David Fleer
Bristlecone Value Partners, LLC
12301 Wilshire Blvd., Suite 320
Los Angeles, CA 90025 USA
Work 1-877-806-4141

“A Slow Speed Train Wreck”

September 21st, 2016

The Los Angeles Times published an excellent long form series last week on the root causes of California’s burgeoning public pension funding gap.  It is an interesting backstory characterized by financial myopia, cognitive bias, and endemic conflicts of interest.

The LAT traces much of the problem to SB 400, a law passed in 1999 which significantly expanded pension benefits for more than 200,000 state workers, while also reducing the minimum age for full retirement benefits to 55 (50 for CA Highway Patrol officers).  At the time, the California Public Employee Pension Fund (CalPERS) was operating at a surplus thanks to a decade-long bull market which had more than tripled the fund’s assets between 1990 and 1999 (making it the largest pension fund in the country).  Proponents of the legislation extrapolated the fund’s recent returns into the future, and reasoned that benefits could be safely expanded without raising taxes. Read the rest of this entry »

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