Schizo CalPERS ponders apocalypse while still mocking pension ‘myths’

Ed Mendel continues to break more juicy stories about CalPERS than the rest of the state media combined. Along with the Dans (Weintraub and Borenstein), he will be a first-ballot inductee in the Golden State Pension Coverage Hall of Fame. His latest scoop shows CalPERS officials being more honest than they’ve ever been, worrying that a big economic downturn could drive the giant pension agency down to just 40 percent of necessary funding. So why does CalPERS keep cranking out the happy talk and disinformation on its website? This, as the kids say, is wack.

My favorite “myth” cited by CalPERS is that “CalPERS is unsustainable.” This post indicates this “myth” was first addressed and allegedly debunked on Sept. 23, 2009, the week the website appears to have been activated. How was it allegedly debunked? With these two lame paragraphs:

Fact: As a percentage of payroll, employer contribution rates are returning to the levels of the 1980s. In fiscal years 1979-80, 1980-81, 1981-82, for example, pensions as a percent of payroll for miscellaneous State workers were 19 percent of payroll. View details of State Miscellaneous Tier 1 Rates.

Fact: Employer contribution rates have been very stable over the past six years, changing by less than 1 percent of payroll during the past six years, thanks to our rate-smoothing policy. The expected increase in employer rates due to the downturn will increase employer contributions by an average of 1 to 3.7 percent of payroll in 2011-12. View more information on projected increases in employer contribution rates for public agencies.

These “facts,” of course, don’t prove jack. Pensions are unsustainable for many, many of the local governments CalPERS so poorly serves, and this very narrow framing of sustainability as being about broad employer contribution rates is a complete red herring. These “facts” don’t change the fact that Stockton, San Jose, Los Angeles, etc., have real crises looming and can’t stay the course. But CalPERS follows the Maviglian tactic of focusing almost entirely on state pension problems, which are minor compared to those facing so many cities.

Of course, what makes the pension giant’s assertion that it’s a myth that “CalPERS is unsustainable” so downright hilarious is that the main person responsible for the “CalPERS is unsustainable” shorthand is …. you got it!

CalPERS’ own actuary!

As reported by, who else, Ed Mendel — and just six weeks before CalPERS declared the claim a myth. This is from a story Ed posted Aug. 12, 2009 about a pension seminar that took an unexpectedly candid turn, perhaps because those in attendance didn’t think a reporter was in the room:

Ron Seeling, the CalPERS chief actuary, described the process used to “smooth” the rate increases that will be imposed on the 1,500 local government agencies in CalPERS in 2011 in the wake of the stock market crash.

Instead of a rate increase of 4 to 20 percent of pay, the smoothing will reduce the rate hike to a more manageable 0.5 to 2 percent of pay.

“I don’t want to sugarcoat anything,” Seeling said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

How priceless — CalPERS setting up a website with a primary goal of disavowing its actuary’s grim warning as a “myth.”

As for Ron Seeling, well, you can guess what happened to him. In March 2010, seven months after his declaration that CalPERS was on an “unsustainable” track, he retired. Did CalPERS put out a press release? Nope.

The appointment of Seeling’s successor three months later? That merited a press release of 413 words about how darn important the job of chief actuary was.


Where have you gone, Ron Seiling-o? A blogger turns his lonely eyes to you (woo woo woo). I’d love to hear the stories Seiling could tell if he were loaded up with sodium pentothal.

P.S., 9 p.m., March 24: Please read the comments, folks, so you can enjoy a truly hilarious attempt by a public employee to pretend CalPERS actually has a good investment record, and that only my stupidity prevents me from figuring this out. Just riotously stupid spinning. I guarantee plenty of laughs.

24 thoughts on “Schizo CalPERS ponders apocalypse while still mocking pension ‘myths’

  1. It’s always amusing when you leave out the full context of Seeling’s comments about the system being “unsustainable.” He was specifically referring to the combination of declining asset values across the board, increasing benefits due to scheduled pay raises at many agencies, and the failure to modify pension formulae to reflect those emerging trends.

    All of those items have changed now, to some greater or lesser degree. How come you never provide that level of context? Too inconvenient for your rants?

  2. Very good attempt at spin, SkippingDog. You don’t mention that I linked to the full article which provided all the context for Seeling’s remark.

    Of course, Seeling’s being pushed out the door for what he said provides the “level of context” readers need.

    Your fuller explanation of what Seeling meant doesn’t make CalPERS’ record any more defensible. It’s just meant to leave a fog over the nightmare. It doesn’t minimize the nightmare.

  3. Nothing in your screed or the linked post provides any context at all. You have just clamped on to the word “unsustainable” without considering what facts supported Mr. Seeling’s use of that word nearly three years ago.

    He was obviously referring to the course and speed of the fund at the time he made his remarks, precisely the two variables that have changed since that time.

