Cross-posted at CalWatchdog.
Last week, I was a witness on a mock trial at Freedom Fest, in which public employee unions were in the dock over the detrimental effect of their pensions on the public treasury. It was a fun event, designed to debate and discuss the role of public employee unions in the current fiscal situation, but the union officials who questioned me and made their case kept coming back to the same argument.
Wall Street is evil. That’s what they say, basically. They deny that the routine six-figure pensions have anything to do with any fiscal problems suffered by cities and states. They deny that pensions are too high. They insist that public employees remain underpaid. They deny the obvious numbers about unfunded pension liabilities. The whole problem is in their view due to Wall Street greed, which sunk the economy and reduced the rates of return that kept sustaining the pensions their members receive.
Now, the unions are crowing over new reports that CalPERS and CalSTRS have recorded huge gains in the last fiscal year based on their stock-market investments. They now claim that there is no pension crisis and that we can go back to business as usual. But even the Bee report shows the following: “Yet the two systems, like many public pensions around the country, remain underfunded and are still feeling the effects of the market crash of 2008. Officials said it will be difficult to duplicate the latest investment results in the coming years, and both funds are likely to continue looking to taxpayers for higher contributions.”
I’m not betting that they will continue 20 percent rates of return for more than a year. And as Wayne Lusvardi, a CalWatchDog.com reporter, explains in a piece posted in Breaking News, “CalPERS made an anemic 3.41 percent return over the last five years and only 0.98 percent over the last three years, falling far short of its 7.75 percent annual target return it needs to meet pension obligations.”
Lusvardi quotes the CalSTRS CEO: “Even given this past year’s impressive performance, CalSTRS would need more than a 20 percent return each year for the next four years to achieve full funding in 30 years, an impractical expectation.”
That’s hardly room for celebration.
Consider these two recent Sacramento Bee stories:
This is just the unions’ latest, desperate attempt to deflect criticism from their plundering of the public treasury. But it is fun listening to them praise Wall Street for a change, which apparently is their new savior.