(August 7, 2012) — The largest public pension fund in the United States is demonstrating again that it will not let criticism in the media go unanswered.
In a post on its website, the $235 billion California Public Employees’ Retirement System (CalPERS) lacerated an op-ed authored by Thomas Elias and published in the Ventura County Star, calling it inaccurate. The op-ed urged pension reform and blasted CalPERS’ “lousy” 2011 investment performance of 1%, saying that the weak return could push Californian cities into bankruptcy.
In response, CalPERS hit back hard: “The August 6 op-ed…underscores why it’s important to understand the facts before stating an opinion,” the post on the fund’s website read. “True to form, Thomas Elias misstates, misunderstands and misinterprets throughout his piece.”
CalPERS highlighted two errors that the writer had made. Elias referenced a practice known as pension “spiking,” in which workers inflate their pension checks, but had ascribed it to the use of overtime pay in a beneficiary’s final year of employment. In truth, CalPERS explained, pension calculations do not reflect overtime. The second error related to Elias’ contention that the pension plan’s anemic 2011 return could exacerbate fiscal problems in many cities. On this point, CalPERS was unequivocal: “CalPERS investment returns this year will not cause further bankruptcies.” The post stated that, because all fund gains and losses are amortized over a rolling 30-year period, any increases in contributions will be small and not have to be made for at least a year.
“CalPERS welcomes dialogue surrounding pension reform,” the post concluded. “We would all be better served if those placing blame on public worker pensions learned the facts before venturing an opinion.”
The fund’s return of 1% in 2011, announced last month, was met with a flurry of criticism in the media. But CalPERS resisted the uproar, saying that “as a long-term investor, we fully expect a range of possible returns every year.” The fund’s chief investment officer, Joe Dear, also weighed in, saying, “The key to having a strategy is working with it. The worst mistake is to abandon the strategy when it appears to have some trouble.”