Saturday, December 5, 2015

The CalPERS Agenda Item Up For Discussion At Tuesday Evening's Sierra Madre City Council Meeting

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At Tuesday's City Council meeting the long awaited big discussion about CalPERS is scheduled for the enlightenment of all. Courtesy of Councilmember Denise Delmar, who asked the Mayor to agendize this long needed discussion.

This is a controversial topic in town, with many here believing it is an example of how Sierra Madre's "full service government" has become an onerous burden to taxpayers dwelling in a small burgh of just about 11,000 living souls.

Unfortunately, this item is near the bottom of a very long list of things. One that starts with the earnest speeches of all the Rose Parade Princesses, and culminates with what is likely to be a near endless City Council rumination on how best to explain to skeptical residents the third UUT increase ballot initiative in three elections. The first two having failed at the polls.

Ironically, the proposed hike in Sierra Madre's utility taxes is in large part dictated by the need to fund CalPERS obligations. So they are not completely unrelated. Here is where this item now stands in Tuesday evening's agenda line up.


It appears to me that Mayor Capoccia might have decided to bury this one. I doubt the City Council will actually get to it, and even if they do there won't be very many people left to watch. Which is unfortunate. The City Manager will hustle her way through it as she often tends to do with unwanted late items, and then it will be received and filed.

That said, I thought I should cut to the chase. The staff report for this thing is a little long and mostly filled with helpful examples of how City Hall did various things to try and save the city money. Like any employees, they do try and please the boss. But honestly, who really cares that much?

So here is the summary.


Then, once you've worked your way through six pages of some fairly hard slogging, you will find the numbers you are actually looking for. Not that city staff's efforts to hold down CalPERS costs, or take full advantage of PEPRA, do not make for exciting reading.

Here is Sierra Madre's yearly CalPERS nut.


If you can explain why the city's budgeted CalPERS costs jumped by nearly three hundred thousand big ones this fiscal year, do share it with us here. That 21% increase, which is nothing to be sneezed at, is not actually detailed very much in this staff report. 

My guess is it's because CalPERS's optimistic past investment earnings projections didn't actually pan out (link), and the difference now needs to be peeled bleeding from the hides of the taxpayers.

By the way, $1,413,000 divided by 11,000 people is $128 per lucky and lovely Sierra Madre resident. On the Josh Moran Tax Scale that's 32 lattes' for every man, woman, child and infant. If you go to Starbucks. However, if you go to Bean Town the latte' count jumps to just under 43. And quite honestly, their lattes' are consistently better.

The link to the city's CalPERS agenda report is found here.

sierramadretattler.blogspot.com

69 comments:

  1. I believe you're right about CalPERS making us pay for their lousy investment as well as high pay to the people that manage that investment account. I thought we already paid an additional 300,000 this year but I'm not sure it is shown here. There is supposed to be another 300,000 for 2016.

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  2. The 300k was the shortfall in projected earnings. A new Calpers rule to pay the shortfall each year . Next year's shortfall will be 400k.

    Try to find this in the budget.

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  3. You could build a new Library with that kind of money.

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    1. Or buy a lot of pipes.

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  4. Off subject but, at 1:15 the afternoon of the 2nd. on the east bound 210 fwy at Baldwin 2 SMPD cars and personnel had someone pulled over. What the heck is that all about and does that mean SM had no police to respond to our emergencies? I don't get that whole 2 car routine. There was a highway patrol car there also and that being the case why did it take 2 of our cars to be there? So we must have 3 cars patrolling because they surely wouldn't leave the city unprotected, would they? Anyone know what that was all about?

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    1. Maybe it relieves the boredom of having to patrol a town where very little ever happens?

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    2. Any little chance they get, they will send out a few cars just to keep the moving parts from freezing up whether its the cars or the people because ot alot happens in Pasadena although they expect to get paid like they are working the beat in South Central.

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  5. Leave no government worker behind.

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  6. Off the subject but,the lattes' @ Bean Town suck.

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    1. Only sellouts drink corporate latte'.

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    2. I think any of the mixed drinks are ok at Beantown, but the plain coffee? Stale - made from old beans. If you want a real cup, go to Peets.
      On topic, but hey, it's the Tattler:
      Are we trapped into Calpers for good? What are real choices here?
      I thought there was some kind of penalty for stopping.

