Talk about a rough couple of weeks for California taxpayers who wish for rational, principled government. On Monday, the board of the state Public 

October 29, 2021
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Dear John,

There’s much thrilling and terrifying California news out there right now. Consider Gavin Newsom’s autocratic extension of “emergency” authority ([link removed]) into 2022 — or his failure to attend last week’s climate hoedown in Glasgow so that he could celebrate the nuptials of an oil-bazillion-heiress in San Francisco. ([link removed])

We could update you on Sacramento’s ongoing fight ([link removed]) against parents who are (shock!) standing up for their own children.

I might even have asked you to examine the bizarre decision to rename L.A.’s Staple Center (The House that Kobe Built!)the funereal-sounding the Crypto.com Center. ([link removed]) “Crypto” is, of course, short for “crypto currency.” But seriously: “Crypt”? In a state governed by a death cult determined to drive the Golden State into an economic ditch and subject its citizens to oligarchic rule by progressive Democrats and their government union allies?

It’s too on the misshapen nose.

But this week, the most important story is one that — surprise — the mainstream media only barely considered because it deals with math: the decision of California’s government pension agency to admit publicly what it has known for years: they’re in trouble. Big trouble. The kind of trouble that brings down local, state and even national economies. The kind that drives up taxes and government borrowing, and leads to the elimination of the services that government ought to provide in favor of simply taxing us for the pleasure of walking on the ground and breathing air.

I know that the words “pension” and “CalPERS” are lke Ambien to most people. But you’re not most people. And the California Policy Center is not most organizations. We exist to tell you what’s really going on just beneath the surface of things.

And so I bring you my friend Chris Reed’s take on the story of the week. Read on.

"Talk about a rough couple of weeks for California taxpayers who wish for rational, principled government. On Monday, the board of the state Public Employees’ Retirement System – the nation’s largest government pension agency with $495 billion in assets – adopted a significantly riskier ([link removed]) investment strategy that involves borrowing and investing up to $25 billion in hopes of improving investment returns. Trustees also voted to increase by 62 percent the amount of funds in private equity funds that are notoriously volatile.

This can fairly be seen as an act of desperation by a pension agency that knows it is on an unsustainable path. Even after a sizzling21 percent ([link removed]) portfolio gain for the fiscal year that ended June 30 – nearly quadruple the average of the last 20 years – CalPERS is only about 70 percent funded.

A year ago, with interest rates at or near historic lows and the stock market so hot, such borrowing would have seemed safer. In November 2021, with inflation at 40-year-highs and the Federal Reserve Board dropping a string of hints that interest rates are going up, it hardly does now. And the assumption that the stock market will just keep booming indefinitely is daffy. In 2018, the market lost 6 percent ([link removed]) of its value for the year. And a war in Asia or a new pandemic or some other national crisis could send the Dow down 34 percent, as happened in 2008.
Support the California Policy Center. Donate Today. ([link removed])

Even before these ominous circumstances, some pension experts – like Stanford’s Joe Nation – have long thought that CalPERS has cooked ([link removed]) the books by using unrealistic medium- and long-term assumptions about its obligations to retirees.

Who appeared to agree with this premise in 2009? CalPERS’ then-chief actuary. At a seminar in Sacramento – unaware that a journalist ([link removed]) was present – Ron Seeling said, “I don’t want to sugarcoat anything. We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan [police and firefighters] … unsustainable pension costs. We’ve got to find some other solutions.”

What does “unsustainable” mean? That the state general fund may have to strongly supplement or even take over making the pension contributions for local governments that find themselves in particularly dire straits, starting with the city of Los Angeles ([link removed]) .

After Seeling’s remarks were posted, CalPERS’ attempts at damage control worked with some government union-allied Democrats – but not Jerry Brown. In 2012, the governor managed to win approval ([link removed]) of the California Public Employees’ Pension Reform Act (PEPRA). Brown oversold its importance. Yet it included modest reforms, ending some pension spiking tactics and limiting benefits for new hires.

But nine years later, incredibly, even that relatively good news could be rolled back. The PEPRA saga has a new twist that shows the extent of union clout not just in Sacramento but in Washington, D.C. Last week, the Biden administration informed Gov. Gavin Newsom that California was ineligible for about $12 billion in federal transit funds in the massive infrastructure bill that was recently approved and in the COVID-19 relief measure enacted in March.

Ignoring a series of legal decisions that protected PEPRA, Biden’s Labor Department now argues that PEPRA violates ([link removed]) a provision of the Urban Mass Transportation Act of 1964. That law prohibits federal grants to states that fail to preserve pension benefits and rights that were collectively bargained.

The Biden threat may be illusory. A 1981 U.S. Circuit Court of Appeals ruling held that Congress did not intend the 1964 law to be such a straightjacket on states, and Brown won decisively in federal court after the Obama administration tried to invoke the same law and withhold state transit funds in 2013. Trapped between his government union allies, his desire for federal transit funds, and California’s need for pension reform, Newsom made it plain in a bristling letter ([link removed]) to the Department of Labor that he will fight its ruling as strongly as possible.

The Department of Labor’s threat may also be kabuki – a way for the Biden administration to show solidarity with government unions.

But if a court fight ensues, without a preliminary injunction against the Labor Department, a long list of state and local projects could go on hold. And if Labor Secretary Marty Walsh doles out the dollars on a first-come, first-served basis to more favored states, the chance that California gets screwed out of at least some of the money it should have coming is real.

Just over a year ago, 64 percent ([link removed]) of the state’s 16-million plus voters provided more than one-fifth of the 270 electoral votes Biden needed to become president. This is the thanks they get?"

**Chris Reed is a contributing editor to California Policy Center, and an editorial writer and columnist for The San Diego Union-Tribune. You can follow him on Twitter @calwhine ([link removed]) .**

Quote of the Week

"The Covid-19 pandemic forced millions of students to learn at home. Many parents saw for the first time how ineffective traditional schools were at educating their kids," - Lance Izumi, Pacific Research Institute

More from CPC
* The Dumbing of America ([link removed]) : Larry Sands explains why our failing education system is leading us down a dangerous road.
* National Review’s Radio Free California Podcast: A Fast-Food Dictatorship of the Proletariat ([link removed]) : CPC President Will Swaim and board member David Bahnsen discuss the effort by CA Assemblymember Lorena Gonzalez, author of the infamous A.B. 5, to unionize fast-food workers by extraordinary means.


CPC and allies in the news
* Lance Izumi and Pacific Research Institute release new book, “The Homeschool Boom: Pandemic, Policies, and Possibilities” ([link removed])


Classroom headlines
* LAUSD attendance dips 2% as families participate in walkout against vaccines ([link removed])
* Public school boards against parents ([link removed])
* Placentia-Yorba Linda school board revise proposed ban on critical race theory topics ([link removed])
* Does Los Angeles Unified’s powerful school board contribute to leadership turnover? ([link removed])
* Families are using new Child Tax Credit for K-12 school costs, Census shows ([link removed])
* LAUSD ramps up efforts to get students vaccinated ([link removed])


Union news
* Emails show LA commissioner used influence to help win $3 million COVID-19 contract, union alleges ([link removed])

* Settlement requires union officials to refund all unconstitutionally taken money ([link removed])


Other things we’re reading
* OSHA suspends enforcement of employer vaccine mandate following Fifth Circuit Order ([link removed])
* California analyst predicts $31 billion budget surplus ([link removed])


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