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AD15: Candidates face CCT ed board

By Lisa Vorderbrueggen
Wednesday, October 20th, 2010 at 11:20 am in 2010 election, Assembly District 15.

I sat in on yesterday’s editorial board meetings with the two Assembly District 15 candidates, Democratic incumbent Joan Buchanan and GOP nominee and San Ramon Mayor Abram Wilson.

The editorial board members asking the questions included Times Publisher David Rounds, Editorial Page Editor Dan Hatfield and editorial writer and columnist Dan Borenstein. (I am not a member of the editorial board and have no vote on the endorsement selection, but I occasionally sit in on the interviews for news-gathering purposes.)

Watch portions of the meetings below.

In Wilson’s session, the board focused heavily on matters related to the salary and pension of San Ramon City Manager Herb Moniz. The mayor has come under heavy criticism for running as a fiscal conservative at the same time he defends Moniz’ pay, which was the highest in California in 2009.

But what emerges from the discussion is the massive gap between Wilson and members of the editorial board when it comes to knowledge of how public pensions work in California.

For Buchanan, the issue is disclosure of public employees’ salaries, which the Assemblywoman has opposed when it comes to front-line workers such as school teachers and janitors. But Buchanan has reversed her stance after the scandal in the small southern California city of Bell, where investigators have uncovered wildly excessive salaries and misuse of public funds.

The Contra Costa Times, among other news organization, successfully sued to force the release of public employees salaries and pensions and has used that data to help uncover abuses such as pension spiking.

Watch portions of the two editorial board meetings below.

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  • Captain

    OK. I’ll guess I’ll start by saying that I’m a former democrat that is currently registered as an independent and I support candidates that are fiscally conservative. I like the TEA Party Message of smaller government, fiscal conservatism, and NO MORE TAXES. Does that make me a Republican? I certainly lean that way because I’m extremely concerned about union control of our states: finances, policy, and the democratic politicians themselves. I wanted to vote for Abram Wilson but had concerns about his explanation of the San Ramon CM’s compensation. It’s this type of excess that allows for comparison city salary surveys that other cities use to justify the ratcheting-up of their compensation.

    I drug my girlfriend to the Tea Party at the Pleasanton fairgrounds. I said let’s just go and see what this thing is all about. We got there late, about 3:30, and approached the one of the first booths, the Tri-Valley Tea Party booth. The gentleman showed me which speakers were coming up and one of them was Mr. Wilson. Perfect, I wanted to hear what he had to say.

    I think the first issue he mentioned, after his opening comments, was that he was fiscally conservative and that San Ramon’s pensions were 100% fully funded. Zero pension debt. I was shocked and in disbelief. How San Ramon can be the only city that is 100% funded, that I know of, was something I was skeptical of. I turned to my girlfriend and said, “he is either lying, clueless, or being a politician. The only way San Ramon’s pension is 100% funded is if they’ve re-financed their unfunded pension liability with Pension Obligations Bonds. If that’s what they’ve done it’s still pension debt. It’s just moved to a separate category. They’ll be paying for work already performed for the next 30 years.” When Wilson concluded the MC said he would be taking questions over by the Harmer booth. I wanted to ask him about his comments. It was 4:55, and part of the deal with my girlfriend was that we were home by five to see the Giants game. We were already behind schedule.

    So thank you to the CC Times for asking the questions that I wanted answers to, and thank you Daniel Borenstein for all the hard work you and your staff have done on the pension issues. I must say watching Mr. Abrams trying to answer these questions was beyond painful. I have to conclude that he wasn’t lying when he spoke at the Tea Party event, and he wasn’t just being a politician; he was just clueless. It’s hard to understand how he could be so ill informed on the issues when some of the worst pension abuses are happening in his own backyard, he is running as a fiscal conservative, and only Orange county has written more than the CC Times on the pension issues/abuse. I don’t think he ever clued in or understood the editorial boards questions.

    I like Abram Wilson the person, but that interview was, again, painful to watch. I was hoping to vote for him, but not sure that’s possible now. I just don’t think he’s prepared for a role in Sacramento. I guess I’ll have to watch the Joan Buchanan interview before I make a final decision.

  • Algernon Moncrief

    Most elected officials could not tell a defined benefit plan from a hole in the ground. Witness this year’s legislative action relating to Colorado PERA.

    WORSE THAN BERNIE MADOFF – COLORADO’S 2010 PENSION THEFT.

    What do the Colorado Legislature and Bernie Madoff have in common? Both stole retirement benefits that were earned over many decades.

