By Dan Walters
Published: Sunday, Apr. 28, 2013 – 12:00 am | Page 3A
Last Modified: Sunday, Apr. 28, 2013 – 7:25 am
David Crane, a businessman who advised former Gov. Arnold Schwarzenegger on financial matters – particularly long-term public pension deficits – recently wrote an I-told-you-so piece for the Bloomberg news service about the State Teachers Retirement System.
He and others had postulated last year that if voters approved the sales and income tax hike being sought by Gov. Jerry Brown, they would see the money disappear into CalSTRS, rather than into classroom instruction, as Brown, et al., insisted.
CalSTRS is now seeking $4.5 billion a year in additional funds from someone – the state, local school districts or teachers themselves – to cover its projected pension obligations.
And as Crane points out, the $4.5 billion assumes that the trust fund can meet its “unrealistically high investment return assumption that implicitly forecasts the stock market to double every 10 years.”
Were CalSTRS to adopt a more realistic earnings assumption – something like what corporate pension systems use – that $4.5 billion could easily grow to $7 billion, thus consuming all of Brown’s tax increase and then some.
Based on those data, Crane is entitled to his I-told-you-so. However, it doesn’t necessarily follow that the new taxes – which are temporary, by the way – will flow to CalSTRS.
Those who occupy the Capitol have an infinite ability to evade reality, even something as seemingly stark as a huge deficit in the teacher pension system that’s growing, by its own numbers, by $17 million each day.
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