While California continues to reel from the recession caused by Wall Street and big banks, some politicians and special interest groups are blaming teachers, firefighters, peace officers, and other public employees for the state's budget woes.
But as Los Angeles Times columnist George Skelton notes: "Let's be clear: State employee pensions are not to blame for Sacramento's budget deficit. Not by any math."
Yet as CEO salaries soar, there are new efforts underway to undermine the retirement security of millions of middle class Californians, financed by out-of-state interests and right-wing zealots.
Here's some information on these scapegoaters and the political motivation behind their attempts to attack public employees.
Assemblyman Tim Donnelly
Republican Assemblyman Tim Donnelly represents the extreme right wing – the true face of pension "reform." A proud Tea Party member and border patrol "Minuteman," he introduced legislation that would severely hurt retirement security for firefighters, peace officers and others who log overtime providing public safety (Assembly Bill 875).
Now a Republican for governor, Donnelly hosted a right-wing radio talk show where he exhibits behavior that can be seen in videos like these: https://www.youtube.com/watch?v=4jkLIQWub4k, where he attacks those who serve the public as "feeding at the trough." He cites $100,000 pensions – when less than 2 percent of California pension recipients have pensions of that size (the average is $31,000).
He has proposed a two-tier system of retirement benefits, which would put billions of dollars back into the hands of Wall Street investors and big banks that caused our nation's financial crisis. He also advocates 401(k) plans – the same plans lost billions of dollars from the retirement accounts of hundreds of thousands of Californians.
Tell the wannabe governor you oppose his attempts to scapegoat public employees: Tim@ElectTimDonnelly.com.
Dan Pellissier: Minister of Propaganda
Dan Pellissier is president of California Pension Reform, a political group that refuses to reveal its contributors.1 The group is an offshoot of the California Foundation for Fiscal Responsibility, which is funded by a secret out-of-state billionaire's foundation.2
Pellissier has a long history of waging war on the retirement security of public employees. He served as chief consultant to California Assembly Republican Leader Scott Baugh, now a lobbyist who sits on the Foundation for Fiscal Responsibility's advisory board, and was chief of staff to former Assemblyman Keith Richman, who drafted a ballot initiative in 2005 that would have robbed the widows of firefighters and police officers of their pensions. Pellissier then went to work for the Schwarzenegger Administration, perhaps the most anti-public employee administration in recent California history.
And talk about the pot calling the kettle black: Pellissier has accumulated a significant pension that includes purchasing five years of "air time." When he turns 55 in five years, he will be collecting $5,000 per month3 – that's more than twice that of the typical state employee.
Most recently, Pellessier told LA's KNX radio that LA's finances would be the city would be like Detroit in 2 or 3 years -- which rightly drew a strong rebuke from newly-elected LA Mayor Eric Garcetti. Pellessier also told the station the only way to reduce pension costs was to "break the promise" made to existing public employees.
Pellissier has been the unofficial minister of propaganda for anti-pension forces. However, Pellissier's misinformation campaign is so out of whack with reality that CalPERS issued its own formal response correcting his error-filled statements: http://www.calpersresponds.com/issues.php/critic-pellissier-picture.
Pellissier also plans to file a ballot measure that will "freeze and then reduce pension benefits for current public employees." 4
1: Secretary of State's Office, 4/20/11
2: California Watch
3: Sacramento Bee, 3/27/11
4: California Taxpayers Association, 4/1/2011
David Crane was Governor Arnold Schwarzenegger's Special Advisor for Jobs and Economic Growth. That the state lost millions of jobs and had negative growth during his tenure should say it all about his credibility.
During that time, Crane became Schwarzenegger's Scapegoater-In-Chief. A multi-millionaire and former investment banker, Crane even was named a "rock star" by the ultra-right-wing "California Watchdog" website produced by the Pacific Research Institute for his public employee bashing.
Crane also is a lecturer at Stanford University and president of Govern for California, a supposedly nonpartisan government-reform group. He has penned dozens of anti-pension op-eds and served on slanted panels on public pensions. And now he’s bundling money for candidates supporting the weakening of retirement security.
In December 2010, he told the L.A. Times that the year 1978, "wasn't notable just because of Proposition 13. That was also the year public employees gained a power Franklin D. Roosevelt had warned against: collective bargaining rights."
