track because, unlike today's savers in 401(k)s, she was forced to save, and save a lot from the start of her career. Just out of grad school at the University of California at Berkeley, she landed an assistant professorship at Notre Dame. The university's retirement plan is a 403(b), cousin to the 401(k) defined-contribution savings plan. It came with a crucial twist that has made all the difference to her retirement security: Participation was mandatory. You had to put in 5 percent of your salary, and Notre Dame kicked in another 10 percent.

That 15 percent savings rate is about three times what an unsuspecting millennial today will save in a 401(k). The typical salary deferral rate when new employees are automatically enrolled in plans is 3 percent, and if there is a company match, it might be half of that rate. It is extremely rare in the land of 401(k)s to find an employer doubling the contribution of the employee, let alone at a 10 percent rate.

“I was a stupid 26-year-old who was simply the recipient of a great deal," said Ghilarducci, 57, who in 2008 moved to the New School, where she is a professor of economic policy analysis. She said her approach to investing the money was one many economists would have taken ("we’re typically very risk-averse”). She put one-third in stocks, one-third in bonds, and one-third in fixed annuities. “I was aware at a young age that how much I saved was far more important than exactly how I allocated it..." she said. "But that’s what saving more buys you — the ability to not have to take as much risk.”

She lucked into another boon. Her annuities were offered through TIAA-CREF, a low-cost provider of annuities and investment funds for the academic world. Participants in the company's fixed annuities have seen their accounts grow at a risk-free 4 percent annual rate over the past decade.

Ghilarducci also has a simplified employee pension plan, or SEP-IRA, with TIAA-CREF. She funds that with self-employment income from her consulting work and books. (Her next book, "How to Retire With Enough Money — And How to Know What Enough Is," is due out next year; she has written or edited six others.) That pot is 40 percent in stock index funds and 60 percent in a core bond index.

Ghilarducci's second husband, Richard McGahey, 64, whom she married in 2013, was a professor at the New School until recently. This month he begins work at the Institute for New

CAC Media Clippings September 2, 2015

Economic Thinking, established after the financial crisis with funding from George Soros. The couple's melding of assets is "pretty typical stuff" for people who were both previously married, each with a child from the earlier marriage, she said. They view "each other's assets as each other's assets," and if one of them dies an untimely death, the assets each accumulated before their marriage will be inherited by each of their children.

Ghilarducci said if she didn’t have access to TIAA-CREF she’d park her money in Vanguard index funds. “It's against my religion to invest in actively managed funds. I suspected they were fishy when I was younger, and now we have plenty of evidence that passive [investing] is better,” she said.

About 15 years ago, Ghilarducci started to focus on getting to retirement in fighting shape. “It was a pure money play,” she said. “I lost some weight and am devoted to my seven-minute workout app and weight training at the gym." It’s not about vanity, she said, "but the money I hope to save if I can avoid illnesses such as diabetes and osteoporosis.”

After doing some intensive research on long-term care insurance, she decided to pass. She cites the high premiums on the policies and new research that suggests that budget-busting extended care will be needed by fewer elderly people than previously thought. “Pushing for Medicare to expand to cover long-term care is my best bet, and honestly, it’s everyone’s best bet,” she said.

Many retirement experts and myriad online tools suggest aiming for retirement income that can replace 70 to 80 percent of your pre-retirement income. Ghilarducci, who has based her plan on living until 92, is out to replace 100 percent. “I anticipate an older me will be more fragile and more tired,” she said. "Cleaning the house or walking home after dinner might not be in the cards. I’m concerned that the 80-year-old me will need a fully escorted life where I pay for services I don’t need today.”

Ghilarducci won’t say just when she plans to retire, because “nobody should ever signal to an employer their retirement plans.” She knows not everyone is in her position. As a tenured professor, “10 years from now I can choose the pace and content of my work.” Outside of academia, she doesn't assume many people can make up for a savings shortfall by working longer, calling it a “fantasy world.” She notes that illness and layoffs—and new jobs after layoffs at much lower salaries—often come into play.

What isn’t as clear is where she and McGahey will live in retirement. They currently live in Newport, N.J., a quick ride across the Hudson River to New York. The high cost of everything in the New York metro area, and particularly health care, is a worry. Ghilarducci said they have begun to talk with friends, only half jokingly, about some sort of communal-living arrangement in which they can all support each other and have access to services. Before she and her husband decide where to settle down, though, they want to see where their respective kids, both 25, wind up living.

