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Bad pension news just keeps on coming three California cities filed for bankruptcy in the past month you -- mostly -- underfunded pension obligations.
Now -- the nation's biggest public pension fund calpers which is the California public employees retirement system.
Their returns have gone up in smoke they announce a paltry 1% return on investments -- the fiscal year that ended June 30.
That is a huge -- From their seven point five.
Here with me is -- -- -- former Press Secretary Aaron -- clear thank you so much for joining us -- and we appreciate it.
I -- we sort of knew that this was the next big shoe to drop because all of these pensions are underfunded they're having all these problems at the same time their budgeting.
Planning on getting a return of between seven and 8% what we'd -- love that.
That's almost impossible so here's the first big one -- the biggest one to come out and say oh guess what we didn't make it.
Mean what happens next.
Yeah that's exactly right in -- what what happens next is that other other programs are gonna have to suffer you know calpers.
Did they don't have any fiscal responsibility to the taxpayers they just have a fiscal responsibility to their members.
And they always get their checks if if they need more money from the state they get more money from the state.
The won the first -- when when the first years of government get paid out so when they come in short that means other areas discretionary spending on parks are higher ahead.
Or other priorities for for the state.
Is especially California that they just automatically get money from California 'cause I was researching this is saying what happens you know when these pension funds coming in under what -- estimate as they -- well.
You know you can get more money from your members on -- can reduce the payments but in California they -- -- the taxpayer to make up that difference on their bad investment.
That's what calpers can go to their members it is not going gonna do that as long as the state has to pay up -- they're not going to do that at cal stirs which is the be teachers fund.
They can't go to their members they actually have to -- with the legislature and they reported one point 8% return on their investment so between our two big pension funds the state is got to start paying that's -- of money.
And that's gonna cost every -- program in the state.
Yeah and they were out did you know it's sort of trying to explain what happened if you look at the details.
You know they -- they got a negative 11% return on their forestry investments that didn't work out very well.
They got a negative return of seven point 2%.
On their stock investments.
Can they blame this on market forces can they blame it on bad management I mean I think they need to get into -- Fund.
Wasn't to be fair Melissa and actually they can come back and have that 20% return who know I capital the last twenty years they've they've had double digit sometimes had they've had -- you know -- -- right now sometimes.
The problem though is they are expecting far more than they're going to get ever since 1999 when -- retroactively.
Guaranteed pension benefits they've boosted benefits.
To state workers.
-- without setting aside the funds to pay for that they've been at about 5% return which is perfectly respect -- -- -- didn't assuming between 75 and 85 during that time and each time they're short it cost taxpayers more money and in other programs suffer.
But they don't necessarily have a -- record for investing and other large pension front so this is happening to ban.
It's very likely that this is happening across the country and we're gonna hear this particular story again again on top of these other pension problems we're having.
I think you're writing you know they would be irresponsible part of this is that they're expecting more they're going to get they expect more.
-- -- Buffett expects on his investment Michael Bloomberg Bloomberg a few weeks ago said something like you know if if they don't comes and offers you 7% return on your investment.
Ticket and -- and -- guy's name is not Bernie Madoff OK and he sees Al comical assist.
So until they start to get real gonna continue to cost all the other programs in the state billions in funding for -- got to raise taxes to pay for these pension promises already have to continue to cut these these these elements that we don't wanna cut or calpers needs to get real and -- being truthful with the taxpayers about what the returns are actually going to be.
Yeah that'll happen no this is a big and distressing story and it's meaningful to taxpayers around the country because this is coming.
To a neighborhood near you so keep your eye on this -- thank you so much for coming on the breaking it down -- -- -- --