"California hasn't been the same since," Crane continued. "Public workers have gained at the expense of private workers as government spending was redirected from infrastructure and education to higher salaries, pensions and other benefits."
According to critics, Crane is less a dyed-in-the-wool Democrat and more of a Bushocrat, an ultra-rich investor who supported G.W. Bush through two elections, and repeatedly frames the collective bargaining rights of government employees as an obstacle standing in the way of pension reform and budget balancing. Campaign finance records show that in March 1999, when Democrats were trying to hang onto the White House in the wake of Clinton's sex scandals, Crane gave $1,000 to Bush. And in June 2003, just three months after Bush invaded Iraq, Crane saw fit to give Bush another $2,000.
In 2008, Crane donated $7,200 to Republican Tom Campbell's unsuccessful 2010 bid for US Sen. Barbara Boxer's seat. And in San Francisco, Crane was one of several billionaires who wrote big fat checks in support of Measure B, which sought to curb the pension and health benefits of city workers, most of whom will make a fraction in their lifetime of what Crane rakes in each year from his widely diversified financial portfolio. Crane also has over $1 million invested in Acacia Partners, over $1 million in Bislett Partners, over $1 million in Kensico Partners, over $1 million in Semper Vic Partners, over $1 million in Berkshire Hathaway, whose CEO is Warren Buffet, over $1 million in the HCP Absolute Return Fund, whose Board includes Warren Hellman, and up to $1 million in Hall Capital Management, whose Board includes Hellman and Gap heir John Fisher. Crane also owns several million dollars stake in real estate investments, and has sizeable stock in Wells Fargo, Chesapeake Energy, Microsoft, Google, Pangloss Oil, Whole Foods Market, M&T Bank Corp., IBM, American Express, WalMart and Exxon.
And he gets income from Acacia Partners and Babcock & Brown, where he was a former partner from 1979 to 2003. While at Babcock, Crane reportedly brokered a controversial jet-lease deal between Arnold Schwarzenegger and Singapore Airlines that allowed Schwarzenegger to defer taxes on millions of dollars.
Crane clearly has his nest egg taken care of. It's a shame he's attacking hard-working middle class families who have earned theirs.
Read a blog post by Paul Weber of the Los Angeles Police Protection League on David Crane: http://www.californiaprogressreport.com/site/comment/reply/8853
Read a blog post by UC Employees on Crane: http://www.afscme3299.org/2011/03/10/sfbg-is-david-crane-just-another-kochhead/
Billionaire John Arnold
For years, the well-financed attacks on California's public employees were paid for by someone pension busters would only say was an "out of state billionaire."
But thanks to the investigative journalists at California Watch, the truth has finally been revealed. The funder: John Arnold, the founder of Houston-based hedge fund Centaurus Advisors and a former trader at Enron, the defunct energy company that ripped off Californians to the tune of tens of billions of dollars during the 2000 energy crisis.
Arnold amassed a personal fortune estimated at $3 billion running Centaurus, a natural gas trading hedge fund he established after leaving Enron shortly before it collapsed in 2001. According to Reuters, he closed Centaurus as natural gas prices hit a slump. He now is dedicating his time to running a non-profit "foundation" with his wife, Laura, which has spent about $10 million in the past two years backing pension rollback efforts in 25 jurisdictions. Denis Calabrese, a Republican political strategist and consultant to Texas Gov. Rick Perry, heads the foundation.
Arnold has refused to disclose how much money and which pension efforts he is bankrolling, However, his operation is believed to have been heavily involved in San Jose’s pension initiative, which is costing the city tens of thousands of dollars in legal fees. His group also is funding a Ventura County ballot measure that will rob current employees of the retirement security they signed up for in good faith.
Said Lowell Goodman, communications director for the southern California chapter of the Service Employees International Union: "It's the height of narcissism for a Texas billionaire who doesn't have to worry about his retirement to come into California and try to meddle with the secure retirement of working-class people."
Read more about Arnold’s attempts to influence PBS on its pension reporting here: http://www.latimes.com/business/hiltzik/la-fi-mh-how-pbs-soldr-20140217,0,7394121.story
Read California Watch's story, "Secret Out of State Donor Powering Pension Reform": http://californiawatch.org/dailyreport/secret-out-state-donor-powering-pension-reform-group-9534
Read more about Arnold and his efforts to destroy retirement security here: http://www.calwatchdog.com/2013/06/26/billionaire-texas-democrat-seeks-to-reform-ca-pensions/
California Foundation for Fiscal Responsibility
Fritz directs the California Foundation for Fiscal Responsibility. But is it even really a "foundation?"