In the meantime, she'll keep saving, and advocating for what she has called "a rescue plan for the American retirement income security system."

(An earlier version of this story suggested the death threats came from Tea Partyers. While Ghilarducci's proposal drew harsh criticism from the right, it isn't clear who sent the threats.) Ballot measure would threaten educators’ pensions* (Capital Weekly blog) 08-06-15 http://capitolweekly.net/pensions-ballot-risk-calstrs-public-teachers

CAC Media Clippings September 2, 2015

*NOTE blog is penned by Asm. Rob Bonta

The retirement security of California’s retired, current, and future teachers and the stability of the state’s pension fund for educators would be put at risk if a ballot measure addressing those issues is approved by California voters next November, according to an internal analysis by CalSTRS that I requested as chairman of the Assembly’s Committee on Public Employees, Retirement, and Social Security.

The Legislative Analyst said this measure would cause “significant uncertainty.” But what is certain is that it would undermine the retirement security of our state’s current and future teachers, particularly women. At a time when there already is a crisis in attracting and retaining teachers, this measure would be a major disincentive to attract our best and brightest to educate our children, and would cause irreparable harm to a system on which retirees and current teachers depend.

According to CalSTRS, “this measure would allow voters in a school district to change all of the terms and conditions of member’s benefits earned for future work, to increase their required contributions or to impose additional risks on the plan’s ability to achieve full funding.” This elimination of vested rights of current teachers will undermine retirement security and break promises made to teachers when they were hired.

The state currently has a single, unified statewide retirement plan for teachers that is administered by CalSTRS. The Legislature designed the plan to have uniform eligibility requirements, vesting rules, benefit formulas, contribution rates, retirement ages, and beneficiary and survivorship allows.

But the ballot measure, proposed by former San Diego city council member Carl DeMaio and former San Jose Mayor Chuck Reed, could result in the creation of up to 1,700 different retirement plans for teachers in the state, says CalSTRS. That would eliminate retirement security for teachers, who do not collect Social Security. It also might cause teachers to lose any retirement benefits they’ve earned if they transfer from one school district to another because the “portability” of benefits could be erased if different districts have different plans.

It also would put the funding of CalSTRS at risk. Last year, Governor Brown signed my Assembly Bill 1469, which put the state teachers pension fund on a sound, actuarially funded course with projected full funding in 2046. CalSTRS says it might also affect the tax-exempt status of the pension fund.

CalSTRS also notes that the Reed/DeMaio measure would hinder any new teachers from enrolling in CalSTRS. That would force state taxpayers to pay more to keep the systems solvent.

“An additional consequence is that CalSTRS’ cash flow would become increasingly negative, impacting CalSTRS’ investment decisions,” notes the analysis. The fund would have to change its investment strategy and cause taxpayer contributions to increase to cover lower expected returns.

CalSTRS also notes that the “impact of the measure would fall most heavily on women. Nearly 70 percent of CalSTRS’ members are women, many of whom interrupt their careers to raise families. Those who wish to do so likely would be deprived of their portable membership rights, since they will be treated as ‘new employees’ who will not be allowed to continue to participate

CAC Media Clippings September 2, 2015

in CalSTRS unless voters in the jurisdiction of their school district affirmatively act to permit their participation.”

Ed’s Note: Assemblyman Rob Bonta, an Alameda Democrat, chairs the Assembly’s public pensions and retirement committee, as well as the Assembly Health Committee.

CAC Media Clippings September 2, 2015

‘Big oil’ is not to blame for California’s gas woes (Lodi News-Sentinel, Opinion) 08-11-15 *Note CalSTRS mentioned

Old tricks are back in vogue again. Now that the public is wondering why California has the highest gas prices in the nation, some politicians and environmentalists are blaming “obscene profits” of “big oil.” I wish it were as simple as that, but unfortunately, the facts simply don’t bare this out.

Most oil companies are not the private property of “fat cats” but are publicly owned and traded on the New York/NASDAQ stock exchanges. Primary holders of stock are investment institutions and state pension funds, such as CalPERS and CalSTRS. Certainly, Ma and Pa next door have a few of their own common stock shares with these giants as well.

