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CSPP
Academic warns of pension obligations across state
I was saddened, but not surprised, to read that Joe Nation will be shutting down Pension Tracker on February 28, 2022. The following notice is now posted on their website:
“Pension Tracker will be shutting down operations on Feb. 28, 2022. We appreciate the opportunity to shine a light on the financial challenges raised by public employee pensions in all states, and in particular in California. We owe thanks to our advisors and financial supporters and to the thousands of Pension Tracker users who have used the sites we launched in 2013. If you’d like any additional information, please email joenation@stanford.edu.”
The article below, republished from the Half Moon Bay Review expresses much of the frustration I feel about hope for pension reform in California and most other states.
Citizens for Sustainable Pension Plans (CSPP) interviewed Marc Levine in 2011/12 when he first ran for the State Assembly. He assured us that he was aware of the 'problem' and vowed to address it if elected. He was elected, but he made no effort to initiate a conversation in the Legislature about reforming the public sector pension system.
Levine is now termed out in the Assembly and is seeking to replace Ricardo Lara as Insurance Commissioner.
Now, Damon Connolly is running to replace Marc Levine in the Assembly. In earlier discussions with Damon Connolly, when he first ran for supervisor in 2015, he showed an awareness of the problem and agreed that it needed addressing. We now know that after serving as District 1 supervisor since 2015, his discussions with CSPP were meaningless. Nothing has been mentioned, much less accomplished. Interestingly, his campaign donation site pictures him in front of a Marin County Fire truck. They also have been involved in his annual birthday barbeque fundraisers.
We admire many public employees, particularly safety employees, but feel strongly that politicians should not become beholden to them for funding their campaigns.
So another chapter closes. Throughout this pandemic, pension reform discussions have been largely off the table, even among the most ardent reformers. The reason, of course, is that Covid-19 took center stage and everything else was pushed aside. It allowed politicians to avoid the topic and to continue to take money from public sector unions and employees without much public notice.
This needs to change.
David Crane remains actively involved in reform efforts, so there is still hope.
HALF MOON BAY REVIEW
Academic warns of pension obligations across state
Hidden cost for public employees
After a decade of presenting information about pension system debt in California, the pension tracker website created by Stanford’s Joe Nation will shut down at the end of February. Nation believes that the website has helped draw attention to the problem and some reforms have been made, but pension liabilities remain an issue throughout the state.
While serving in the California Assembly from 2000-2006, Nation tried to focus public attention on pension liabilities, which he views as a looming problem for many cities, counties and special districts as well as the state itself. He says that when he left the Assembly, “there was almost no noise about this at all.” Nation is concerned that pension debt “is going to crash down at some point.” After completing his third term in the Assembly, he joined the public policy program at Stanford and began working on the website he hoped would make the rather abstract problem of pension liability more real for people.
“When you’re talking about an unfunded liability of a trillion dollars,” Nation explains, “people kind of just say, ‘Yeah, whatever. Is that a lot?’”
Nation and his team compiled 4 million data points and presented them on a pension tracker website in a way that he hopes enables people to grasp the magnitude of the issue.
“The idea was to take this somewhat abstract problem,” Nation says, “and bring it down to the local level. So that you could say, to take a real example, the city of Palo Alto has an unfunded liability per household of about $95,000. That’s real money. Even in Palo Alto, that’s real money.”
The website allows users to look up any city or district and see the amount of liability and specifically how much debt there is per household and per person in that system, and compare these amounts with other cities and districts throughout the state.
For example, in 2019 the value of pension assets held by the city of Pacifica was over $176 million. The amount of debt toward pension obligations was about $60 million, which is about $5,000 per household. That ranks Pacifica 129 out of 448 cities in the state.
Yet there is an additional consideration in the way these numbers are calculated that Nation hopes the website makes apparent. The pension funds typically plan on a growth in their assets of about 7 percent each year. That enables them to treat the amount of debt on $100 due to be paid next year as $93. Nation thinks 4 percent is a more accurate growth factor and notes that some economists would recommend putting it closer to 2 percent.
To illuminate the differences, the pension tracker site lists the numbers both in terms of the current market value of assets and liabilities, and “actuarial values” as calculated by the fund managers. For Pacifica the amount of debt jumps to $205 million and household debt to over $15,000 when calculated at actual market value.
Half Moon Bay stands in a better position than its neighbor to the north with liabilities under $9,000 per household, ranking 262 among California cities. A lower rank is preferable because it indicates less debt. “These are not horrible numbers for Half Moon Bay,” Nation observed. While the numbers might not be overwhelming for city residents, they do not include pension obligations accrued through other local agencies such as the Coastside Fire Protection District and San Mateo County Sheriff’s Office.
Asked whether the website has done its job, Nation says, “It was just about awareness. Obviously, we were hoping this would lead to additional reforms.” He believes pension debt is already harming localities.
“Cities and counties and special districts and school districts every year are having to pay a lot more in pensions,” he said. “They only have a pie that’s this big and that pension slice of the pie is getting bigger and bigger, which means the other slices are getting smaller.”