City Manager's Response
to Comments Regarding CalPERS
Tuesday, March 4, 2003
Dear Editor:
In response to Mr. Styritzel’s letter to the Lodi News-Sentinel regarding the California Public Retirement System (CalPERS) on March 1, 2003, I agree that there are serious problems. However, let’s use the facts to evaluate the problem. First, if you will go to the CalPERS web site (www.calpers.ca.gov/about), you will see that CalPERS went from assets of $172 billion on December 31, 1999 to $133 billion on October 31, 2002. It looks to me like they LOST $39 billion. Mr. Styritzel said they EARNED $5.2 billion.
Secondly, Mr. Styritzel implied that the City of Lodi may be using CalPERS “trust” funds to finance the City’s General Fund. This is illegal and impossible. The City of Lodi transfers funds to the CalPERS trust account each year based on what we are billed by CalPERS. At that time, we no longer have control of the funds; however, Governor Davis did try to use CalPERS funds last year to balance the State budget and was stopped. This year he is offering State employees an incentive to retire early and then hiring them back at their same job as “consultants”. I believe this results in CalPERS funds being used to partially balance the State budget.
Thirdly, in his letter, he said CalPERS only lost .04 of 1% and had an asset value of $150 billion. Again, on the CalPERS web site you will see that as of June 30, 2001, they had lost 7.2% of their portfolio and as of June 30, 2002, they had lost an additional 5.9%. This explains the loss of $39 billion at CalPERS.
Fourthly, I do agree with Mr. Styritzel that employee pensions are not jeopardized by these losses and that they are protected by a well-diversified portfolio; however, the guarantee is the fact that the employers (California cities and schools) will be asked to make up their losses by paying higher rates in the future. That is in part why our rates are going up so dramatically. Like everyone else, CalPERS lost money in the stock market; however, they have done an excellent job over the long run investing their money. But I do question some of the CalPERS investment practices.
Finally, the City publishes its audited Annual Financial Report each year and it is presented to the City Council in January. This report provides the latest information from CalPERS. In this report, it shows that the City’s liability for pensions is $125 million and that the assets in the City’s accounts at CalPERS is $140 million. This means that the City is over-funded 68.6%. In addition, the City HAS continued to pay into CalPERS even though we were are considered “super-funded”. In 2002, we paid PERS $2 million and in 2003 we paid CalPERS $2.4 million. I, too, ask why are CalPERS rates rising so dramatically?
On March 18th, the City Council will have a Shirtsleeve meeting at 7:00 a.m. at the Carnegie Forum with a representative from CalPERS; an actuary who advises the City on its CalPERS rates; and the City’s financial advisor. At this meeting they will discuss the projected rates that the City of Lodi will be paying in the future for its employees. The public is invited to this meeting and it should be of interest to those who would like to learn more about CalPERS.
H. Dixon Flynn
City Manager