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Politics : Politics for Pros- moderated
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From: LindyBill4/12/2014 11:17:16 PM
1 Recommendation

Recommended By
lightshipsailor

   of 793868
 
This won't end well.

California Math Test
The state pension fund has some unbelievable facts.

April 11, 2014 6:50 p.m. ET
online.wsj.com

The California Public Employees' Retirement System has a well-deserved rap as a taxpayer drain. So to rehabilitate its image, the pension fund has produced a "study" purporting that public-worker pensions are California's biggest jobs generator. As if Californians needed more reason to doubt the pension behemoth's math.

According to the 14-page analysis, "CalPERS benefit payments and investments in California are essential to the state's economy" (Calpers's bolded emphasis). For instance, Calpers "supports" 1.5 million jobs in the state. That figure includes every job at a California business in which Calpers invests including the 664 companies in its public equity portfolio like Google, GOOGL -1.63% Apple AAPL -0.74% and Walt Disney. DIS -0.65% Who knew that the public pension fund was essential to the survival of so many successful California public companies?

Calpers also notes that "the economic impact of CalPERS benefits far exceed initial taxpayer contributions." Lo, the fund claims to return $10.85 in "economic activity" for every dollar taxpayers contribute, which would make public pensions the best government stimulus of all time.

Their crude economic calculation is something to behold. The fund estimates that employer contributions account for 22% of every dollar in pension benefits, which would equate to $2.8 billion for the fiscal year 2011. Calpers then contrives a 2.39 "multiplier" from a "Social Accounting Matrix" to compute that its $12.7 billion in annual retiree payments generated $30.4 billion in economic activity and 113,664 jobs—more than a third of the state's employment growth that year.

Note: White House economists used a multiplier of a mere 1.5 to arrive at their off-the-wall estimate that the stimulus program would create 3.7 million jobs.

Here's a more honest accounting of Calpers's economic "impact." California taxpayers have sunk about $70 billion into Calpers over the last decade, which they otherwise could have spent on more productive enterprises or pursuits. For every one dollar workers contribute to their retirement, taxpayers are investing two. Local sales and property taxes have risen to pay for increasing pension payments. Public workers have also been laid off and infrastructure delayed—all of which has depressed economic growth.

Over the last couple of years, Calpers has raised local governments' future pension contributions by 50% to make up for its erroneous actuarial calculations and investment projections. This political report offers one more reason why taxpayers and public workers shouldn't trust Calpers with their money and would be better served by defined-contribution retirement plans that employees own and control.
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