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    3. In the agenda report there is a section about what it would cost to get out. Looks pretty dire. Kind of like the contract someone might sign when selling their soul to the Devil. Apparently somebody sold ours.

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    4. A lot of bad stuff went down during the Shenanigan Era.

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    5. I used to think that 8:58, that is until I learned that Starbucks employees get health insurance, 401(k) matching, and other benefits that the independents can't provide.

      I hated seeing a group of 20-somethings working herd to create their own funky coffee atmosphere and develop customer traffic at a particular location only to have Starbucks open across the street and take away most of the business with its corporate blandness.

      I like to support small businesses, but let's face it, there are more workers than business owners, so the greater good, ya know.

      If someone can talk me out of this position with solid facts, I wish s/he would.

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  7. All 11,000 + living souls in Sierra Madre are standing on quicksand when it comes to CalPERS retirement donations for civil servant's and alike the sooner the voting public changes over to LACSD safety services the better then UUT bogie-man will go away. With rapid increase in CalPERS recipients retiring the only logical justification is to increase the contribution rate ASAP - remember government is the only racket that can cover it's losses bad discussion by simply increasing taxes or other forced contributions to make up for BAD results.

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  8. I believe a bankruptcy of some type is the only way out of Calpers?

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    1. They'll take your money. In crime circles it's called a ransom payment.

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    2. Kindly share which provisions of bankruptcy law have led to the formulation of your belief, 9:18.

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    3. CalPERS gets their share in BK. City of Vallejo paid all their CalPERS obligations. San Bernardino is fighting to stiff CalPERS. In litigation.

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    4. Following the Vallejo example you cite, the suggestion then is file for bankruptcy and still pay the entire CalPERS obligation. Seems a bit strange take such a drastic and expensive legal step and end up doing what the city is already obligated to do.

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    5. @ 10:25 here ya go. http://focusonpublicbenefits.com/?p=355

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    6. Aslo 10:25 It was asked as a question,not a statement that's what this symbol means (?) commonly referred to as the question mark.
      But I'll do 10 seconds of research for you.

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    7. 9:18 stated a belief about bankruptcy for SM, but not the basis of the belief. I requested the basis of the belief.

      I saw the ? mark as applying to the word "only" in the comment. Otherwise we are left with 9:18 actually questioning whether s/he was actually entertaining a belief.

      As to Stockton, you may wish to read the opinion, which, while perhaps slapping CalPERS down a bit with respect to its actual stake and standing in the Stockton BK proceedings, ultimately did not reduce the pensions of the city workers.

      Based on a cursory reading of the opinion, it also would appear that the SM could even terminate CalPERS prior to bankruptcy or insolvency, thereby triggering a sizable termination charge (due to reduced returns in the termination pool) and a termination lien. With a perfected termination lien, it may be difficult or impossible to alter pension rights in BK, thus protecting existing city worker pensions.

      But I'm not a BK lawyer, so what do I know other than the old adage "Watch out what you wish for; you might get it."

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    8. Based on a cursory reading of the opinion, it also would appear that the SM could even terminate CalPERS prior to bankruptcy or insolvency, thereby triggering a sizable termination charge (due to reduced returns in the termination pool) and a termination lien. With a perfected termination lien, it may be difficult or impossible to alter pension rights in BK, thus protecting existing city worker pensions.
      ==
      Did you even READ Judge Klein's ruling? The "termination lien" is useless, the BK Court will wipe it clean off the map. As for Vallejo, they did NOT even try to reduce CalPERS pensions in BK, and that is why they will be back in BK in a few ore years. As for Stockton, the pensions were left intact, but the retiree healthcare was completely dissolved. Any muni that files BK can wipe CalPERS clean off the slate, if they want to. And Judge Klein ALSO ruled that CalPERS has NO STANDING to even litigate in BK Court, as they are a third party servicing agent, not a party to the litigation.

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  9. I really love your blog.. Pleasant colors & theme. Did you build this website yourself? Please reply back as I'm trying to create my very own website and would like to learn where you got this from or exactly what the theme is named. Cheers!