Of course not. Its board of advisors aren't pension experts or academics. It includes a lobbyist, political consultant, a dealer in 401(k) plans, and anti-tax groups, including Jon Coupal of the Howard Jarvis Taxpayers Association, and Lew Uhler of the National Tax Limitation Committee. http://www.californiapensionreform.com/about/advisory-board/
Fritz also refuses to reveal who the secret backer of the "Foundation's" efforts is. According to a report by investigative journalists at California Watch, all we know is that it is an out-of-state billionaire.
Fritz is one of the state's leading Chicken Littles. Here's what she told conservative Wall Street Journal columnist John Fund: "The taxpayer as well as essential government services are being crushed by unsustainable pension obligations."
Nevermind that pensions account for just 4 percent of the state budget. Nevermind that the state pays less for retirement as a percentage of payroll today than it did in 1980, when Jerry Brown was last Governor. The situation was not a crisis in 1980 and it is not today.
The headline-grabbing Fritz also publishes a list she calls "The $100,000 Club," failing to mention that less than two percent of public employees earn pensions of that magnitude. Fritz says she is a Democrat. But you'd never know it. She refers to those protecting pensions using Republican rhetoric like "union bosses," http://articles.latimes.com/2011/jan/18/opinion/la-oe-fritz-pension-reform-20110118/3 has accepted awards from the Howard Jarvis Taxpayers Association, and runs "Pension Boot Camps" that have featured speakers such as right-wing California Congressman Devin Nunes.
To watch Fritz try to explain her organization and its backing, watch this video: http://www.youtube.com/watch?v=H8q06QkMmFY
In the last few years, San Jose Mayor Chuck Reed has become the face of pension bashing in California.
First he duped San Jose voters into approving Measure B in 2012, a measure that resulted in deep cuts to employee pensions. Why do we say duped? An investigation by NBC Bay Area found that Reed grossly exaggerated the scape of the city’s fiscal troubles by repeatedly claiming a retirement cost figure inflated $250 million more than the true value.1
Meanwhile, Reed's miscalculations also have cost residents of his city dearly. Reed has spent millions of dollars of taxpayer money to defend it in court, where many provisions of the measure have been ruled unconstitutional.2
Public employees, including police officers, left in droves after having their retirement security was slashed, leaving San Jose with a shortage of law enforcement and not enough recruits in the pipeline who are willing to put their lives on the line. The city has seen a homicide count north of 40 for the third consecutive year, the first time that has happened in over two decades.3 Investigations of "less serious" crimes like narcotics, vice, and burglaries have been neglected due to lack of police staffing.4
After his failures in San Jose, Reed now has set his sights on workers around the state of California. Although he failed to put it on this year’s ballot, his proposed statewide ballot initiative titled the “Pension Reform Act” does little reforming; instead, it eliminates the vested benefits rights for hard working public employees. The nonpartisan Legislative Analyst’s Office has already estimated the measure would cost state and local governments “billions of dollars.” 5 Not so money-saving after all. And it is opposed by Republican, Democratic, and nonpartisan mayors from throughout California.
Along the way, Reed has behaved in a manner that his constituents shouldn’t be too proud of. Reed was fined by the state’s political ethics board in 2013 for making improper contributions to the re-election campaign of one of his City Council allies.6 He’s set aside his real job serving the people of San Jose in favor of jetting around the country courting the likes of Congressman Paul Ryan and former Los Angeles mayor Richard Riordan. All the while, Reed has refused to name the sources of the dark money bankrolling his efforts, though we suspect the same group of conservative politicians and wealthy Wall Street types are behind the curtain.
Senator Mimi Walters
Is it any surprise the wealthiest member of the California Legislature has introduced the most bills to punish California's middle class and scapegoats public employees whenever she can, even though her family business rakes in millions from state taxpayers?
Walters says that "desperate times call for desperate measures" that include slashing middle class retirement benefits. But Walters refuses to support any increases on her fellow millionaires who continue to live high on the hog during tough economic times.