    We have 80-year old widows in Colorado, who worked hard for the State for thirty years, who trusted the State and made their pension contributions like clockwork for decades, only to see their contracted retirement incomes stolen by the State. This money was taken out of their pockets because the State failed to make pension contributions as recommended by their own actuaries, to the tune of $2.7 billion in the last seven years. If the state had responsibly followed the recommendations of its actuaries, the PERA trust funds would now be more than 90 percent funded. The Colorado pension shortfall is primarily a result of legislative action over the last decade, Bill Owens, et al, in 2000 cut contributions and allowed the purchase of cheap service credit, and now the Legislature wants retirees to bear the cost of legislative ineptitude. In testimony to the Legislature even the proponents of the reform bill acknowledged this historic under-funding of the pension. PERA claims that the pension fund was unsustainable without their actions, because the funded ratio of the pension stands at 68 percent. However, the funded ratio of the pension was in the low 50 percent range in the 1970s, and the pension still exists. If a funded ratio of 68 percent this year is unsustainable, how has the pension been sustained since the 1970s when the funded ratio was in the 50s? Not much of a rationale for breaking retiree contracts.

    If you find yourself short on funds, you rearrange your spending priorities, or raise additional revenue, YOU DON’T BREAK CONTRACTS! Why would the Colorado Legislature choose to break pension contracts before breaking other contracts, such as construction contracts? How can a state that is in default, that breaks contracts, maintain its credit rating?

    The fact that what Colorado did to public sector employees in this year’s pension reform bill (SB1) cannot be done to private sector employee pensions under I.R.C. Section 411(d)(6), says quite a lot about the moral underpinnings of SB1. This federal “anti-cutback rule” for private sector DB plans permits changes to the plans only if the changes operate on a prospective basis.

    Colorado PERA’s actions make it clear that the time has come for the inclusion of public defined benefit plans under all Internal Revenue Code Qualified Plan requirements. It is now obvious that allowing the states to regulate public defined benefit plans does not afford equal protection to state and local government employees.

    PERA has put it in writing in pension plan materials over the years, that the COLA “is guaranteed”. Members purchasing service credit gave PERA thousands of dollars based on these materials. Money that they could have left in their 401Ks. PERA officials now claim that the members cannot rely on their pension plan documents regarding their defined benefits. However, Goldman Sachs recently paid a half billion dollar settlement to the SEC based on promises made in plan documents. Apparently, some judges believe that plan documents can set forth contractual terms. In any event, the contractual pension language is set forth clearly in Colorado law.

    Colorado’s retiree COLA (and those of 36 other states) are “automatic COLAs” as opposed to “ad hoc COLAs” (which exist in about a dozen states and can be periodically altered.) Colorado’s COLA of 3.5 percent is guaranteed in Colorado law in an identical fashion to the base retirement benefit itself. So, the PERA retiree’s claims are based on both statutory language and plan documents. This 3.5 percent COLA won’t look so hot in the coming years if inflation spikes.

    The Colorado pension reform bill’s (SB1) proponents should accept that states cannot legislate away a debt for work that was completed in the past. What the state is attempting is a claw back of deferred pay. The bill’s sponsors should accept that states cannot avoid their contractual obligations simply because they prefer to spend resources on alternative public services or obligations.

    Some pension reform advocates argue that public sector pensions should be held to the same standards as private sector pensions. My response to that is “I agree wholeheartedly!” Under the federal Internal Revenue Code reducing accrued pension benefits for private pensions is illegal. If the public sector PERA pension were covered under this I.R.C. law and held to the same standards as private pensions, then last February’s theft of accrued benefits by the Colorado Legislature would not have been attempted. Essentially, federal law provides higher protection to private pensions than it does to public sector pensions. Public pension members are forced to appeal to the courts to prevent the theft of their benefits. (Happening.)

    Members of the Legislature pointed out many times, to no avail, that the so called “pension reform bill” was a violation of contracts to which the State was a party. Here are some examples (on tape from the floor debate):

    Rep. Lambert: “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”
    Rep. Swalm: “We’re breaking new territory in this state by trying to reduce the COLA. We’re probably going to get a lawsuit out of that. If we cut the 3.5 percent COLA there will be a lawsuit.
    Rep. Gerou said that it is a disservice to the state to rush a bill through when her committee knew that it will go to litigation, and said what we are doing to the retirees is wrong.
    Rep. Delgroso said that it is tough for him to tell people that he is going to break their contract.
    Senator Harvey said “We have made a commitment. We have a contract with current retirees. That is already in place. Reforms should be made for new hires. We do not have that commitment to new hires.
    Senator Spence said “The bill places an unfair burden on retirees.”
    Senator Scheffel said “We are breaching our promises to existing retirees.”
    Senator Lundberg said “This bill is a deal that was cut before this body met.”

    The cavalier abandonment of contractual obligations brings shame to the state of Colorado, aligns Colorado with Third World countries like Bolivia. No person, Republican or Democrat should countenance the breach of contracts. Conservatives support contract law as the foundation of capitalism.