    You could at least be honest about your use of Seeling’s quote and note that the context has significantly changed in the intervening three years, but I suppose that wouldn’t support your agenda as well.

    • “screed” ? Skippy, you’re getting very desperate (or running scared).
      Don’t worry, your pension is safe …. for a while longer.

    • Oh, yeah, CalPERS is in such great shape now compared with 2009. Yo, Skip, did you see the first part of the post? CalPERS war-gaming a drop to 40 percent funding? Oh, yeah, CalPERS is thriving!

      I also love your oh-it-was-just-the-real-estate explanation for CalPERS’ terrible record. How does the reason it was terrible make it any less terrible? How is that “context”? The point still holds: CalPERS’ fig leaf of strong investment performance is no more.

      • I did read the posts about CalPERS discussing what steps would be necessary if the economy took a 20% plunge, but that doesn’t have any relevance to your continuing failure to provide basic, factual context for your opinions about public pension finance.

        If you’d bother to actually read the Wilshire report, you’d also find that the fund’s other investment strategies are beating market performance across the board. So, like anyone who invested in real estate during the 2004-2008 period, CalPERS is taking the same hits on property values. That doesn’t mean the fund’s other assets have magically lost value, anymore than it means your IRA or 401 has not substantially recovered since the 2008 crash.

        We all know you get paid to write opinions, but you could at least inform them with some basic factual analysis along the way.

        • Groan. CalPERS’ performance is in the bottom 1 percent of all large pension funds the last five years. CalPERS turned on its actuary and pushed him out after he called its overall pension benefits framework “unsustainable.” CalPERS has a website that calls the pension crisis a “myth.”

          Consider these facts, and it could not be more ridiculous that you pretend I am the one who is leaving out the crucial context and “factual analysis.”

          You don’t have the moral high ground. You’re a smoke machine trying to hide the real facts. You’re not going to get away with it on my website.

          • The moral high ground is to give the full context of the claims you make about Seeling’s statement, and about the overall performance of the CalPERS portfolios.

            My own index funds didn’t make much money last year either, but they did the year before and are doing great this year. Does that mean I’m not making any money on my investments? Of course not. As J.P. Morgan so famously said: Markets go up; markets go down. That reality doesn’t make either markets or their investors incompetent.

          • The scariest thing about all of this facinnial carnage coming is that everybody involved KNOWS it’s coming AND STILL WON’T ACT!I’ve lost track of the number of times I’ve written my Congressman and Senators telling them how disgusted I am with their fiscal mismanagement. The first rule of getting out of a hole is to stop digging but those of us shouting that at TPTB are simply being ignored. The kind of stupidity I’m seeing now at the Federal level makes me very, very worried for the future of this country. I think Prof. Mead’s vision of things ending well in the post- Blue period is far too optimistic. There will be more than one Detroit before we see the end of this mess.

    • That is somewhat midelasing. Because 2001 was a bad year, the the 10 year number now excludes that year. If it were still included, the return would drop to 7%. Second, the loss to the Harvard endowment fund in 2008 was $11 billion dropping the value from $37 billion to $26 billion. The recent gains have brought it back to $32. billion. (Rick Caird; March 16, 2012 at 1:10 pm)You make a fair point, Rick, but to be fair, the market decline in 2001 was mostly the result of the attack on our country that took place on September 11th. That was obviously a highly unusual if not unique occurrence and I am not sure that including the stock market return that year really provides a better indicator of what types of returns can be anticipated in the long run.

  4. I’m curious, Chris. Do you have any evidence that CalPERS “pushed” Ron Seeling out of his job there? According to every published source I can find, Seeling is honorably retired from the agency.

    You wouldn’t be fudging a little just to make your points, would you?

    • Oh, please, give me a break. Of course he is “honorably retired.” And of course the circumstances of his departure are out of the norm. CalPERS gushes over departing execs. Look at its press releases. But not Seeling. The day he was quoted as calling CalPERS’ benefit structure “unsustainable,” the CalPERS media machine began systematically disavowing him, and the buzz was that he was a dead man walking. Bingo.

      Let’s get back to your buncombe, Skipping Dog. How does the “context” of CalPERS’ horrible investment record minimize its horribleness?

      I’ll be waiting a long time for an answer, because you don’t have one.

    • Oh Please …………….. Of course CalPERS “pushed” him out….. he stood up to their BS. BRAVO for him !

      He simply had met the age & service requirements to leave as a retiree.

      • I understand that’s your assumption, TL. Do you have any published report by anyone that supports that conclusion?

  5. The context matters in several ways, Chris. First of all, the 1% return you’re now gloating over was for calendar year 2011.

    Chris’ note: Completely wrong. I never talked about a 1% return in 2011. I cited a Wilshire study showing CalPERS, over the past five years, was outperformed by 99% percent of large funds.

    Which makes Skip’s next two paragraphs dumb. He’s commenting on something he attributes to me but which I didn’t say.

