CalPERS’ Pension ‘Myths’ Busted

Will Swaim

U[PDATED to include comments from Wayne Davis, CalPERS, Mar. 30, 4:46 p.m.]

CalPERS has quietly removed the controversial “Myths vs. Facts” page from its website, abruptly ending one of the agency’s efforts to soothe public anxiety about the cost of rising pension benefits to public employees.

The page disappeared March 7.

A spokesperson for CalPERS, the state agency that manages public employee retirement funds, said “Myths vs. Facts” was removed following the agency’s December decision to reduce its discount rate.

“There are just a lot of changes going on, so we’re updating the page,” CalPERS’ Amy Morgan told California Policy Center.

Morgan could not immediately identify changes other than the discount rate that would require the agency to remove the page. She said she could not predict when the page might return.

Several sources close to the agency said the page was ditched because an independent oversight board demanded corrections.

“‘Myths vs. Facts’ sometimes required us to recast and rewrite items as circumstances changed,” said said Wayne Davis, chief of CalPERS’ public affairs office. “Sometimes that information stayed up longer than we liked, so we’re looking for another, simpler way to present it. We get a lot of requests for information every day, and we have a lot of data and research to offer, so our goal is to make sure people can find what they’re looking for and get the answers they need. And we want to do it in a straightforward fashion.

“Like every organization with a website and digital presence, we’re always looking for ways to improve what we present. That was the aim here.”

Davis said there was no pressure “from any outside board or organization.”

“It didn’t happen,” he said. “We made the decision internally and discussed it only among ourselves. No one else played a role or had a say in it.”

Indeed, CalPERS’ internal documents released to CPC under the California Public Records Act suggests remarkably little internal discussion before the decision to pull the plug on “Myths vs. Facts.”

Shortly after the site disappeared, CPC asked the agency for “copies of all CalPERS communications among employees regarding removal of this page.” In response, CalPERS offered just a few emails, the earliest of which were dated March 6. In one (subject line: “Myths vs. Facts”), an employee in CalPERS’ digital department asked another, “Would you like us to move forward on this? It won’t be too difficult.”

Not too difficult at all, apparently: A day later, the CalPERS internal documents show, “Myths vs. Facts” was gone – and gone so abruptly that all that’s left is an error message.

It was an ignominious and sudden end to a page whose bold – though unstated – public relations purpose was to calm Californians who are anxious about the skyrocketing cost of government employee pensions.

CalPERS’ own numbers show its pension fund is about $115 billion short of the the cash it needs to pay off its obligations to retirees. A more conservative estimate, using Moody’s formula, puts the number at more than twice that – about $312 billion. The most exacting estimate, by Stanford University, shows CalPERS is underfunded by about $448 billion – nearly four times the agency’s own estimate, and about $25,671 per California taxpayer.

Despite such bleak predictions, the “Myths vs. Facts” page was invariably upbeat, mirroring the most aggressive claims of union leaders.

“I believe it originated shortly after the Stanford Institute for Economic Policy Research published its initial piece on the magnitude of the shortfall,” said Joe Nation, the Stanford professor of public policy who oversaw the grad students who produced the research. Nation, who, as a California Assemblyman from 2000-2006, was an early critic of the pension problem. He said the “Myths vs. Facts” page “seemed a way to try to counter our research and similar research that points to a much bigger problem” than CalPERS was willing to acknowledge.

Following the format of a simple FAQ, the “Myths vs. Facts” page published what it called “myths” about the pension system and responded to each with reassuring but almost invariably misleading “facts.” It was a source of irritation – or inadvertent amusement – for the agency’s critics.

In one instance, “Myths vs. Facts” asserted that its “analysis of U.S. Census Bureau data finds that state and local government pension contributions constitute a small percentage of spending” – ranging “from 3.1 percent in 1994 to 4.4 percent in 2012, with a low of 1.7 percent in 2002.”

It was telling that the “range” ended around the time that state and local officials, buoyed by an asset bubble, began raising the pensions it paid government workers, often even retroactively.

CPC’s Marc Joffe has found the median pension burden of California’s cities is 6.85% – with 25 of them contributing in excess of 10% of annual revenue.

Elsewhere on the “Myths vs. Facts” page, CalPERS admits that California governments were hit with rising pension obligations in the 2000s. But it’s a “myth,” the agency claimed, that the spike followed passage of SB 400, the 1999 law that raised pensions benefits for state workers by a whopping 50%, and made the hike retroactive.

The “fact”?

“The 10-year period was highly abnormal, going from extraordinarily low contributions (from participating agencies) following an economic boom period to higher-than-average contributions following the worst economic recession since the Great Depression,” the CalPERS page declared.

CPC’s Ed Ring said “these ‘facts’ are obfuscating an obvious truth, which is that SB 400 and the legislation and local measures that it inspired, increased pension benefits by 50%, and they did this retroactively which meant the 50% enhancement had a significant, immediate impact on the calculated amount of the liability. And it created a more than 50% impact on the required payments to the funds because many of the employees affected were close to retiring, so there was no time to increase their contributions.”

Most recently, CPC’s Ring noted that “Myths vs. Facts” erroneously claimed the average pension for a state employee was “about $31,500 per year.” Ring said CalPERS could only reach that low-ball assessment of payouts by including all public employee retirees, no matter how brief their service. The average full-career pension for a CalPERS retiree is actually $71,402, Ring showed.

“Some critics have deemed it propaganda,” Steven Greenhut, a longtime CalPERS observer and Western Region Director for R Street Institute, said of the late “Myths vs. Facts” page. “I wouldn’t go that far, but it always seemed highly inappropriate for a government agency to try to debunk media reports and spin the numbers and facts in its own direction. That’s the role of a PR agency, not a pension fund that is supposed to mainly be a good public steward.”

Will Swaim is the president of the California Policy Center.

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