    So, why is the SB1 theft more egregious than the Madoff theft? The Colorado Legislature stole money from retirees who are less well off than Madoff’s pre-qualified hedge fund clients.

    The Madoff victims were taking risks to seek a higher return on their investments, the Colorado PERA victims simply trusted that their contracts would be honored.

    Colorado PERA and the Legislature justified their theft on false premises, citing 2008 market numbers when they knew the markets had recovered approximately 20 percent in 2009. PERA’s General Counsel stated on tape before the 2010 legislative session began that he expected a pension return “north of 15 percent”) for 2009.

    It appears that Colorado PERA used the very resources of PERA members to hire a team of lobbyists (up to a dozen) to take earned benefits from those same members. That’s just insane.

    Many members of the Legislature acted in ignorance. Spoonfed by the lobbyists, they ignored the legal rights of PERA retirees, and swallowed whole without question the assertions of PERA’s CEO and its chief legal counsel. If the members had read any case law, (for example, the state defined benefit pension case law summary by Prof. Amy Monahan at the University of Minnesota School of Law, Google it!), or even the 2004 Colorado AG opinion on pension benefits (retiree benefits are inviolate) they would not have supported the bill.

    PERA’s own General Counsel was quoted in a 2008 Denver Post article as follows: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments, Smith said.”

    Although members of the Colorado PERA Board of Trustees are fiduciaries, charged to act only in the interests of the members and the retirees, they recommended SB1, acting primarily in the interests of PERA employers who were concerned with keeping their contribution rates low.

    Adding insult to injury the Legislature stole more money than it needed. The pension theft bill sought to increase PERA’s funded level to 100 percent, although an 80 percent funded level is considered well-funded among pension experts. You don’t have to pay off your pension tomorrow, neither does the state and other PERA employers.

    There were many other options available to address the pension shortfall, options that have been adopted, or are under consideration in dozens of states. See the legal, prospective pension reform that was accomplished in Utah this year.

    Members of the Legislature have taken an oath to uphold the constitution and yet voted to violate the Contract Clause and the Takings Clause. Proponents of the bill refused to see that the retiree COLA (annual benefit increase) is set forth in Colorado law with the same force, status and weight as is the base retirement benefit. Only tortured legal reasoning, and wishful thinking, lead them to believe otherwise.

    The Legislature had the ability to investigate the legality of its actions up front, but chose to act with no legal advice. Throughout the floor and committee debates on SB1 the members displayed an ignorance of, or an intentional disregard for the relevant case law. They failed to conduct the due diligence expected of an elected body. State legislatures across the nation are examining the legal limitations on their actions regarding pension reform, exploring all legal options prior to acting. (PERA claimed to have a legal opinion to justify their actions, but never released it.)

    PERA has been disingenuous by claiming that the reform bill represents “shared sacrifice” among employees, employers, and retirees, by not making it clear that retirees bear most of the burden of their proposed reforms, for many retirees the confiscation of benefits will reach one-quarter of their total retirement benefits received over the rest of their lives. In debate, the bill’s sponsors said that retirees would bear 90 percent of the cost of the reform. In any event, I am not relieved of my contractual obligations just because someone else has better terms in their contract. The entire premise is ludicrous.

    While ignoring its own contractual pension obligations (underfunding of $2.7 billion in the last seven years according to PERA’s own actuaries) the State of Colorado has pumped half a billion dollars into pension obligations that are not its responsibility, those of local governments (Old Fire Police Pension obligations).

    The Legislature made a pact with unions to support the “pension reform bill” (SB1) to protect union jobs. Incredibly, these union members tossed their former members, their retired “brothers” under the bus. From the beginning the plan was “let’s steal the money we need from retirees.”

    Finally, Madoff eventually admitted to his crime, but the Colorado General Assembly is still pretending that their theft of pension benefits is something to be celebrated. They tout it as a “bi-partisan accomplishment. This will be a long-standing embarrassment to and black mark on our state.

  • John W

    Re: #1

    Early on, I planned to vote for Wilson. Under his watch, San Ramon (where I live) seemed to be a pleasant exception to municipal mis-management in CA. Too many Buchanan votes looking out for the public employee unions. Her role in the fake pension spiking reform bill. Her opportunistic decision to run for Congress before she had done anything as a new Assembly member, wasting more than a million dollars of her family’s personal wealth in the process. To my surprise, I ended up voting again for Buchanan anyway. If she is re-elected, I’m hoping she has learned from the public backlash to some of these things. I will never for anybody who signs the Grover Norquist Club for Growth “pledge” as Wilson did. You make pledges to your constituents, not to outsider political blackmailers like Norquist. Wilson’s apparent cluelessness about overly-generous compensation packages in San Ramon and about pensions just sealed the deal for me to stick with Buchanan, in spite of her faults to date. Hope I don’t end up regretting it.