Walters has introduced a number of bills this legislative session to reduce retirement security for public employees. 1 2 She's also tried to derail the state's budget by saying she won't vote to balance the budget unless attempts are made to gut public employee pensions (despite the fact she'd never vote for the budget herself anyway). And finally, she is out to block negotiated state employee contracts – even though they contain major concessions by public employees.3
Appearing on Fox News (where else?), Walters said public employees are making more than private sector employees (wrong, private sector workers earn 4-8% more according to the most recent studies) and that gutting pensions would help solve the state's budget problems this year (also wrong; pensions are less than 4% of the state budget).
Read about Mimi's millions on her financial disclosure statement here: http://www.fppc.ca.gov/form700/2012/Legislature/Senate/R_Walters_Mimi.pdf
Tell Senator Walters you oppose her efforts to slash benefits for the middle class: http://district37.cssrc.us/content/my-offices
Daniel W. Hancock
Chairman, Little Hoover Commission
Chairman, Little Hoover Commission
For years, the Little Hoover Commission had a well-deserved reputation as a government watchdog that delivered the truth – and nothing but the truth – about issues facing the government. But as he exited Sacramento, Gov. Arnold Schwarzenegger stacked the Commission with political appointees who delivered a sloppy report full of unlawful and unconstitutional recommendations on the state's public pension system.1
Because Schwarzenegger's appointees are private sector business people with little or no knowledge of state government, the interests of pensioners weren't represented in the study; the commissioners are largely from industries that have tried to reduce labor costs and increase corporate profits by cutting employee pensions in the private sector. In fact, many of the recommendations are repackaged proposals from the same special interests who have been working to eliminate and reduce retirement benefits for public employees for years.
State Treasurer Bill Lockyer led the critics of the report, calling it "long on rhetoric and short on thoughtful analysis." He noted the report's main recommendation of cutting benefits for new hires "besides being legally dubious, has no foundation." 2
The CEO of CalSTRS also had harsh words for the report. "Our conclusion is that implementing the recommendations made in the report – even if it were possible to do – would likely weaken, rather than strengthen, retirement security for California's public educators," noted CalSTRS CEO Jack Ehnes." In fact, in some circumstances, the Commission's recommendations could increase the total cost of providing retirement benefits.3 The report makes many of the same misdiagnoses others have made of the cause of the financial problems faced by public pensions. These misdiagnoses lead to impractical recommendations, which may reduce the liabilities incurred by public pension plans, but do so at the expense of the retirement security of school educators and at increased cost to school employers."
Ehnes continues that "... it is time to move past the political rhetoric and focus on solutions that are truly responsive to the problems." Not only are there substantive legal weaknesses in the report, but it fails to convey the underlying drivers of this financial dilemma. The report opens with the assumption that underfunding is due primarily to "'overly generous benefit promises, wishful thinking and an unwillingness to plan prudently,' a premise that fails to reflect any recognition of the financial market's collapse and its underlying causes...The credibility of the report also suffers from broad generalizations that do not hold up when applied to specific plans."
CalPERS also blasted the loaded language of the report -- particularly that pension costs would "crush government" as a "gross exaggeration." CalPERS pension costs represented 1.8 percent of the State's $87.2 billion general fund budget in FY 2009-10. In comparison, the cost of debt service amounted to 5.3 percent of the general fund budget in the same year For every pension dollar paid over the last 20 years, 64 cents comes from investments, 21 cents from employers, and 15 cents from members. With its $230 billion in funds, CalPERS noted the report ignores its recent recovery of assets -- some $70 billion since the financial crisis.4 The fund had a 16.2 percent return in 2013 and 7.9 percent annual return over the last 20 years.5
- The average CalPERS pension is about $25,000 per year. Half of CalPERS retirees receive pensions of $18,000 per year or less.
- Public workers have saved taxpayers hundreds of millions of dollars by agreeing to concessions in more than 300 California counties, cities, and local districts.
- California pays less as a percentage of payroll for pensions today than it did in 1980.
- CalPERS reports a 12.2 percent return on investments in 2012 and an 8 percent average return over the past 20 years.
- CalPERS has earned back the $97 billion it lost during the recession and then-some. Meanwhile, CalSTRS' portfolio returned 13.45 percent for calendar year 2012.