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Lockyer: Pension funds should dump gunmakers

California Treasurer Bill Lockyer wants the state’s gigantic public pension funds to divest themselves of investments in any firearm manufacturer that makes guns banned in California.

Lockyer said Monday that he has asked staff at the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to identify all their investments in gun manufacturers. As treasurer, Lockyer sits on both systems’ boards.

The request follows reports that CalSTRS indirectly owns a part of Bushmaster Firearms International, the North Carolina-based maker of the .223-caliber assault rifle that Adam Lanza used in his murderous spree Friday at the Sandy Hook Elementary School in Newtown, Conn. Lanza killed 20 children, six adults and himself.

“STRS and PERS should not be investing in any company that makes guns that are illegal in California, especially ones used to kill 20 innocent children and 6 innocent adults,” Lockyer said Monday.

Reuters reports CalSTRS had invested $751.4 million with Cerberus by the end of March 2012, according to its website. Cerberus owns Madison, North Carolina-based Freedom Group Inc., which includes Bushmaster.

Bushmaster’s XM15 line of rifles are specifically banned by California’s assault weapons law.

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California parents value college but aren’t saving

California parents value a college education more than a good-paying job for their kids, but most have not started saving to help pay for that education, according to a new survey conducted for ScholarShare, the state’s “529” college savings plan.

“The good news is parents realize the importance of a college degree to their kids’ future and economic prosperity,” State Treasurer Bill Lockyer, who chairs the ScholarShare Investment Board, said in a news release. “The bad news is higher education costs continue to rise, and most parents have not been able to start making preparations to help ensure their family can afford those costs. A ScholarShare account can help fill that critical financial need.”

Named for the section of the IRS code under which they were created, 529 plans let earnings on investments grow tax-deferred, and disbursements, when used for tuition and other qualified higher education expenses, are federal and state tax-free. ScholarShare accounts can be opened with as little as $25, or $15 when combined with regular, automatic monthly contributions of at least $15. The program has no annual account maintenance fee, no income limit and offers a high maximum contribution cap of $350,000. ScholarShare now holds more than $4.4 billion in assets in about 250,000 accounts.

The survey conducted by Hart Research Associates found 84 percent of parents considered it “very important” that their children attend college. That’s a higher percentage than those who prioritized having a good-paying job (75 percent) or owning a home (69 percent). Latino (93 percent), black (88 percent) and Asian (90 percent) parents said attending college was “very important” at significantly higher rates than white parents (72 percent). And 78 percent of parents overall said a college education was more important now than it was 10 years ago.

The survey also that when asked what they would be willing to do to improve their current financial situation, 65 percent of parents would be willing to delay their retirement and 46 percent would be willing to save less for their retirement. But only 45 percent said they would delay saving for their kids’ college education and 40 percent said they would save less for their kids’ education.

Yet most parents worry about being able to afford their kids’ tuition: 53 percent said they’re “very concerned” about their ability to pay.

Only 43 percent of parents have a college savings account. Parents who have been saving more than 10 years have set aside an average of $25,193, compared to $14,733 for those saving 6-10 years and $4,663 for those saving five years or less.

Fifty-nine percent of parents surveyed said it’s certain or very likely their children will attend a University of California or California State University school; 51 percent said it was certain or very likely their children would go to a community college; and only 26 percent said it was certain or very likely their children would attend a private university. (That adds up to more than 100 percent because the “very likelies” have some either-or.)

And 44 percent of parents said they expected scholarships or grants to cover at least half of their children’s higher education costs; 35 percent said cost coverage would come from their own savings and income, and 28 percent said it would come from student loans. (That adds up to more than 100 percent because parents expect to use more than one funding source.)

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Lockyer quits pension study panel, blasts report

State Treasurer Bill Lockyer today resigned from a pension advisory panel of the Stanford Institute for Economic Policy Research, questioning the methodology and conclusions in the think-tank’s new public pension study.

The SIEPR study, released today and authored by former Assemblyman Joe Nation, D-San Rafael, estimates the state’s unfunded public worker pension liability at almost $500 billion and calls for pension reforms including benefit reductions for current employees.

“When it comes to public pensions, maybe SIEPR should stand for ‘Stanford Institute to Eviscerate People’s Retirement,.’” Lockyer spokesman Joe DeAnda said today. “Nation approached Lockyer to join the advisory panel after Lockyer strongly criticized SIEPR’s April 2010 report on public pensions. Lockyer agreed to join the advisory panel because he believed SIEPR was interested in producing more thoughtful, evidence-based reports. Unfortunately, that turned out not to be the case.

“While Nation may have listened selectively to certain advisors, Lockyer certainly wasn’t one of them, and his concerns about methodology and other issues were ignored. SIEPR clearly has a public pension agenda, and it doesn’t include legitimate research.”

