NEXT MEETING: April 3, 2015
Putting Richmond Students First
Enjoy a special presentation by violin students from Benito Juarez Elementary School led by Don Benham, followed by a conversation with Jorge Lopez, Chief Executive for Amethod Public Schools (AMPS).
AMPS believes that all students can succeed in rigorous college-prep environments when provided with high expectations, capable educators and leaders, a disciplined commitment to academics, extended time for learning, and access to a range of enriching learning experiences. An excellent college education is necessary for expanded opportunities in an increasingly competitive and global 21st century job market, and together as a school community AMPS strives to meet that challenge, and to prepare students to be driven individuals who take smart and calculated path for the good of their personal progress. AMPS seeks to strengthen the character and academic foundations needed for underserved students to excel in school in order to assume positions of responsibility and distinction in society. Central to the network’s mission is the belief that it doesn’t matter where you start in life, but what you do with what you have in life is what counts.
MEETING OF March 28, 2015
Whoa Nellie! As the check-in line whittled down to a mere three and the buffet line got down to only five, President Stoney Stonework welcomed the 60+/- guests and Rotarians to today’s meeting and called to order the Richmond Rotary Club. Erle Brown was asked to lead us in the Pledge of Allegiance. Stoney led us in the invocation, a silent prayer for Freedom, Peace & Justice on Earth. Sidney was on his way to David Calfee’s Celebration of Life (more later). Filling in for Sid and busier than a one armed Boatwright was Stacey Street.
Mack Lingo from Berkeley Rotary. Hello Mack!
Rotarians with Guests
Felix Hunziker introduced again local boy and Chevron engineer Oscar Garcia. Jan Brown introduced her husband Byron Brown. Prez Stoney introduced his wife Maryanna Stonework. Mark Howe introduced his guests, City Manager Bill Lindsey and new City Director of Finance Belinda Warner. Nick Despota introduced his wife Nel Benninghof. Don Lau introduced Randy Enos, School Board Trustee. In the Rotarians as Guest Dept, it was nice to see Paul Allen who said he would not be such a stranger in the future.
Other Guests included:
County Supervisor John Gioia, Capt. Anthony Williams RPD, Susan Segovia, Sean Pyles, Jim & Marilynn Mellander, Kevin Keane, Joan Barrett, Ben Therriant, Susan Wehrl, Kazue Nakahara, Leah Casey, Patty Caressa, Vann Ferber, Martin McNair, Mike Pacer.
Bill Koziol reported talking with both Ralph Hill and Charlie Wong and they are both doing well and would appreciate a phone call.
Happy and Sad Dollars
Understanding Public Employee Pensions
Jim Young introduced today’s speaker, Investigative Reporter Daniel Borenstein from the Bay Area News Group – “Contra Costa Times”. Dan has worked for the Times and its affiliated newspapers since 1980, including previous assignments as political editor, Sacramento bureau editor, projects editor and assistant metro editor. Dan is a Bay Area native and Contra Costa County resident. He holds undergraduate degrees in journalism and political science and master’s degrees in public policy and journalism, all from the University of California, Berkeley (Go Bears!). Dan Borenstein’s weekly column often focuses on public finance issues, including columns during the past six years on government employee pensions. Today’s presentation has been ‘personalized’ to the public employee pension issues of the City of Richmond.
Here are the zingers:
Important Fundamentals of pension vocabulary & definitions:
In a defined benefit plan like CALPERS and OPEB the City has the responsibility, liability actually, to manage the contribution variables and risks in order to guarantee the retirees ‘defined benefits’. In the defined contribution plan (401k plan) the employee/retiree manages the variables and risks including the ultimate retirement rate of payment.
Borenstein said that he thinks ‘defined benefits plans’ are a good thing because they allow retirees to actually plan their income and pool (share) the economic risk of investing, BUT they must be based on the fundamentals of affordable (sustainable) contributions AND realistic investment expectations and accounting, especially time-value*.
Herein lays the problem for the City of Richmond and most, if not all, of the other public employee pension funds in California. The funds are based on unrealistic and unsustainable assumptions. Some of the plans have been subject to inappropriate accounting. Taken together and rolled into public employee contracts under the authority of California Contract Law, they have produced the current unfunded public pension deficit.
How does this happen? Here is the formula used for calculating public employee pension benefit:
The ‘Multiplier’ is something of a magic number that is hotly debated in public employee contract negotiations. The larger the Multiplier, the larger the benefit.
There is another number that is very important to the total amount of pension benefit liability but it is not a direct part of the individual formula. That number is the minimum age or years of service at which employees can retire and receive 100% of the Multiplier benefit. This number is very important because it sets the minimum number of years the pension fund has to earn income before payments must be paid to retirees. It also is an indirect, but not absolute, determinant of how long the pension fund must pay benefits to retirees. The duration of retiree benefits is determined by life expectancy Starting earlier usually means a longer time retirement benefits are paid.
So, when public employees work hard for a long time and get paid a decent living wage (to do the often tedious and sometimes dangerous work of public life in the community), and, are promised the benefit of a ‘high’ Multiplier, they can plan to retire with a pension that is a significant percentage of their working life salary.
Well, not quite, one other thing needs to happen. That defined pension fund needs to have enough money put into it every year the public employee works, so that the ‘wise and prudent’ pension fund managers (CALPERS, etc.) can invest the money in order to insure that every retiring public employee can receive their ‘defined benefit’ if they retire at the earliest age allowed by the pension plan. This is how the unfunded pension liability of $446,000,000 came into being:
Dan Borenstein’s presentation was a tour de force of specific facts and figures that I am sure will be accurately shared with the public again in the near future. If you hunger for those facts and figures, you should have been there. This scribe does not want to misrepresent Dan’s detailed efforts so they are not included here.
Thank you Dan Borenstein for an illuminating discussion of a complicated subject.
*Time-Value, arguably the most important and difficult concept in finance. Ask your CPA for clarification or maybe we can have a whole program about it. Colloquially it is exemplified by the old saw, “A bird in the hand is worth two in the bush.”
Rotating Editor, Jim Young