CalPERS Responds to Its Critics

Last week, CalPERS did something unusual: It wrote a retort to its critics. In an article titled “Critics Pick Their Facts but Ignore the Truth,” CalPERS responded to two editorials in two different newspapers. CalPERS called the editorial writers “serial critics of defined benefit plans” who “selectively mine the facts so they can advance their anti-pension platforms.”

An editorial published in the Bay Area’s Mercury News, titled “How Did CalPERS Dig a $153 Billion Pension Hole?,” accused CalPERS of manipulating actuarial assumptions and methods to keep employer and employee contribution rates low in the short-term and amassing a huge funding deficit in the long-term. The article’s author, Dan Pellissier, is President of California Pension Reform. He contended that CalPERS should not have estimated a 10-year return of 7% when independent experts advised it to expect a 6.2% return.

CalPERS responded that it projects returns 60 years into the future; thus, its 7% figure is a blend of short-term, 10-year, and 60-year projections. It pointed out that since 1988 when the current CalPERS portfolio began, its returns have averaged 8.4% per year.

The Orange County Register editorial, “Losing Your Pension? CalPERS Wants to Shift Blame to Cities,” is by columnist Steven Greenhut, who authored a book about public employee unions called Plunder! The editorial concerns CalPERS’ proposal for a bill that would require agencies to notify their employees when they intend to exit the pension fund. Greenhut advised informing retirees and taxpayers about the size of the state’s pension debt and the “frighteningly low rate at which CalPERS is funded.” The editorial claimed that CalPERS was controlled by unions and that it negotiated with agencies like muggers negotiate with victims.

CalPERS retorted that, although it already notified affected retirees and employees when an agency tried to leave CalPERS, “we also believe that any employer making a decision that jeopardizes the retirement security of its current and past employees should tell them as well.” As to Greenhut’s argument “that we should disclose to members the unfunded liability, funding status, and other fiscal data related to the health of the Fund,” CalPERS curtly replied: “Newsflash: We do.” Then it described the many investment, actuarial, and financial reports it sent to employers and posted on its website.

Categories: Public Pensions


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