GULLIXSON: Getting beyond 'trust us' in debt crisis
Published: Sunday, July 22, 2012 at 3:00 a.m.
Last Modified: Saturday, July 21, 2012 at 6:40 p.m.
You just don't understand.
When I hear that in my personal life, it usually means that I'm in trouble — and would benefit from a few auditory adjustments. But when I hear that in my job as a journalist these days, I get the feeling that someone is trying to hide something.
You don't understand. Everything is under control. Trust us.
How many times have we heard assurances like that from those in positions of authority? Then came the day when we began to learn the truth about such things as derivatives, liar mortgage loans, bailouts, Libor corruption, unfunded liabilities, (fill in the blank). And it became clear that things weren't under control. Taxpayers were left holding the bag for risks they didn't even know they had assumed.
The latest kick-in-the-gut revelation came Friday when we learned that the state Parks Department had secretly set aside $54 million in surplus funds at a time communities were holding bake sales and fun runs to keep state parks like Annadel and and Sugar Loaf Ridge open. This came just days after learning that a high-ranking parks employee was the mastermind behind a secret vacation buyout program for himself and other employees, bilking the public to the tune of $271,000.
Pretty classy stuff. It's hard to know which ethical breach to howl about first.
Nonetheless, leaders in the public sector keep telling us to trust them, that we just don't understand.
You can hear it in the message sent last week from an executive of the California Public Employees' Retirement System. He was responding to our Wednesday editorial on the need to hold CalPERS accountable for its miserable performance in managing $233 billion in retirement assets.
“Your July 17 editorial demonstrates a severe misunderstanding of CalPERS pension fund investment strategy and mischaracterizes how a single year return will actually impact public agencies,” wrote Deputy Executive Officer Robert Udall Glazier. “Allow me to set the record straight.”
(I invite you to read the whole thing for yourself. We published it on Page B5 Saturday and posted it online on pressdemocrat.com. Just click on the “opinion” tab.)
Why did we come down hard on CalPERS?
Well, the phone is ringing again.
But no one at CalPERS has been held accountable for its mistakes. I would include here CalPERS' major blunder in 1999 when it promised the state Legislature that retirement accounts were so flush that the state could significantly bolster public employee benefits at no real risk of taxpayer funds. They were wrong. In fact, since then, the system's portfolio has earned only 75 percent of what CalPERS had promised. As a result, the state has had to spend $20 billion more on pensions than had been projected. And CalPERS' accounts are still $85 billion short of meeting long-term obligations to retirees.
Glazier also downplays the financial impact of this latest shortfall, noting that losses will be spread out over years. Is that supposed to make us feel better, that it will just be added to the long-term debt?
“Increased contributions (for pension benefits) will be required — or, in some cases, benefit cuts may be needed — in order to stave off a crisis,” the report found.
Somehow I don't think you can chalk this up to a big misunderstanding. We need an honest discussion about solutions — not whether a problem exits.
Paul Gullixson is editorial director for The Press Democrat. Email him at firstname.lastname@example.org.
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