George Diehr presents…
Standing
Up for
the CSU &
Against the
Pension
Privatization
Gamble

"“There’s an old saying"
“There’s an old saying, so goes California, so goes the rest of the nation. That’s exactly what they’re worried about. You talk about pensions. What do you think, it’s just about California? No. If California’s pension system goes, now it will go like an avalanche.” Governor Arnold Schwarzenegger, Orange County Register, Jan. 25, 2005

Why Gamble?
“You’re putting so much risk of the stock market onto each individual person, they become in danger of losing retirement protections.”
Art Pulaski, executive secretary of the California Labor Federation, AFL-CIO, Oakland.

Slide 4
Why gamble now?
According to some the governor’s defined contribution proposal piggybacks on President Bush’s plan to privatize Social Security. “This is the California version of Social Security privatization.”
Carroll Wills, a spokesman for the California Professional Firefighters.

Slide 6
WHY GAMBLE NOW?
Others hinted at a backlash against CalPERS for its activist corporate governance positions.

CalPERS Board of
Administration
13 members set policy for…
Ensuring a secure retirement
Investing for optimum risk adjusted return
Negotiating for quality health care at reasonable cost

Slide 9
Slide 10
Budget Proposal
Most common CalPERS Plan: employer contribution = 17%; the employee contribution fixed at 5%.
The budget proposal:
equal sharing of the contribution by the state and employees means employee contribution would more than double to 11%—effectively, a 6% pay cut.
$469 million in pension contributions would have to come out of the paychecks of K-14 teachers for the 2005-’06 fiscal year.
And more: state contribution to health care premium frozen, …

Legislation
Assemblymember Dr. Keith Richman proposes elimination of a defined-benefit plan for ALL PUBLIC employees
The proposed amendment to the state constitution known as ACA5, would put all new employees into a “defined contribution” plan--e.g., 401(k).
All investment risk would be placed on the individual.
Employer contribution would be limited to 6% for most plans.

Slide 13
Ballot Initiative
The Howard Jarvis Taxpayers Association wants to break the promise of a defined-benefit pension
Their purpose is to obstruct the right of employees to bargain over wages and benefits by using the ballot to end our retirement system.
It is like having voters approve every contract we negotiate.

Comparisons
(CalPERS Data)
Administrative costs of defined contribution plans are typically 2% of assets
Only 50 cents of each $1 in a defined contribution plan is paid out in benefits.
Administrative costs with CalPERS, the nation’s largest defined benefit plan, 0.18% of assets
80 cents of each $1 in a defined benefit plan is paid out in benefits

If it Ain’t Broke…
Q: Will privatizing pensions help fix the budget crisis?
A: NO.
Privatizing pensions will NOT balance the state or local budgets
Privatizing pensions would cost the state over $7.6 BILLION
No savings for over 20 years

If it Ain’t Broke…
Q: What is the significance of “under-funding” of CalPERS?
A: Privatizers have taken a snapshot of one year.
At times the fund has been OVER-funded and at other times under-funded.
Recently were over-funded by 123.5% allowing employers to cut contribution by over $6.05 billion.
Economic downturn led to increase in employer contribution
Fund now bouncing back earning 23% in 2003 and increasing assets by $30.4 billion.

If it Ain’t Broke…
Q: How generous are public employee retirement benefits?
A: Average monthly benefit paid to retirees is $1,669.
400,000 school employees, police, firefighters, garbage workers and health professionals receive an average of $19,128 per year—hardly “generous.”
Most municipal workers and teachers DO NOT receive Social Security.

If it Ain’t Broke…
Q: Is defined contribution really preferred by the private sector and other states?
A: NO. Most large private sector companies have a defined benefit plan like ours
Among employers with 10,000+ employees use of DB is increasing
SBC recently reinstituted its DB plan. Others are: Chevron, Unocal. Lockheed Martin, Boeing, Albertson’s, etc.
Nebraska recently converted back to DB. DC returns were 6-7%; DB plan returned 11%.
Kansas rejected DC saying, “conversion from the current defined benefit plans…would not result in lower employer contributions….”

Consider the Source
http://www.sourcewatch.org/wiki.phtml?title=Grover_Norquist
What is CFA Doing to Protect Our Secure Retirement?
CFA is on the Executive Board of “California Families Against Privatizing Retirement” that is:
Doing opposition research, focus groups, polls.
Working against the Richman legislation
Working with our members to build base of people who can speak on the issues (est. 1.5 million people.)
Diehr will be visiting selected CSU campuses to explain the threats of budget changes and legislation.
Part of a group fighting the pension and other initiatives in the fall.

What can you do NOW to prepare for the Fight in November?
Know the facts behind the myths
Talk to family and friends
Bring the issue to your department meeting

Be Informed.  Get Involved.
Resources & Contacts:
George Diehr:  gdiehr@csusm.edu
CFA:  secureretire@calfac.org
Web:  www.calfac.org
CalPERS:  www.calpers.ca.gov
AFL-CIO Center for Working Capital:
www.centerforworkingcapital.org/RetirementSecurity/