Oil company profits are reflected in stock prices. Because the U.S. markets are bumping up against all-time highs, Wall Street investors have been especially brutal to companies that miss their marks. During the last several months, energy companies have been severely punished with some shares dropping as much as 50 percent or more!

Take one of the largest, Chevron, for example. Its stock price for the last 52 weeks has gone from $130 per share to $85 — a loss of 35 percent. Conoco Phillips has dropped from $82 to $50 — a loss of 41 percent. Exxon has faired slightly better going from $100 to $77 per share — a drop of about 23 percent. As any savvy investor can tell you, these numbers are hardly examples of “obscene profits” but rather losses of actual and projected incomes.

If oil companies were free to manipulate prices and wanted to make tons of money, why wouldn’t they be doing this all over the country? Why wouldn’t stations sell gasoline in Texas and South Carolina for the average California price of $3.65 per gallon instead of $2.41 and $2.22 respectively?

The answer is simple. Other parts of the country don’t have the taxes and regulations that we do. Let’s take a look at a sample of gas taxes throughout America.

According to the American Petroleum Institute, California, at 60.75 cents per gallon, has the fourth highest gas taxes in the nation. We’re right behind Pennsylvania at 70 cents, New York at 65 cents and Hawaii at 64.5 cents. How do these fees affect prices at the pump? Here are the average prices-per-gallon for the last three states: Pennsylvania $2.69, New York $2.82 and Hawaii $3.25. Taxes in all four states partially contribute to gas prices of $.08 to $1.04 higher per gallon than the national average of $2.61.

Now let’s look at the gasoline taxes in Texas and South Carolina. For Texas, it’s 37 cents — a little more than half of California’s. For South Carolina, it’s 35 cents. It’s doesn’t take a mathematical whiz to realize that high taxes contribute to higher prices.

But this still doesn’t answer why California is head and shoulders above everyone else for the cost of retail gasoline.

None of the other states require special blends that add about 30 cents per gallon and limit refinery capacities. If Pennsylvania runs short, for example, they can borrow from any other state to make up the deficits. We can’t without special dispensations from the California Air Resources Board.

CAC Media Clippings September 2, 2015

Even then, we are a petroleum “island” and have no pipelines to receive supplies from other areas. California is the only state under the delusion that we can single-handedly affect global climate by our own cap-in-trade policies. Some experts claim this law, which went into effect on January 1, has already raised the cost of gas by 8 to 10 cents per gallon and could eventually raise prices by an additional 75 cents beyond what we see today!

I wish we could blame the oil companies for our woes, but reality tells a different story. If “Big Oil” were getting rich, as some are trying to claim, then my stock portfolio would be humming “Happy Days Are Here Again” instead of “Cry Me a River!”

Steve Hansen is a Lodi writer. Prices based on last week’s reported data.

CAC Media Clippings September 2, 2015

Count the bad ideas in California’s pension overhaul initiative* (Los Angeles Times, Business column) 08-15-15 BY: Michael Hiltzik *NOTE: Quotes from CalSTRS analysis.

Along with taxation and immigration, one political issue that never seems to go away is the cost of public employees, especially their pensions.

Public retirement plans are consistently blamed for local and state budget woes. Any time a community runs into fiscal trouble, its workers are among the first to be demonized, and often bear the brunt of the remedies. After all, pension obligations are typically among the largest liabilities any government entity must bear, so why not hack away?

In California, pension overhaul proposals have become a perennial feature of state and local ballot campaigns. Failed proposals were aimed at the statewide ballot twice in the last four years, and the proponents of the last effort, in 2014, have started the ball rolling for a new measure.

Like so many voter initiatives, the "Voter Empowerment Act of 2016"has a few reasonable- sounding nuggets buried within a landscape of bad ideas. Atty. Gen. Kamala D. Harris gave the measure its formal title and summary last week. So its proponents, former San Jose Mayor Chuck Reed, a Democrat, and former San Diego Councilman Carl DeMaio, a Republican, can shortly start collecting signatures to place it on the November 2016 ballot. As one can tell from their name for it, the measure will be pitched merely as a way to give taxpayers a direct vote on the pension plans of their public servants.

But there's much more to it than that. The Wall Street Journal described the measure as one that would "end defined-benefit pensions and save taxpayers billions of dollars." The measure would end defined benefit plans for new public employees as of Jan. 1, 2019, unless voters affirmatively continue them. But the second part of the phrase is arguable, as the cost of terminating plans could be high.

