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  #1191  
Old 08-16-2018, 02:58 PM
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Mary Pat Campbell
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https://seekingalpha.com/article/419...crisis-horizon

Quote:
Pension Crisis On The Horizon
Spoiler:
By FS Staff

Listen to this podcast on our site by clicking here or subscribe on iTunes here.

We've often discussed problems facing state pension systems, but now, we're seeing the makings of a crisis forming over unfunded liabilities and state pension systems.

This time on the Financial Sense Lifetime Income Series, Jim Puplava discusses what he sees as a coming tsunami of pension problems for retirees.

Perfect Storm Brewing
This analogy of a perfect storm is appropriate, Puplava noted, because of the scale of the problem facing federal and state agencies when it comes to meeting pension obligations. The fact is, there are a number of forces all converging at the same time that will hit and cause widespread problems for pensioners.

It boils down to unfunded pension liabilities both at the state and the municipal level, Puplava noted. Politicians have made unrealistic promises to public workers during good times to build political clout, he added, but during times of low investment returns, these promises have become unrealistic and untenable.

The other aspect of the coming storm is rising Medicaid costs, which are squeezing state budgets, Puplava stated.

We're covering this crisis in part because of a new study published by the Pew Foundation that supports these conclusions.

"If you were a state or a municipal worker in a troubled state, you should be made aware of it," Puplava said. "In the next decade, you're going to see many of these states begin to reduce benefits to retirees. It's already happening right now. They're going to change the guarantees offered and they're going to reduce pension payouts."

Promises, Promises
We can trace the origin of the problem back to 1965 when President Lyndon Johnson pushed through Medicare and Medicaid, Puplava said. Medicaid is paid for by the states, covering low-income families, people of all ages with disabilities, and people who need long-term care. The level of coverage also expanded under Obamacare, he added.

The problem is, growth of Medicaid costs is outpacing tax revenues year after year at the state level. In 2016, state and local governments collected $136 billion more in taxes than they did in 2008, Puplava noted. Over two-thirds of those dollars went to fund pensions and Medicaid.

It's important to remember that for states, Medicaid payments are mandatory, as are pension payments, meaning that these have to be included in the budget and can't be reduced.

Federal actuaries predict Medicaid's annual cost, which was $600 billion in 2017, will rise to $1 trillion by 2026, Puplava stated. States pay about 40 percent of the cost of Medicaid, and as such, they're slated to face serious budgetary issues in the near future.

"The higher and faster Medicaid payments rise, the less money is left in the state budget for essential services," Puplava said. "Many states have had to cut everything from fire protection to police coverage. … To save more, many of the states are sending less aid to the cities, which in turn are increasing fees, fines, and taxes. … It's not only going to affect the state's first and municipal workers but eventually, it will be coming on the federal side as well."

Pension Protection
Many states and those administering public pensions, such as CalPERS in California, include unrealistic expectations of returns of 7.5 percent annually to calculate their funding, Puplava noted.

The Pew Foundation study found that state pensions only earned 1 percent on their assets in 2016, versus their assumptions of 7.5 percent. This disparity added $146 billion to unfunded liabilities for that year. The Pew study also found that state pensions right now are sitting on roughly about $2.6 trillion in assets versus total pension liabilities of $4 trillion.

So, even a small change in the rate of return can impact pension liabilities dramatically. On top of that, Puplava noted, we're more likely in the next 2 years to face a recession and a bear market.

States aren't contributing enough to sufficiently fund the cost of new benefits, because, obviously, the amount of money the state has to put into the plan comes out of the budget.

When Moody's examined pensions' operating cash flow, which measures inflows and outflows of a pension fund, the results were staggering, Puplava noted. Most public pension plans have negative ratios, he added, meaning they are paying out more than they are taking in from investment returns and contributions.

"We've been in this low-interest rate environment since roughly about 2008, and everybody's scrambling trying to earn a rate of return," Puplava said. "They're taking on a lot of risks to do that. … If you're a public employee, you should really make yourself aware of your state's fiscal and pension finances. … Also, try to build up your own nest egg as much possible. … Have what I call a 'plan B' or a backup system in case pensions in your state are cut."
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  #1192  
Old 08-16-2018, 04:34 PM
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Mary Pat Campbell
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Originally Posted by campbell View Post
CALIFORNIA
CALPERS
GOVERNANCE

http://www.latimes.com/business/hilt...521-story.html


https://www.nakedcapitalism.com/2018...xecutives.html


This one is juicy - even juicier than the shenanigans with the Calpers Board member who is causing so much fuss.

background from April:
https://www.nakedcapitalism.com/2018...defensive.html


Not going to quote the rest of these, but it does make for

https://www.nakedcapitalism.com/2018...-form-700.html

https://www.nakedcapitalism.com/2018...ns-resume.html

https://www.nakedcapitalism.com/2018...uity-firm.html

and Calpers's bad track record on hiring CFOs:
https://www.nakedcapitalism.com/2018...t-calpers.html
https://www.sacbee.com/site-services...216635310.html

Quote:
Ousted CalPERS CFO fought to keep job after inquiry found resume embellishments
Spoiler:
Charles Asubonten was in a corner by the time CalPERS dismissed him from the high-paying job he’d just started as the chief financial officer for the nation’s largest public pension fund.


He’d already been exposed for exaggerating career accomplishments in his application by a CalPERS critic with a blog.

Then CalPERS conducted its own investigation. It found that Asubonten could not provide records to show that the company where he said he worked as managing director even existed.

He also could not demonstrate that he earned a monthly salary of $23,750 prior to joining CalPERS, which he claimed on his application.

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“The false, incomplete, incorrect and misleading information you provided to CalPERS both before and after your hire warrants your rejection,” the CalPERS report on Asubonten read.

