Brews & Views Thursday: “California’s Pensions: a $500 billion debt”


Posted by on Wed, January 19, 2011

Free public forum at the Half Moon Bay Brewing Company on January 20 welcomes David Crane, special advisor to Governor Schwarzenegger on jobs and economic growth, and Joe Nation, former state lawmaker and public policy professor at Stanford, with moderator Lenny Mendonca of McKinsey & Company.


On Thursday, January 20, the Half Moon Bay Brewing Company hosts the second of its 2011 speakers' series, Brews and Views, with two special guests discussing one of California's hottest topics: the state's vastly underfunded state and local pensions, at least one of which are now the subject of an Securities and Exchange Commission (SEC) investigation.

Moderator Lenny Mendonca, co-founder of the Half Moon Bay Brewing Company, founder of Brews and Views, and Director at McKinsey & Company, will facilitate a lively and illuminating discussion with David Crane, former top advisor to Governor Arnold Schwarzenegger on jobs and economic growth and recent appointee to the University of California Board of Regents, and Joe Nation, former state assemblyman and current director of the Graduate Public Policy Practicum at Stanford University and lecturer with Stanford Institute for Economic Policy Research (SIEPR).

Ten percent of proceeds from all dinner sales at Half Moon Bay Brewing Company that evening will be donated to Cabrillo Education Foundation.


On January 7, 2011, the New York Times reported that the SEC is investigating California's state employee pension plan, CalPERS, for failure to provide adequate disclosures on how risky the pension investments were and how much funding it would need to fund a shortfall.

David Crane reported in April that pension costs for state workers have gone up over 2,000 percent over the last 10 years, "crowding out spending on colleges, parks, health, the environment and other public programs. More cuts are in store for those programs because pension costs are scheduled to more than double to $10 billion per year...Worse, pension debt has been hidden from you through evasive accounting by our pension funds that would make even Wall Street blush."

Joe Nation's recent SIEPR report (November 2010) found that the employee pension funds of California's local governments and special districts are underfunded by $200 billion. The study, which showed that local government pension plans are underfunded by almost 45 percent, followed an April 2010 study conducted by four Stanford University students who estimated that the three state employee pension plans - CalPERS, CalSTERS and the University of California Retirement System, who together administer the pensions of 2.6 million Californians - could be underfunded to the tune of $500 billion.

A panel discussion will be followed by an hour-long Q&A session from the audience.

Thursday, January 20, 2011
6 to 8 p.m.

The Half Moon Bay Brewing Company
390 Capistrano Road, Princeton-by-the-Sea, Calif.

Admission and snacks are complimentary. Beer, wine, and other beverages will be available for sale at the event.

For more information:
Call 650-728-2739 or visit   

I’m sure we’ll hear over and over that it’s a revenue problem as well ranting about disclosure on the safety of the investments, not an annuitized spending. and ya’ll know where to get the “revenue” from…

CalPers is currently pegged to hope/achieve ~8% annual return. Yeah, they lost 5% in 2008, and 23% in 2009, but +11% last fiscal year, and pre-2008 four straight years of double digit earnings.

Let’s please not look at CalPers here. They are amongst the hallmark of public fund managers. Nor blame Wall St.

Hopefully this discussion will spend the appropriate time what public employee unions have brought to bear w/ their political muscle in a blue state (and not let Jerry Brown and the State Legislature get away with what they’ve wraught by improving the unions ability to “negotiate” the stature of employee unions within state political structure).

There is already almost no turning back, and we just put the “coffin’s final nail” back in office.

Yeah… it’s a “revenue problem”.

Comment 2
Thu, January 20, 2011 10:09am
Barry Parr
All my comments

Public employee pensions are a problem, but I’m not sure we’ve determined what kind or how large a problem they are. However, they are a convenient focus of rage.

But it would be a mistake to think that this is a single problem.

The state’s incarceration rate (and everything that goes along with it) is a problem.

Revenue is also a problem.

We’ve been suffering under several decades of faux populist reforms that have made the state more bankrupt and ungovernable. These “reforms” have served the purposes of corporations, the wealthy, and possibly a decent share of the upper middle (at least those who are principally motivated by money).

The public not so much.

Comment 3
Fri, January 21, 2011 8:25pm
Carl May
All my comments

Look at the pension deals state legislators,  other elected officials at the state level, and top appointed bureaucrats get. And the high-paying job gravy train they are on—Crane exemplifying this. You expect sensible laws and regulations for the masses of state workers, union or not, from such people—especially when, through deals, the worker collectives are big supporters of the politicians?

So far, the cornucopians show no waking up from the notion all the stuff ever-increasing numbers of people need for their lives will magically come from somewhere. And the religiously-pushed growth ethic that fosters the phoney notion the state can grow out of problems caused by overgrowth still rules over the gullible and innumerate. The wealth-diverting Californian (and American, for the most part) political way is to keep the 80% of us slobs below the income gap thinking economic downturns are ephemera and that land of milk and honey is just a little way off if we will only play along.

Comment 4
Wed, January 26, 2011 12:11pm
Kevin Barron
All my comments

“Public employee pensions are a problem, but I’m not sure we’ve determined what kind or how large a problem they are. “

There are global-warming naysayers, and that seems like a public pension nayquote. Barry, the facts/figures/forecasts/etc put the IOCC to shame.

Agree it’s not the only problem, but it’s on the “Mt Olympus” of problems.

And revenue itself it’s so much the problem, as prior revenue forecasts and the increasing regulatory environments effect on revenue. In case you haven’t noticed, many companies HQ’d in California have the bulk of their employees either offshore or out of state. To think it’s primarily salary a la real estate/COL is folly. California likes business less and less, but needs it’s revenue.

“the cornucopians show no waking up from the notion all the stuff ever-increasing numbers of people need for their lives will magically come from somewhere.”

No magic, we were just told we’ll just keep taking from the top 2%. Adn those big evil companies that give us iPads, Google search engines, local biopharma, oh and the villans in oil companies, the ones that give us gas that is the same price (inflation adjusted as it was in 1981, and it about 33% more than it cost 90 years ago (again, inflation adjusted, but realizing we have to take the lead out, meet 13,419 EPA standards, wind up with over/under stock of “winter blends” and “summer blends”. You know… those companies that are killing America anyways…

The rest of your rhetoric Carl amuses me… your zero-population growth rants.

Comment 6
Thu, January 27, 2011 5:38pm
Carl May
All my comments

Whoosh. Count Kevin among those who wishes the physical realities of our material world weren’t so.