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  10. $128 works out to 35 CENTS a day. If 35 cents a day is going to break your bank account, maybe it was poor financial planning that led you to SM. There are less expensive places to live.

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    1. A family of 4 has to come up with $500.

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    2. That kind of money can be raised standing by a 210 entrance ramp.

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    3. Actually, that would be $512, 10:32. Like I said, poor financial planning skills!

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    4. What would you do with $512 if you were allowed to keep it?

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    5. Maybe you and the kiddies can run a lemonade stand to raise the $512.

      But then the city code enforcer with a Calpers retirement plan might come around and cite you for running a business without a permit. D'OH!

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    6. Let me guess. A lemonade stand permit costs $512...

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    7. $512 spent in town would do a lot more than pissing it down the CalPERS Ponzi Scheme.

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    8. You keep using that word Ponzi. I do not think it means what you think it means.

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    9. Inconceivable!

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    10. A Ponzi is a Korean car.

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  11. We were told when Starbucks came to Sierra Madre that their business plan was to search out areas with a "coffee culture" and insert a Starbucks to pull away customers from the hometown coffee café. This is why I avoid corporate coffee. Even when you travel in parts unknown you can find the hometown coffee café by doing a Garmin search. Even in Kansas, get off the interstate and find a college town. Hang out with the students at the local joint!

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    1. This comment has been removed by a blog administrator.

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  12. Page 3 today's Mountain Views New. Big & very Bad news. The Cops want to outlaw switching to the Sheriff by passing a ballot measure to prevent outsourcing the Police Dept to protect their Calpers.

    This has to be stopped!

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    1. That was covered on The Tattler a couple of weeks ago, but yeah, not good.

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    2. Let me guess. Susan thinks it is a good idea.

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    3. I just read that, too, 11;48AM. Proponents are the desk officer and someone who runs a design company out of his home! The PD has all that union money behind them. The CC should switch to the Sheriffs Dept. now, before the elction.

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    4. A police department that sues us a lot and can never be fired. Wow. Talk about a miserable situation.

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  13. 11;36 Are you the old fella that sneers and mumbles obscenities under his breath as you walk by Starbucks? The 20-30 local patrons that always fill the place get a kick out of you keep up the entertainment. If there were a local establishment with acceptable coffee I would patronize it. Unfortunately there is only Bean Town with nasty Denny's coffee. Blue cup,Peets, Stumptown etc. also have great coffee unfortunately they are not within walking distance and are corporate entities also.

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    1. People attach a lot of importance to where they buy their coffee in Sierra Madre apparently. Is this a local version of culture wars?

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    2. So 12:19, you discerned from 6 or so posts about coffee (by maybe 3 different people in a town of 11,000) that people in SM "attach a lot of importance to where they buy their coffee" and you even wonder whether those few comments are indicative of a brewing culture war.

      So when you happen to notice a twig on the ground, do you automatically wonder whether you're lost in an old growth forest?

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    3. A brewing culture war? Over coffee? Oh dear.

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    4. I'm surprised you never heard about this, 1:04. It has been perking for years.

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    5. No, I try to filter that kind of thing out. It is hardly grounds for civil strife.

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    6. I don't want to make any coffee lovers bitter or sour this zesty discussion, but two posts refer to lemonade, suggesting that coffee is not the only beverage in town.

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    7. You have a tart wit.

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  14. Per Sierra Madre's most recent CalPERS statement they have a covered payroll of $4.6M.

    Roughly $2.7M is for non-safety and $1.9M for safety.

    The median private employer contributes 3% of payroll to their employees' 401k.

    If Sierra Madre wanted to offer a 10% 401k contribution, or 333% more than private employers, for non-safety staff and a 15% contribution for safety employees, it would cost them roughly $550k a year, for a savings of approx $900k a year.

    In addition to the enormous savings this provides, it would also provide cost stability where costs wouldn't jump 21% one year because of CalPERS mistaken assumptions.



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    1. But then you'd have to add another $300,000 to put them back in Social Security.

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    2. That's even better. Employees now have SS safety net, an incredibly generous 401k, and city saves $600k a year!