UPDATE @ 4:40 P.M.: This just in from Joe Nation (you’ll need to read Lockyer’s criticisms of the report after the jump in order for this to make sense, but I didn’t want to bury Nation’s reply) —

I am disappointed that Treasurer Lockyer has decided to withdraw from our effort to reform California’s public employee pension systems. I do not recall any specific suggestions from him (since he was unable to attend any meetings) or from his staff on methodology, but his statement suggests that he believes that we should have considered only one discount and investment rate, 7.75 percent. In direct response to his statement:

Table 8 of the report is correct. The “roughly 6 percent” rate noted is indeed the discount rate used by most corporations for reporting the present value of pension fund liabilities. As the Treasurer no doubt knows, corporations are required to use a different discount rate for reporting liabilities than the rate they use as an assumption for returns on assets set aside to meet those liabilities.
Regarding investment return assumptions, I share the Treasurer’s concern about corporations that — like California’s pension funds — are employing unrealistic assumptions such as the 7.8 percent figure he refers to in his statement. I reference Warren Buffett’s letter on this very point. As he points out, when it comes to dangerously inflated assumptions of returns on pension fund assets, both corporations and governments are guilty.

Our report assesses pension financial health using discount rates from 4.5 percent to 9.5 percent. Even in the 9.5 percent scenario, which is very unlikely based on either historical performance or current projections, CalPERS and CalSTRS are unable to meet their obligations. Lockyer’s fixation on a 7.75 percent rate is precisely the reason that pension systems find themselves in poor conditions. And repeating private sector mistakes doesn’t help us. Just as we saw with Lehman, AGI, Bear Sterns, and others, understating debt and betting our financial future on unrealistic assumptions will only make the problem worse. In fact, each day that we ignore the public pension crisis costs California $3.4 million that could be better spent on education, social services, and protecting our environment.

Finally, other researchers have concluded that CalPERS and CalSTRS are in worse shape than we describe. Alicia, Munnell, a Democrat member of Clinton’s Council of Economic Advisors, uses methodology that put CalPERS at 56 percent funded and CalSTRS at 39 percent (far lower than our assessments). A consensus is growing that aggressive action is needed to reform our broken pension system. I hope Mr. Lockyer will consider re-joining that effort.

Grant Boyken, Lockyer’s top pension aide, e-mailed Nation today with Lockyer’s resignation. Read the full text of that e-mail, after the jump….
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Lockyers hosting Assembly fundraiser tonight

State Treasurer Bill Lockyer and his wife, Alameda County Supervisor Nadia Lockyer, are hosting a fundraiser tonight for Assemblyman Bob Wieckowski, D-Fremont, with some other Assembly candidates on the guest list as well.

Tickets to the wine reception at Wieckowski’s home start at $50 with sponsorships ranging up to $3,900, the maximum personal contribution to a legislative committee allowed by law.

Wieckowski, a freshman and former Fremont City Councilman, won the 20th District seat in November with 73 percent of the vote to Republican nominee Adnan Shahab’s 27 percent; Shahab has formed a committee to run again in 2012.

It won’t be nearly the same race, however. A first-draft map issued recently by the California Citizens Redistricting Commission shows the district in which both Wieckowski and Shahab reside would be markedly different from the 20th District’s existing lines.

Bill Lockyer’s fundraising prowess is legendary. His own Lockyer for Treasurer 2010 committee finished 2010 with just under $3 million in the bank, after both repelling a challenge from Republican nominee Mimi Walters and giving his wife’s supervisorial campaign more than $1.5 million. He has formed a committee to run for state controller in 2014.

Among those scheduled to attend tonight’s event, according to Facebook, is Peralta Community College District Trustee Abel Guillen of Oakland, who has formed his own committee to run for Assembly next year. Guillen lives in the 16th Assembly District, where Sandre Swanson will be term-limited out.

Also scheduled to attend tonight is Dr. Jennifer Ong, a Hayward optometrist who has formed a committee to run next year in the 18th Assembly District, where Mary Hayashi is term-limited out.

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The buzz on Jerry Brown’s May budget revision

From state Senate Republican Leader Bob Dutton, R-Rancho Cucamonga, and state Senate Budget Vice Chair Bob Huff, R-Diamond Bar:

Bob Dutton“Senate Republicans believe Governor Brown is moving in the right direction by making education and law enforcement funding a top priority. We also applaud the governor for embracing Republican proposals of paying down state debt and providing some job-creation incentives.

“But the May Revise goes too far on taxes and not far enough on reforms.

“Rather than curbing government spending, the governor’s revised budget still sets the state on a course of excessive spending growth in the future – spending that relies on tax increases.

“With $6.6 billion in new revenues, Republicans are right – we don’t need, and it’s ridiculous to ask voters for, five years of new taxes.