The Legislative Analyst's Office observes that cutting worker pensions also could mean that government bodies would have to raise wages to attract and keep qualified employees. Depending on the ultimate retirement packages, government employers could end up on the hook for Social Security, costing them as much as 6.2% of payroll.

The legislative analyst and Harris say the measure could undermine or even nullify the "California Rule," a collection of court rulings guaranteeing that pension benefits can't be reduced after an employee is hired. That's a major change that could deprive the measure lots of public support. Reed says it's untrue. The measure "doesn't affect the benefits of current employees at all," he told me. Yet as is pointed out by critics representing public employees, the measure gives voters the right to determine "the amount of and manner in which compensation and retirement benefits are provided." It explicitly protects only benefits earned for "work performed," implying that benefits based on futurework of current government employees, starting as soon as the day after a vote, could be cut.

The giant California Public Employees' Retirement System and California State Teachers Retirement System, CalPERS and CalSTRS, both say the initiative would create immense administrative and financial uncertainties associated with closing standardized defined benefit

CAC Media Clippings September 2, 2015

plans to new workers and replacing them with — in CalSTRS' case — as many as 1,700 individual school district retirement plans with differing terms and benefits.

Who would gain from a shift of public pensions toward defined contribution plans? Wall Street, which could collect those fees from individual worker accounts rather than facing down increasingly cost-conscious pension funds. One of those sounding the alarm about the public pension "crisis" is billionaire investment impresario John Arnold, who backed Reed's 2014 initiative with $200,000. Asked whether Arnold would be involved this time around, Reed said, "I hope so." He estimates that an initiative campaign might cost $25 million. Who would lose? Government employees. When the Central Valley city of Stockton filed for bankruptcy in 2012, city workers were quickly blamed. One of Stockton's creditors, the investment firm Franklin Templeton, asserted that its employees had routinely "spiked" their salaries to make their "lavish benefits" even richer. The truth was that the average retiree received $24,000 a year and that the workers had sustained waves of furloughs, given up years of cost-of-living increases, and lost virtually all their retiree health benefits during the struggle to keep the city afloat.

One reliable rule of thumb about municipal fiscal crises is that wherever you find a large retirement liability, you can be sure that the rot originates much deeper. In Stockton, it encompassed ill-advised investments in downtown amenities, as well as a costly pension debt refinancing into which the city was snookered by the ill-starred investment firm Lehman Bros. Similarly, the 2012 bankruptcy of the city of San Bernardino reflected the housing bubble and crash, along with fiscal mismanagement that included years of allegedly faked books. The statewide pension shortfall likewise flowed from the top down. When state pension funds fattened up on rich stock market returns in the 1990s, lawmakers bestowed retroactive pension increases on state workers, while CalPERS and the other major public pension funds gifted government employers with contribution "holidays." CalPERS told the Legislature that these arrangements would be almost cost-free, thanks to "the booming stock market." But when the markets crashed, the pension funds landed deeper in the hole than anyone had anticipated.

Some critics undoubtedly will blame state public worker unions and their stranglehold on Democratic office holders, but, alas, these were bipartisan blunders; 22 Republicans in the Assembly and all 15 GOP senatorsvoted for the retroactive sweeteners. Reed, to his credit, isn't among those suffering political amnesia. "Employees didn't cause these problems," he told me. "Elected officials drove us off the cliff."

The burden of making up for their mistakes is borne by employees — especially newly hired workers, who are relegated in almost every pension "reform" to a lower-cost second-tier retirement system with skimpier benefits than their seniors. That's the remedy embodied in a 2013 statute that instituted less-generous pensions for new employees and raised their contributions to at least half the costs of their pensions. The Legislature also barred retroactive benefit hikes and set CalSTRS on course to eliminate its entire unfunded liability over the next 30 years.

The initiative from Reed and DiMaio allows voters to enact even more stringent pension plans. Reed says he's confident that the "public isn't interested in punishing employees," so voters will be judicious about making pensions too cheap. We'll see.

If the initiative makes it to next year's ballot, expect the airwaves to fill up with images of retired cops, firefighters and teachers enjoying round-the-world vacations while you, the taxpayer, struggle to make ends meet. Initiative campaigns are extremely vulnerable to exaggeration and

CAC Media Clippings September 2, 2015 demagoguery. So is the topic of public employee pensions. Put them together, and the result might be ugly indeed.

