What They’re Saying

What They’re Saying – CalPERS

Jim Auck – Treasurer of the Corona Police Officers Association:

“We cannot afford to lose funding for law enforcement officers in exchange for a socially responsible investment policy.” (Sacramento Bee, Jul. 17, 2017)

“The CalPERS board has a fiduciary responsibility to the membership to deliver the best returns possible. While we don’t necessarily promote tobacco or some of the issues that they’re divesting from, they’re legal. Whatever is delivering the return they need, that’s where they need to put our money.” (Sacramento Bee, Jul. 17, 2017)

Joe Nation, Ph.D., Stanford Institute for Economic Policy Research, former Democratic member of the California state Assembly:

“Pension costs have crowded out and will likely to continue to crowd out resources needed for public assistance, welfare, recreation and libraries, health, public works, other social services, and in some cases, public safety.” (Stanford Institute for Economic Policy Research, October 2 2017 )

Steve Crouch – International Union of Operating Engineers, Director of State Employees:

“It’s time for CalPERS to re-evaluate their investment strategies and focus more on improving their investment returns and less on ‘socially responsible’ investments.” (Sacramento Bee, Jul. 17, 2017)

Ruth Wright – Finance Director of Oroville, CA:

“It’s crazy to even try to think about doing more. We’re already providing such minimal services to the community. All cities and counties cannot keep up with the increases… I think it’s up to them (CalPERS). They need to do something. They need to do a better job investing… They said ‘tighten your belts.’ To think we just need to tighten our belts … How do you look me in the eye and tell me to get back to the bargaining table? It’s very clear CalPERS does not understand the burden they are putting on cities.” (Oroville Mercury-Register, Sept. 27, 2017)

“In three to four years our cash flow is going to be gone. We don’t even know how we are going to operate past four years. We have been saying the bankruptcy word, which is not very popular.” (Sacramento Bee, Oct. 4, 2017)

Brian Dahle – CA State Assemblyman:

“They can’t bail everybody out in the same situation…There’s a lot of municipalities in California, counties and cities, that are putting out a lot of their income to pensions.” (Bloomberg, Nov. 16, 2016)

Bruce Channing – Laguna Hills City Manager & Chairman of League of California Cities Pension Services Committee:

“Cities all across the state of California are gravely concerned about the rising costs of their annual retirement contributions and the growing size of their unfunded actuarial liability… saying we have to invest our way out of this really is not the answer.” (Reason, Sept. 29, 2017)

Chuck Reed – Former Mayor of San Jose:

“We had 10 years of cutting services, every year, to balance the budget. We’d reached the end of the line in cuts. You know when you’re laying off cops and firefighters you’re pretty much out of things you can do.” (Sacramento News & Review, Sept. 28, 2017)

Derek Johnson – San Luis Obispo City Manager:

“If we do nothing, by 2031-32, we’ll be $80 million in the red. It’s a significant issue. I would not underplay it. But we’re not alone.” (New Times San Luis Obispo, Oct. 12, 2017)

Don Kent – Riverside County CFO:

“Our bill from CalPERS will increase significantly, largely due to circumstances beyond our control.” (Patch, Oct. 18, 2017)

Kerry Eden – Corona Assistant City Manager & Administrative Services Director:

“Corona is struggling with CalPERS rate increases, which is leading us to make some very difficult decisions. We are on a path to insolvency.” (Bond Buyer, Oct. 5, 2017)

Kevin Jeffries – Riverside County Supervisor:

“These are devastating numbers going forward. We’re trying to get our projected anticipated [general fund] costs under control, but we haven’t fully [considered] the increased challenges from our pension liabilities.” (Patch, Oct. 18, 2017)

Leyne Milstein – Sacramento Finance Director:

“Our revenues cannot keep pace with these cost increases.” (Sacramento Bee, Oct. 4, 2017)

Paul Foster – Mayor of Redlands, CA:

“It’s still money we wish we would be using for a whole wide range of things, but we have an obligation under state law to pay the pensions.” (Redlands Daily Facts, Sept. 30, 2017)

Ray Corpuz Jr. – Salinas City Manager:

“If police and fire are the no. 1 and 2 largest departments, and PERS was counted as a department, that $18 million would be the third largest one.” (The Salinas Californian, Oct. 2, 2017)

Sam Abed – Mayor of Escondido:

