CalPERS Board Tells Arnold Not to Terminate Public Pensions
March 3, 2005 12:25 PM
Gov. Arnold Schwarzenegger is seeking ways to overhaul the long-established CalPERS benefit and pension plan, and some SF State faculty view the proposals as everything from "a risky proposition" to "a terrible idea."
California State University members of the pension plan pay slightly more than 5 percent of their checks to California Public Employees' Retirement System (CalPERS) in exchange for a guaranteed pension at retirement. The government then contributes any additional funds needed to ensure the pension amount.
The governor has proposed restructuring the $180 billion CalPERS investment pension fund, which serves over 1.4 million state employees and more than 20,000 CSU faculty members. Under Schwarzenegger's plan, new employees would be given 401(k) plans and have to invest individually beginning in 2007.
“It’s the difference between taking money you have and investing it in a bank where you’re insured by the FDIC, and investing the money in an account where you can get three times the interest but have no security,” said ethnic studies professor Leon Cathey. "It’s not a good idea.”
Many faculty members see the governor’s proposal as an attack on their pensions and worry that the campus’ ability to recruit new faculty will be diminished if the governor’s proposal is implemented.
Mitch Turitz, president of the SF State chapter of the California Faculty Association, said that school is already at a disadvantage when hiring due to the CSU policy of not adjusting salaries for cost of living. By converting the guaranteed CalPERS pension fund into an individualized form of “legal gambling,” Turitz warned that even more setbacks will occur on a campus that is already losing professors at a higher rate than they are hiring them.
“This is not good for any public employee in the state,” Turitz said. “The items are politically interrelated ... and if the government succeeds in reducing pension benefits, that increases the likelihood of success in reducing health benefits.”
Shidong Li, an associate professor in the math department, said the “government is not valuing professors as they should,” and called any cuts to CalPERS “a disadvantage to getting people to work for the government and in California.”
Li said the faculty lack “striking power,” since only students would be hurt by a strike that would have "no economic damage.” He said that is “why they always cut education first.”
Schwarzenegger’s office released figures showing projected savings on the over $2 billion annually that the state contributes to CalPERS. California Faculty Association numbers project a loss for at least 10 years if the switches are made.
Accounting professor Ken Danko said the government is essentially “transferring risk from the state to the individual.”
“I don’t mind the risk, but I want to know where that additional money will be coming from," Danko said. "Anything the state cuts, individuals will have to make up, which would essentially be a salary reduction.”
Danko also noted that when the stock market is high the state's contribution is lower. During the bull markets earlier this decade CalPERS became the second largest investment retirement fund in the world, behind only Norway's national plan, and there were several times that the state did not have to contribute any funds.
Dr. Robert Williams, a senator for the Statewide Academic Senate, questioned why “a pension that is well managed” should be under attack.
“It is not a fiscal question, (rather) it is a political question,” he said. "(The proposed changes) won’t result in positive profitability.”
Political opponents say the governor's plan is aimed at the administration board members at CalPERS, including State Treasurer Phil Angelides, for their activist agenda in recent years. The board has leveraged the $180 billion fund to try and persuade businesses to adopt more socially responsible practices.
"There is a renewed level of activism because we have just been through, in the last two or three years in this country, the greatest wave of corporate scandal ... since the 1920s,” Angelides told reporters in December 2003. Several high-profile businesses, including Enron and WorldCom, have been decimated in recent years by allegations of widespread fraud.
The CalPERS board backed workers in the Safeway strikes last year and filed suit against the New York Stock Exchange in 2003, when Exchange Chairman Dick Grasso was forced to resign after terms of his $139 million pay package were revealed.
The CalPERS board rejected Schwarzenegger’s proposal to overhaul the plan on Feb. 16 with a 9-3 vote. The vote is a recommendation to the CSU Board of Trustees and CSU Chancellor Charles Reed, who will have the ultimate say in whether to accept the governor’s proposal and end the current CalPERS plan for CSU employees.
Williams said the statewide Academic Senate is already exploring ways to respond to anticipated reaction from Schwarzenegger, who said recently that he is “at war” with state Democrats. The California Faculty Association is circulating a petition and will present it to local legislators at their offices this and next Friday.
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