“Clearly the California economy is trying to recover, which makes it critical that the state budget include reforms that Senate Republicans have been seeking from day one – a hard spending cap, pension reform and business-regulation relief.

“The Senate Republicans’ long-terms solutions provide the stability small businesses need to grow and create jobs.”

From State Senate Budget Committee Chairman Senator Mark Leno, D-San Francisco:

Mark Leno“The revised budget proposal Governor Brown released today makes use of the state’s unexpected improved revenues in a fiscally responsible way and addresses California’s structural deficit so that we do not dig the hole any deeper. While our cash forecasts are encouraging, we are far from resolving the long-term deficit problem, and must not fall into the trap of utilizing one-time solutions, borrowing and deferments that would only aggravate the problem. This revised budget is an honest and balanced spending plan that extends current revenues to stimulate the economy, secure jobs and protect public investments in K-12 education, universities, public safety and social programs. I am committed to working with Governor Brown, my colleagues in the Legislature and the people of California to help our state recover and flourish once again.”

From Assembly Republican Leader Connie Conway, R-Tulare:

Connie Conway“In our ‘Roadmap to a No Tax Increase Budget,’ Assembly Republicans showed that we can protect funding for the classroom and law enforcement without raising taxes. We call upon the Governor to stop trying to raise people’s taxes and start working across party lines on a no-tax increase budget compromise. Protecting our core priorities, reforming state government and bringing back private sector jobs – without raising taxes — must continue to be our focus as we work to get California back on track.”

From state Treasurer Bill Lockyer:

“The Governor deserves credit for not succumbing to expediency and remaining focused on California’s longer-term fiscal future. The plan reflects an understanding that, despite welcome revenue increases, the State still faces significant budget shortfalls not just in the next fiscal year, but in subsequent years. It closes those ongoing deficits with a balanced approach that solidifies California’s fiscal foundation without short-circuiting the state’s economic recovery.

“The plan’s effect on our ability to borrow $10 billion to meet the State’s cash-flow needs remains unclear. If full implementation of the Governor’s FY 2011/12 plan remains contingent on voter approval of taxes, my office will not be able to complete a cash-flow borrowing transaction unless the final adopted budget includes real, inescapable, quickly-implemented spending cuts that would be triggered if voters reject the taxes.”

Lots more, after the jump…
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Lockyer: Let further cuts start in GOP districts

State lawmakers who want an all-cuts budget because less government is better should get their wish starting with their own districts, state Treasurer Bill Lockyer said this morning.

Lockyer, visiting the Bay Area News Group-East Bay’s editorial board, said that when these lawmakers – many of whom already serve the state’s most recession-stricken areas – start hearing from their constituents about even deeper cutbacks in police and fire services, public schools and universities, social services and the like, they’ll soon think the better of stonewalling a public vote on Gov. Jerry Brown’s plan to extend current tax rates for five more years.

It’s a put-your-money – or lack thereof – where-your-mouth-is tactic.

Short of even more painful cuts atop those already signed into law, Lockyer sees no end to the current deadlock, he said.

Refuting the common “it’s a spending problem, not a revenue problem” meme, Lockyer noted that under Gov. Ronald Reagan, general fund spending amounted to about $5.02 for every $100 of wealth in the state. If Brown’s tax extensions are enacted, the rate would be about $5.05 per $100 – basically flat since 40 years ago.

He came loaded for bear with a packet of graphs and charts showing the huge spending reductions that an all-cuts budget would entail, and as well as tracking various scenarios under various kinds of spending caps. The long and short of it is that Brown’s plan would allow the most growth in general-fund spending over the next five years; about 4.7 percent; a spending cap based only on personal income growth would allow about 4.4 percent growth; a spending cap based on growth in population and the Consumer Price Index would allow for about 2 percent growth; an all-cuts budget espoused by Republicans would allow for about 1.7 percent growth; and ACA 4, a rainy-day-fund expansion measure passed by the Legislature last year and now awaiting voter approval, would shrink spending by about 0.7 percent.

“The dirty little secret is that neither D’s nor R’s know what creates jobs,” he said, noting that Democrats tend toward dumping more money into public spending while Republicans look to “make the rich richer.” There’s less evidence for the latter’s efficacy, he said, but both reflect more ideology than actual track record.

He said although he favored moving in January to put a tax-extension measure on the ballot without Republican votes, he understands why Brown might’ve felt “the optics necessitated the exercise” – an effort to allow for bipartisanship, even if Republicans “were always going to find an out” from signing onto the plan.

“The people who want less government ought to be at the front of that line to get less government,” he said, even as Brown “has to keep doing what he’s doing, keep engaging Republicans.” The task is to “have people try to understand what an all-cuts budget means, in very specific terms.”