2013-12-19 / Front Page
State treasurer warns about teacher pensions
Lockyer, the state’s chief banker since 2006, spoke to about 50 people attending a dinner hosted by Ventura County Supervisor Linda Parks at Tuscany restaurant. The public policy dinners are held quarterly.
“The teacher retirement system in 30 years implodes if it doesn’t get fixed,” said Lockyer, a former state attorney general and 25-year member of the California Legislature. He was reelected treasurer in 2010 and plans to retire in 2014.
He said California has become part of a greater nationwide debate over what constitutes adequate retirement income for public employees. Bankrupt Detroit recently defaulted on its public employee obligations.
“That’s the legal dispute going on now, whether it’s Detroit or other communities,” he said, “is whether you can change current employees’ pension promises and to what extent those are protected or not.”
Lockyer said California is suffering a $5-billion annual shortfall in its funding obligation for retired public school educators. His office and some legislative analysts recommend that an additional $500 million a year be taken from recent budget surpluses and directed to CalSTERS, the teachers’ retirement fund.
“I hope the legislature will do that,” Lockyer said.
On a brighter note, Lockyer said the 30-year return on Cal- STERS investment has been about 9 percent but that current actuarial estimates require only a 7.5 percent return.
“So historically, we should be able to pay those bills,” Lockyer said.
CalPERS, the retirement fund for non-educators, faces its own set of challenges as it has grown to become the third largest public pension system in the United States.
But according to Lockyer, “It’s much more solvent than you would think by listening to some of the comments we hear from the critics.”
“(Cal)PERS seems pretty good; (Cal)STERS (is) still in crisis mode,” he said. “In the foreseeable future, there will be a ratcheting down of retirement promises and commitments,” he added.
Contributing to the problem is the longer lifespan of the employee. Firefighters and police men and women, for example, can retire in their 50s but now live to 83 on average, Lockyer said.
“Our view, at least at Cal- PERS and CalSTERS, is that these are vested rights and contracts in our system that have been honored. . . . They’re commitments we have to keep.”
California’s investment in the future should be made in education, he said.
“Virtually every politician can tell you what needs to be done to address the income gap that’s alarming and growing in our society and how to create jobs, but the truth is we really don’t know. The only thing we can say as long term strategy is that education works.”
Lockyer also addressed the growing trend toward business migration out of state. Taxes and regulatory pressures are a contributing factor.
Thirty years ago, only about one-third of the state’s revenue came from personal income taxes. Today, it’s two-thirds. But he said that while upper wage earners pay a greater share of personal income taxes, the state’s aggregate tax level remains 10th in the nation (and not first, as many believe).
He said he opposes the new top-two primary system in which the nominees for Assembly and Senate can be from the same party.
“I’m bothered by the fact that we’ve excluded from the November ballot minor party candidates. I think it’s an abridgement of free speech.
“We have a primary fight all year long and it’s exhausting,” he said. “It amplifies campaign fundraising and expenditures.”
And regarding the controversial north-south, high-speed rail project in California, Lockyer said it can only succeed with the help of private investment. Predicted ridership will not be enough to pay the high cost. California already spends $8.6 billion a year in public debt service and another $600 billion in bonds will be needed for infrastructure projects over the next decade, he said.
But if the state can afford the high-speed rail, it could be a “game-changer.”
“There’s an enormous need to help the imbedded poverty in the Central Valley,” he said.
Listening to Lockyer’s talk were Fran Pavley, the state senator who represents Calabasas, Agoura Hills and Westlake Village, and other local officials.
Parks said her quarterly dinners have been a success. “It’s a great opportunity to learn about policies and things that affect our county and state,” she said.