CalPERS CEO on Pensions and Bankruptcy
October 10, 2014
The ruling last week by a federal bankruptcy judge in Stockton's bankruptcy case has caused many to speculate about the future of pensions. Public employees, retirees, employers, lawyers, taxpayers, and journalists have legitimate questions and concerns.
As the administrator of pensions, the California Public Employees' Retirement System does not win or lose in this situation. If pensions are reduced in bankruptcies, the only losers are public employees.
Contrary to the belief of many pension critics, CalPERS is no Goliath. Franklin Templeton Investments - the last bondholder standing in the way of the city of Stockton's plan to rebuild - is no David.
Franklin Templeton is a sophisticated Wall Street investor that did its due diligence, analyzed the risks, and decided to make a $36 million investment in Stockton. As it turns out, the investment did not pay off. That’s how the investment world works. Franklin needs to move on.
The real Davids are the current and former employees of the city of Stockton whose retirements are at stake. These librarians, secretaries, firefighters, police officers, 911 dispatchers, and school custodians chose to serve the public at lower salaries in return for the promise of a reliable and secure pension. Their pensions are deferred compensation that they earned by working 10, 20, and sometimes 30 years in service to their communities.
Public employees contribute from every paycheck toward their own retirement. It is not a bonus or optional benefit that an employer may choose to not pay during hard times.
We applaud the leadership of Stockton officials in finding solutions to protect the pension promises made to its public employees while forging a reasonable path toward a fiscally sustainable future.
CalPERS will stand by Stockton, its employees, and residents, and will continue to champion those who really stand to lose - the real Davids - the public employees and retirees who spent their careers serving our communities and California.
Anne Stausboll is Chief Executive Officer of the California Public Employees' Retirement System.
(Printed in the Sacramento Bee on October 9 in response to the editorial, "Bankruptcy case should be a loud warning to cities," October 3)