Still, Asubonten had one last opportunity to hold on to his job. He took it, even though it guaranteed that CalPERS’ investigation into his application would become public.

His last-ditch appeal to the State Personnel Board reiterated his contention that he accurately described his work experience, and that CalPERS’ own executives failed to ask him during interviews about the questionable period of his career that drew the attention of Naked Capitalism blogger Susan Webber.

Their failure to question him, Asubonten’s attorney wrote, mattered because it showed that Asubonten did not attempt to deceive CalPERS Chief Executive Marcie Frost and Chief Counsel Matt Jacobs when they interviewed him in August 2017.

“This report is devoid of any evidence showing that (Asubonten) misrepresented his employment history to the very persons who hired him during the interview process,” his appeal says.

Asubonten chose to withdraw his appeal before an administrative law judge heard his case, but it was too late if he wanted to keep a lid on CalPERS’ findings. Contesting a disciplinary action to the board automatically makes a report releasable under the California Public Records Act.

Webber didn’t miss the chance to get the document. She published it in a piece that faulted Frost for missing red flags in Asubonten’s presentation.

CalPERS dismissed Asubonten on May 16. The 25-page CalPERS investigation making the case for his dismissal reported that he made vague statements in interviews.

For instance, he was asked how income he earned in 2007 related to wages he claimed he earned a decade later.

He said, “This is the biggest problem. And this is why I have said time and again, people who are in business with private equity do things different. Not illegal, but different things.”

Before Webber’s report, Asubonten had been developing a good reputation at CalPERS. Frost defended him when Webber first raised questions about him. So did CalPERS Board of Administration President Priya Mathur.

CalPERS is on the market for a new chief financial officer, and a new chief investment officer.



https://www.nakedcapitalism.com/2018...n-scandal.html
Quote:
Sacramento Bee Fingers CalPERS CEO Marcie Frost, General Counsel Matt Jacobs, and Board President Priya Mathur in Asubonten Resume Fabrication Scandal
Spoiler:
The Sacramento Bee’s Adam Ashton published a solid piece, Ousted CalPERS CFO fought to keep job after inquiry found resume embellishments, on the dismissal Charles Asubonten.

Ashton brought the story to its final chapter by describing how Asubonten made the facts of his sudden departure public by contesting CalPERS “rejection” of him during his probation. Ashton also gave our role in exposing Asubonten’s resume fabrications prominent play, which was sporting of him given that we’ve given him a hard time for other stories that looked to hew too closely to the giant pension fund’s spin.

Key portions from his story:

Charles Asubonten was in a corner by the time CalPERS dismissed him from the high-paying job he’d just started as the chief financial officer for the nation’s largest public pension fund…

His last-ditch appeal to the State Personnel Board reiterated his contention that he accurately described his work experience, and that CalPERS’ own executives failed to ask him during interviews about the questionable period of his career that drew the attention of Naked Capitalism blogger Susan Webber.

Ashton also included how CEO Marcie Frost and Matt Jacobs failed to do adequate due diligence on Asubonten, and how Frost and Board President Priya Mathur defended him despite the voluminous documentation of on Asubonten’s misrepresentations that we’d published:

Their failure to question him, Asubonten’s attorney wrote, mattered because it showed that Asubonten did not attempt to deceive CalPERS Chief Executive Marcie Frost and Chief Counsel Matt Jacobs when they interviewed him in August 2017…

Before Webber’s report, Asubonten had been developing a good reputation at CalPERS. Frost defended him when Webber first raised questions about him. So did CalPERS Board of Administration President Priya Mathur.

There are nevertheless two curious aspects to this story. The first is that it does not mention Mike Hiltzik’s articles in the Los Angeles Times, particularly his first piece, Questions about new CalPERS CFO’s background and experience should be taken seriously by the pension fund, which was clearly what forced CalPERS to investigate Asubonten. That fact should alarm CalPERS beneficiaries and California taxpayers. Frost, other CalPERS executives, and the board were circling the wagons behind someone who had among other things filed false documents that had been sworn under penalty of perjury in a role that put him in charge of banking relationships. Resume fabrications are unacceptable in virtually any position for good reason, and they should have set off alarms for someone in a role with financial responsibilities. Yet it was only when l’affaire Asubonten became too high profile did CalPERS decide to investigate.

The second is the timing of Ashton’s story. We posted on Asubonten’s State Personnel Board filing on July 31 and Hiltzik followed up almost immediately.

Perhaps Ashton was waiting for a slow news day and it took longer to arrive than he expected. I’ve found myself in the position of writing about something later than I wanted to because more pressing stories got in the way.

However, another possibility is that Ashton was planning to write a somewhat different piece and got left in the lurch by CalPERS. On Tuesday, CalPERS had the innocuous-looking item 8d on its Board of Administration agenda, an “oral report” by board member Bill Slaton on the Performance, Compensation & Talent Management Committee. I had been told that CalPERS would present what it intended to do about its recruiting practices so as to prevent another Asubonten-like episode.

As one person who sat in on the meeting told me, “What Slaton said came and went so fast that it was over before I realized it had begun.” Another stated that Slaton said that he and board member Richard Costigan had discussed the matter with staff and were satisfied with what they intended to do.

I don’t put much faith in tea and cookies conversations like this. And it may be that CalPERS did itself a PR disservice yet again by opting for secrecy. Ashton may have been holding back on his final Asubonten report to spin it with, “CalPERS has learned a lesson and here is what it is doing.” Thus it may be that being deprived of a more positive spin led to CalPERS getting yet another rehash of an episode that reveals a dangerously lax attitude towards checks and controls. And if CalPERS has made at best minimal changes, it’s sure to gin up even more visible and costly mistakes down the road.
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