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    3. Nice use of the extraordinarily high 333% figure (which, inter alia, doesn't account for higher private sector salaries) to distract from the simple fact that, using Fellner's figures, the cumulative returns from investing $550k per year in a 401(k) cannot come close to the returns from investing $1.4 million ($550k + $900k.)

      Why not give us the amounts a typical retiree would receive each year under each scenario? For example, an employee who was earning $75,000 retires after 25 years of service and is expected to live an additional 20 years. How much would the CalPERS pension pay per year, and how much can be withdrawn from the 401(k) per year before it is depleted at the end of year 20?

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    4. CalPERS employee retiring at $75k salary after 25 years of service would get a pension benefit of: $46,875. (75k * 25 * 0.025)

      10% match for 25 years in a 401(k) would yield a $288k account balance, assuming a conservative 5% annual return. This would provide $28,932 a year for 20 years.

      The Social Security benefit would be: $21,192, assuming a retirement age of 65.

      So in that example you offered, the 401k + SS would be better, but CalPERS would be better if person retired at 55 instead of 65.

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    5. (which, inter alia, doesn't account for higher private sector salaries)
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      Realllyyy....Baby Einstein, please show me where in the real world, ANYWHERE, a $200K per year GED education job.....Like a GED cop or FF...didn't THINK SO! Now beat it.

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    6. an employee who was earning $75,000 retires after 25 years of service
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      25years of service?? Your "entitlement mentality" oozes out of every word you type...

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    7. Btw, those calculations assume the employee contributes nothing to the 401k and just accounts for a 10% employer contribution, which I mistakenly called a "10% match" instead of just a 10% contribution.

      If the employee contributes 10% as well, the 401k would be worth: $576,391 and provide a yearly benefit of $58,752. Again, this assumes an extremely conservative investment return of only 5% a year.

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    8. $1.4 million pension cost is a lot of money for a "small burgh of just about 11,000 living souls."

      Apparently the entire cost of CalPERS pensions is $127 per capita per year.

      In a city where the average home price is over a million and average income is fifty percent higher than the rest of California.

      A quick look at salaries in the city shows that these employees aren't ripping anyone off.

      This year's CalPERS increase is apparently 7   lattes' for every man, woman, child and infant, on the Josh Moran Tax Scale. The city can save that much by freezing salaries for two years.

      Wait, .....it looks like that has already been done.

      SurfPuppy, did you even look at the city salaries before spouting off?

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    9. Please explain why you think I owe you something. Because honestly I do not think you're worth even one latte.' I already have idiot relatives I have to give money. I don't want to have to add you to that list. Everybody vote NO.

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  15. It's not clear you understand how CalPERS functions.

    The $1.4M fee is, in part, the result of incorrect CalPERS' assumptions and is necessary to pay down the debt created from these flawed assumptions. Treating this as a comparative investment figure to a 401k is incorrect.

    Yes, $1.4M is a bigger number than $500k. Obviously spending triple the money will, or certainly should, yield greater results. My comment actually tries to balance the interests of employee and employer.

    If, as your comment suggests, the only concern is maximizing employee benefits, yes you are better off spending as much money as possible. I dispute the notion that governments should only act in the best interests of government employees and take no consideration of how to balance that against the burden imposed on taxpayers.

    Consequently, I demonstrated how public employees could receive 333-500% richer retirement benefits than what most taxpayers receive, while saving the City $600k a year.

    You appear to reject this idea. At the very least, you should demonstrate why government employees should get retirement benefits that cost 10 times as much as private employers pay, as opposed to "only" 3-5 times more, as I suggested.

    The answer to your question comparing the benefits under each system is that it depends. CalPERS is almost always going to be better for employees with 25+ years. 401k will be better for employees with less than 20.

    Again, I think there is more to consider that just maximizing the benefits of government employees, regardless of the cost.

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  16. The concern is not solely maximizing employee benefits, but is honoring contracts with employees.

    Leaving aside for the moment that you appear to have included the SS benefit only for the 401(k) scenario, you appear to concede that your suggested approach reaches something akin to parity if the employees each work an additional 20,000 hours (10 yrs 55-->65) than called for under the current agreement.

    Surely, you will concede that this alone is a striking, no a whopping, departure from the existing lawful contract with public employees.

