Pension Spending

Yesterday marked the 25th anniversary of the California Legislature’s passage of SB 400, a retroactive pension increase for public employees that constituted the largest single issuance of public debt in California history.

One of the first things I learned after Governor Schwarzenegger appointed me to the board of the California State Teachers’ Retirement System (CalSTRS) in 2005 is that public employees only contribute to their pensions upfront but taxpayers contribute upfront and are on the hook for 100 percent of any funding deficiencies.

When launching GFC in 2011 it was my hope that we would see meaningful pension reform by 2020, but we have failed to achieve that objective and the negative consequences for public services and taxpayers have been enormous. As evidence, just look at the four-fold explosion in annual pension spending by the Los Angeles Unified School District this year compared to ten years ago:

Under SEC rules, investment advisors who do work for state and local pension funds can be disqualified if they make political contributions at certain levels to elected officials or candidates for those offices who have a say in the public pension decisions to contract with investment advisors. That’s a good thing because public pension funds such as CalPERS and CalSTRS enter into money management contracts the objectives of which should be to protect pension beneficiaries and taxpayers, not to enrich Wall Street.