“We are facing a $4.5 million deficit next year, $8.3 million the next year. These are real numbers. They are reality. Twelve million in 2020 and $15.5 million [the year after that]. If we don’t do anything today, the city needs to come up with $40.3 million [over the next five years] to maintain the city’s services at today’s levels.” (San Diego Union Tribune, Sept. 28, 2017)

Sara Lamnin – Hayward City Councilmember:

“In Hayward, 68 percent of our unfunded pension cost is retiree benefits… this means the promises of the past weren’t paid for, frankly. Over the next three fiscal years, the city of Hayward’s revenue is projected to grow 1.4%, but our cost for PERS is going to go up 30.5%.” (Reason, Sept. 29, 2017)

Dane Hutchings – League of California Cities Representative:

“Other cities are operating (in) functional insolvency, meaning they are bankrupt — they just don’t know it yet. Our goal is to educate our membership. Many cities don’t understand their liability.” (Oroville Mercury-Register, Sept. 27, 2017)

David Crane – Professor of Public Policy, Stanford University:

“Retirement spending has doubled in the last five years, and you ain’t seen nothing yet.” (CBS San Francisco, Sept. 25, 2017)

Orange County Register Editorial Board:

“It is easy to be a “socially responsible” investor with other people’s money. But when those politically manipulated pension portfolios fail to meet the retirement systems’ lofty investment return assumptions, it jeopardizes the financial health of the systems established to provide benefits to millions of government employees and that force taxpayers to make up the difference.” (Orange County Register, Apr. 7, 2017)

Pasadena Star News Editorial Board:

“The politicization of state pension fund investments has once again come back to bite us — this time in coal stocks — harming taxpayers and government employees alike… CalPERS’ divestments cost it approximately $8 billion over a 15-year period, according to an October 2015 report from Wilshire Associates, CalPERS’ main investment consultant. Playing politics with government workers’ and retirees’ pension funds does not serve them or the rest of the taxpayers in the state. This is all the more reason to remove politics from the equation altogether and switch to a 401(k)-style defined-contribution system that lets workers invest their retirement funds as they please.” (Pasadena Star News, Aug. 17, 2017)

Romy Varghese – Bloomberg reporter covering California:

California will be forced to pay billions more in pension contributions for government employees after the state retirement system’s decision to lower its assumed rate of return. California is already paying $5.38 billion to the California Public Employees’ Retirement System this year, and in fiscal year 2018 the state will need to add at least $200 million more. By fiscal year 2024 the annual tab will increase at least $2 billion from current levels.” (Bloomberg, Dec. 23, 2016)

What They’re Saying – Private Ordering

Yale Law Journal:

“Because shareholder proposals can be negotiated away behind closed doors, they give both shareholders and managers incentives to act opportunistically, generating agency costs. Conflicts of interest may arise in the settlement process between shareholder proponents and other shareholders; between officers and the board; and, at institutional investors, between fund managers and fund beneficiaries. The settlement process creates information asymmetries that benefit shareholder proponents at the expense of other shareholders. Ultimately, proposal settlements undercut the economic and noneconomic justifications for the shareholder proposal mechanism itself.” (“Shareholder Proposal Settlements and the Private Ordering of Public Elections”, Yale Law Journal, Nov. 2016.)

Yale Law Journal:

“Agency problems inherent in intermediary capitalism influence the social and environmental standards that are set through proposal settlements. For example, the beneficiaries of public pension funds—teachers, firefighters, and police officers—may have different political interests from the financial services professionals who manage the funds. Yet it is a fund’s managers who determine the social and environmental agenda for the fund, craft the social and environmental policies demanded in proposals, and agree to a company’s offer of settlement. Since proposals can be bargained away more or less in secret, a fund manager might compromise on a disclosure standard in a way that fund beneficiaries would not approve, or even bring a social and environmental proposal as a bargaining chip to extract a private benefit from the company. Thus, settlement outcomes may advance the political and personal interests of fund managers at the expense of fund beneficiaries.” (“Shareholder Proposal Settlements and the Private Ordering of Public Elections”, Yale Law Journal, Nov. 2016.)

The Legal Intelligencer:

“If a company fails to change its ­practices concerning board diversity, climate risk or any other priority of BlackRock and BlackRock fails to see any progress in spite of its consistent engagement efforts or companies fail to satisfactorily respond to BlackRock’s engagement attempts, BlackRock may use its proxy vote to vote against certain management proposals.” (“The Role of Private Ordering in Corporate Governance”, The Legal Intelligencer, May 1, 2017)