    That’s nice, but financial institutions don’t run on calendar years. We won’t know the final results from the current investment year until June 20, 2012.

    Second, CalPERS had an investment return of almost 21% for fiscal year 2010-2011 – that was last June. Given the improvement in markets overall since the beginning of the 2012 calendar year, it seems likely that the 2011-2012 fiscal year return will be well above the 1% you’ve been crowing about.

    Finally, you know as well as anyone that the real estate losses of the 2008-2009 and 2009-2010 fiscal years are being amortized over a period of smoothing years. You may not agree with that approach, but you’re a writer and not an actuary. Here’s an interview with Alan Miligan, Ron Seeling’s successor, that describes how a long term investment horizon works. You might find it at least informative, even if you don’t bother to include the facts it contains in your rants.

    Chris’ note: Once again, Skiparoo, you completely ignore my past responses, to wit: The “context” you say is so important still doesn’t explain away why CalPERS was outperformed by 99 percent of its peers. Milligan’s theories of long term investment certainly don’t explain it away.

    The condescension of your comments is so funny, given that you attribute to me things I never wrote. Dumb de dumb dumb.

    • I was there in the 1990 s literally in the room when California puilbc union officials celebrated their victory in getting employee retirement pay based on the single highest year of compensation. Everyone knew, but nobody would say it, that such a formula couldn’t work in the long run. They were wholly invested in the lie and employees at the time were ecstatic. This is what happens when union lawyers become legislative leaders and government personnel directors the unions essentially control both sides of the bargaining table. It’s a sham that both sides love, and it will be difficult to fix because California voters appear to be irredeemably dependent on promises that never pay off

  6. If anyone would know condescension, it would certainly be you, Chris. Nevertheless, I went back to the Wilshire Report that you and Ed seem to love so much right now. The information about CalPERS seems to have been taken directly off of a chart on page 20 of section 4 (I’m sure you have it. If not, go to the CalPERS site).

    On closer review, it seems Ed is incorrect in his conclusion about CalPERS this year. The total plan revenues were 1.27%, which surpasses the Median return for all of the > $10 billion funds of 1.13%. The bottom 5% (95th percentile) was -1.07% (negative), which means CalPERS couldn’t be in that group.

    You and Ed should recheck your numbers, since it seems to be that you’ve decided to spin a tale that’s unsupported by the Wilshire Report.

  7. BTW, Chris, did you ever take a basic accounting or statistics class? If you’re going to make claims like these, it might be helpful for you to know what all those funny numbers at the bottom of the page in official reports actually mean.

    • LOL — skipping dog is ridiculing my knowledge of accounting and statistics after he does endless contortions to try to put into favorable “context” CalPERS’ five-year record of incompetence, of being outperformed by 99 percent of its peers!!!!!

      Skiparella, I indeed took a college statistic class and got an A in it and took lots of hard sciences, too. My math SAT was in the top 1 percent..

      But I return to my first point: You suggest I’m ignorant of statistics and accounting for thinking CalPERS didn’t do well when it was outperformed by 99 percent of its peers. Yo, Skipadeedoodah, do you think the Charlotte Bobcats are the class of the NBA? Do you think the Washington Generals are Hall of Famers? Oh, my!

      This is one of the more retromingent displays of attempted gotcha commenting I’ve ever seen. I’m the dummy for thinking CalPERS isn’t peachy keen!

      Thanks for a great laugh, Skiparooski — you have skillz.

      Your admirer!

      Chris Reed

      • So, before or after your nice snarky reply, did you ever bother to fact check the CalPensions story by actually looking at the Wilshire report?

        You really should give that a shot.

        P.S. You’re not another one of those Hillsdale College grads like Seiler who thinks they’ve been the recipient of some divine Austrian economic wisdom, are you?

        Note from Chris Reed:

        I will take this as a concession …. Chris Reed 1, SkipToTheLoo 0. No more demands I appreciate CalPERS’ genius. Triumph is sweet!

      • The answer is so smpile: A 100% tax on all government retiree benefits for any retiree under the age of 67.The law says we have to give it to you. It doesn’t say we can’t take it back. Pension eligibility for government employees should match that of SS eligibility.They can retire anytime they want, they just can’t collect keep the benefits until 67. Nor should their monthly pension payment exceed that of the national average SS check. Then government employees would be motivated to make society richer, not enrich themselves at its expense.

  8. This kind of thing is why EVERY pension plan sholud immediately transition to a defined contribution plan. That way, no elected official or company official can over promise benefits and these budgetary time bombs won’t exist in the future. This is not advocating employee-only contributions to a 401K. I am in such a plan with TIAA-CREF as a university employee. My employer matches my contributions and the money is in my name from the time of deposit.The argument has been made that defined benefit plans are more lucrative to the worker. Well, it’s not magic money and has to come from somewhere.jim

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