[quote=sdduuuude]For the state to choose to put taxpayer money at risk and imagine themselves to be capable of investing the money properly is a plan that will work perfectly up until the day when it doesn’t. Plus, they have to turn to a private investment contractor and have them do the investing for them – a cost that I’m sure CA Renter would like to avoid.
It isn’t the government’s place to take care of their employees for life or put our money at risk. The definition of “risk” is that there is both an upside and a downside, by the way.
Pay the employees now, let them manage their own retirement, avoid the risk, and avoid putting taxpayer money on the shoulders of the evil wall street people. I don’t see how that is a bad idea.[/quote]
I don’t necessarily disagree, but I’ll add a couple of points.
A DB plan isn’t just risk. There is, and has been, pretty substantial reward.
And the state doesn’t actually manage the money. It’s managed by a somewhat independent committee made up of representatives from the employees, appointees of the governor, and I think a couple ex-office holders (like former state treasurer, or something like that). Fees to the private contractors they hire to manage are paid by the fund itself, not directly by the state. Which means their fees are paid out of state monies, employee contributions and earnings.
And governments really do sometimes return savings to taxpayers in the form of tax reductions. It certainly happened at the federal level. And the top CA income tax rate has floated between 9-11% for many years. (may have been a rate slightly below 9%, i can’t remember.) So while the savings solely from pension cost reductions may not have been the reason rates went down, it was probably part of the reason.
On the taking care of employees for life thing…eh. Part of the comp package. I think there was a time when they weren’t covered by Social Security. Pretty sure teachers weren’t. I think SDPD for instance, still isn’t. DB pensions are/were a way to equalize.