CAC Media Clippings September 2, 2015

Watchdog: Proposed ballot measure could save money on pensions, but at what cost?* (OC Register, Watchdog column) 08-17-15 BY: Teri Sforza *NOTE: CalSTRS’ analysis quoted.

A controversial reform measure headed for the 2016 ballot could cut public pension costs by giving taxpayers a say on retirement plans – but it could upend collective bargaining in the process, according to several analyses.

The “Voter Empowerment Act,” as backers call it, got a rather dry official title and summary from the attorney general last week: “Public employees. Pension and retiree healthcare benefits. Initiative Constitutional Amendment.” It’s now being poll-tested before official signature- gathering begins, probably within a week or so. Supporters need 585,000 signatures to qualify the measure for the ballot.

What it would actually do is a matter of blistering and contradictory rhetoric, which will grow more bombastic as the November 2016 election approaches.

Backers say it would require voters to approve guaranteed pension benefits for new workers, as well as benefit increases for current ones. Opponents say it would eviscerate collective bargaining, gut public pensions and obliterate guaranteed retirements across the board.

To steady ourselves, we turn to an analysis by the nonpartisan Legislative Analyst’s Office. It concluded that the measure would, indeed, make significant changes that could profoundly affect the collective bargaining process.

It also would produce “likely large savings in public retirement and health-care costs” as voters opt to reduce or eliminate guaranteed-payout pension plans (“defined benefits,” in the official parlance) in favor of 401(k)-type programs; as well as “significant savings to provide retiree health benefits” by requiring new workers to pay half the costs that now fall solely on governments.

There are several wild cards.

“The fiscal effects of this measure would depend heavily on how voters exercise their powers,” the LAO said. “Granting voters these powers could result in compensation packages that are very different than what would have been created through existing processes.”

The effects on collective bargaining could be dramatic. And due to the less-generous retirement benefits that would likely emerge, governments would face pressure to increase other elements of compensation to attract and retain workers.

Attorney General Kamala Harris released the summary that would appear on the ballot itself last week, concluding that the initiative “eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including those working in K-12 schools, higher education, hospitals, and police protection, for future work performed.”

Harris’s summary incorporates the LAO’s conclusion that there’d be “significant effects – savings and costs ... The magnitude and timing of these effects would depend heavily on future decisions made by voters, governmental employers, and the courts.”

CAC Media Clippings September 2, 2015

Neither side much liked Harris’s summary.

Backers said it’s wrong, and the measure won’t change benefits that public workers currently possess; opponents bemoaned that Harris failed to specifically mention the “teachers, nurses, police and firefighters” who would be affected by it.

The state’s largest pension systems are weighing in, warning of administrative and fiscal chaos.

“The most immediate administrative impact ... would be the closing of all CalPERS defined benefit plans to new employees as of Jan. 1, 2019,” said Anne Stausboll, CEO of the California Public Employees’ Retirement System, in a letter to legislators last week. Pension reforms that took effect in 2013 reduced retirement formulas for new hires and raised the age at which they can retire.

“Closing these plans would present huge administrative challenges, requiring new investment strategies and actuarial assumptions,” Stausboll warned.

The California State Teachers’ Retirement System – a separate entity – said the measure could throw the system’s funding dangerously out of whack.

“To the extent that new employees are not allowed to enroll in the current defined benefit plan, the fiscal and demographic assumptions on which contribution rates were premised...will no longer be accurate,” CalSTRS said. This would require more money from both employers and employees to keep the system afloat.

Dave Low, chair of Californians for Retirement Security, a coalition of public labor unions, called the effort “a Tea Party-backed measure” and “a back-door way of repealing Constitutionally- vested and promised rights to retirement security and health care” that breaks contracts negotiated through collective bargaining.

“This type of extreme measure will be unacceptable to California voters and is doomed to fail,” Low said in a prepared statement.

Backers of the measure disagree.

“We’ve done the research to give us great confidence that voters will see past the lies from politicians and efforts by unions to mislead them,” said Carl DeMaio, former Republican city councilman in San Diego.

“This measure takes away a huge power politicians have used to generate support from labor unions to fund their political campaigns. We’re eliminating the backroom deals. All this does is give taxpayers a seat at the table – they’ll have the final say.”