    And please tell us what happens to the 401(k) plans when the next 2008-like bubble bursts? Will the gov't guarantee the plans? Of course not.

    An important question is why do we have defined pension plans for public employees in the first place?
    Could it be that it's all part of a trade off that was highly advantageous the gov't, i.e. pay lower than market rate salaries now to public employees in exchange for pension payments later?

    You may say that the expected future increased tax revenues did not materialize, but don't blame the worker who the public employer induced to take the lower paying gov't job with promises of future pension payments. You honor your agreements, don't you?

    But you know very well which sector of society benefits from 401(k) plans in lieu of pensions, don't you? And if all public pensions were rolled over into 401(k) plans, as has been proposed, you are well aware that that scenario would amount to a theft of historic proportions, aren't you?

    Now please, for the sake of transparency, do tell us how much of your income derives from Wall St, large corporations, and the top 1%, either directly or indirectly through the institutes with which you are associated.

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    1. A good sign we've run out of arguments is the old "you work for the 1%!!"


      RE: "Leaving aside for the moment that you appear to have included the SS benefit only for the 401(k) scenario"

      Sierra Madre employees, like most CalPERS members, do not get SS benefits. This is something CalPERS constantly repeats in their talking points.

      The rest of your post seems to suggest that you may not realize that all of CalPERS $300B assets under management are invested in Wall St?

      Try googling things like: Calpers' Private-Equity Fees: $3.4 Billion - WSJ

      or Former CalPERS CEO pleads guilty to bribery, fraud - San Jose Mercury News

      If I was on Wall Street's payroll there's nothing I could do to benefit them more than keep the gravy train that is the public pension industry going. What an amazing feat - have an agency that literally sends billions of dollars each and every year to Wall Street which is defended by people who claim to be anti-Wall Street!



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    2. Thanks for the info re most CalPERS members not also getting SS. I've heard that many that do, but didn't know that most do not.

      Yes, CalPERS assets are indeed invested in Wall St.

      But tell us truthfully, which has more clout in trying to keep management fees low, trying to ensure that shareholders' returns have priority over insiders' compensation packages, and, in some cases, actually having enough clout in electing corporate directors: (1) a couple of hundred thousand individuals without any expertise in financial matters, each fending for him or herself? Or (2) a couple of hundred thousand individuals combined into one formidable entity under professional financial management?

      You know the answer, which is why Wall St and its elected and other minions, who often hide behind "low tax" propaganda while actually steering tax dollars to their preferred industries, cannot stand CalPERS.

      Yes, Wall St loves CalPERS investments, but the voracious appetite of the beast that is Wall St is not satisfied with ANY impairment to its greed, whether in the form of reduced management fees, pressure to reduce compensation packages for executives, or any checks on any business practices.

      As for a CalPERS CEO pleading guilty to bribery and fraud, the only thing remarkable about it is that any CEO of a large corporate entity was actually charged in the first place. I won't ask you to list non-CalPERS CEOs who have committed bribery and fraud--I'm not sure my computer has enough memory.

      You may not be on the Wall St payroll, but how about some transparency. Who pays you and who pays/contributes to those who pay you?

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  17. What we really need is transparency. You gotta love transparency.

    We have some transparency, at least when is comes to tax Expenditures, but little or no transparency when it comes to tax Receipts. Simple things like who from and how much. Sure, you know what your neighbor is paying in property taxes, but you can't find out what your hedge fund manager neighbor is--or more likely isn't--paying in federal and state income taxes.

    We need a transparency of tax Receipts to complement the transparency of tax Expenditures. Let's create tax Receipt transparency, then sit back and watch the ensuing San Andreas-magnitude of public outrage and demand for tax fairness rupture the political landscape. Meaningful tax relief for the middle class will assuredly follow the ejection of the currently elected, most of whom are sycophants of the top 0.1%.

    Certainly transparency gurus can agree that transparency of tax Receipts would provide crucial information necessary for a meaningful discussion of tax and expenditure policy. Sure, some may invoke privacy concerns about income and taxes actually paid, but transparency gurus must eschew such claims to privacy of income information. After all, Transparent CA releases the income information of a significant portion of the population.

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