Sweetened, retroactive retirement formulas granted by politicians in the early 2000s are one of the biggest reasons the gap between what public agencies owe employees to date for retirement benefits and what they actually have grew from $6.3 billion to $198.2 billion between 2003 and 2013.

That hole must be filled with meatier investment earnings and heftier contributions from public workers and employers or increased payments by taxpayers.

CAC Media Clippings September 2, 2015

Op-Ed Bill McKibben: Being carbon-foolish cost CalPERS and CalSTRS $5 billion (LA Times, Commentary) 08-18-15

First they ignore you, then they laugh at you, and then they lose a truckload of money.

For three years now, a fossil fuel divestment campaign has been gaining traction around the world. Those that have begun selling their fossil fuel holdings include France's largest insurance company, Oxford University and the nearly $900-billion Norwegian sovereign wealth fund. Many California institutions have joined in, including Stanford University, Pitzer College, San Francisco State University, De Anza Community College — even the Santa Clara Valley Water District, which serves Silicon Valley.

But the really big money in California — the pension funds CalPERS and CalSTRS — have stayed on the sidelines.

The California Public Employees' Retirement System and the California State Teachers' Retirement System styled themselves savvy investors that didn't want to make decisions based on mere morality, spurning the argument that it was time to stop investing in companies searching for yet more hydrocarbons. Instead, the funds promised to "engage" with those companies to change them.

How has that strategy worked so far? On Monday, the federal government gave Royal Dutch Shell the final permits it needs to drill in the Arctic for the first time in 20 years. And a new report shows that those savvy investors managed to lose their clients — the state's pensioners — $5 billion in its oil and gas portfolios last year.

We at 350.org commissioned the analysis because we had an inkling of what it would show: Had CalPERS and CalSTRS listened to the scientists and the college kids, retired cops and teachers who sought divestment and gotten out of coal before it collapsed, they would have avoided those shocking losses.

As the head of Trillium Asset Management, which performed the analysis, said, "This is a material loss of money, which directly impacts the strength of the pension fund."

This loss won't bankrupt the pension funds, which still gained overall because the rest of the market went up so sharply. But even for a rich state, $5 billion is real money.

The divestment campaign began early this decade when British financial analysts published data showing that the fossil fuel industry had as much as five times as much carbon in its reserves as scientists said the planet could burn if it had any hope of staying below a 2-degree Celsius rise in global temperature — the one red line that governments, including our own, have drawn in decades of international climate negotiations. The math makes it clear that if Exxon and Chevron and their ilk follow their business plans, the planet tanks.

A morally minded investor, looking at those numbers, might say, "If it's wrong to wreck the planet, it's wrong to profit from the wreckage." Accordingly, the United Church of Christ, the Episcopalians and the Unitarians have all begun divesting.

A harder-headed investor might say, "If I sell, someone else will buy the stock, so who cares?" The answer, campaigners have stressed, is that selling stock exerts both political and indirect financial pressure on these companies.

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And in fact the World Bank, the Bank of England, Deutsche Bank and others have warned about a "carbon bubble." Even Peabody Energy Corp., the world's largest private sector coal company, in its last annual report, told investors that divestment campaigns "may adversely affect the demand for and price of securities issued by us, and impact our access to the capital and financial markets." (The corporation's stock, by the way, which sold at $72 four years ago, closed Monday at $1.18.)

A practical investor might say, "These scientists are bringing me new information, knowledge that isn't yet fully priced into these investments. If we can't safely burn all that coal and oil and gas, perhaps we won't burn it. Maybe world leaders will start to restrict the use of carbon." And, indeed, they have begun to do so in the run-up to this year's big Paris climate conference.

So far, it's the divestment-minded investors that have come out on top financially. In fact, over the last five years, fossil-free index funds have outperformed the broader market by 1.2%.

It's too late for California's funds to avoid taking at least a little bath. But state Senate President Pro Tem Kevin de Léon's SB 185 — part of a larger climate change package — would divest the state from coal stocks and at least get California on the right track.

And the bill's proponents have been reasonable, asking only that the two pension funds announce their intention to divest from fossil fuels and then take five years to sell their holdings. No one wants them to hold a fire sale in a market trough.

We need our biggest, richest institutions to play their part — if not just to be ethical, then because they're committed to protecting their clients' assets.

Bill McKibben is the founder of the global climate campaign 350.org and a professor of environmental studies at Middlebury College.