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You just don't understand.

When I hear that in my personal life, it usually means that I'm in trouble — and would benefit from a few auditory adjustments. But when I hear that in my job as a journalist these days, I get the feeling that someone is trying to hide something.

<i>You don't understand. Everything is under control. Trust us.</i>

How many times have we heard assurances like that from those in positions of authority? Then came the day when we began to learn the truth about such things as derivatives, liar mortgage loans, bailouts, Libor corruption, unfunded liabilities, (fill in the blank). And it became clear that things weren't under control. Taxpayers were left holding the bag for risks they didn't even know they had assumed.

The latest kick-in-the-gut revelation came Friday when we learned that the state Parks Department had secretly set aside $54 million in surplus funds at a time communities were holding bake sales and fun runs to keep state parks like Annadel and and Sugar Loaf Ridge open. This came just days after learning that a high-ranking parks employee was the mastermind behind a secret vacation buyout program for himself and other employees, bilking the public to the tune of $271,000.

Pretty classy stuff. It's hard to know which ethical breach to howl about first.

Nonetheless, leaders in the public sector keep telling us to trust them, that we just don't understand.

You can hear it in the message sent last week from an executive of the California Public Employees' Retirement System. He was responding to our Wednesday editorial on the need to hold CalPERS accountable for its miserable performance in managing $233 billion in retirement assets.

"Your July 17 editorial demonstrates a severe misunderstanding of CalPERS pension fund investment strategy and mischaracterizes how a single year return will actually impact public agencies," wrote Deputy Executive Officer Robert Udall Glazier. "Allow me to set the record straight."

(I invite you to read the whole thing for yourself. We published it on Page B5 Saturday and posted it online on pressdemocrat.com. Just click on the "opinion" tab.)

Why did we come down hard on CalPERS? <CS8.7>Because for every dollar the retirement system falls short of its lofty goal of earning a 7.5 percent return — <CF102>every year — <CF101>for the next 20 years, taxpayers have to make up the difference. And there is no limit to what that could be. The system is set up so public employees, through Cal-PERS, get all the benefits of financial markets and none of the risks. Whenever CalPERS needs more money it just picks up the phone and orders it. And the state has to answer.

</CS>Well, the phone is ringing again. <NO1><NO>CalPERS reported last week that it earned a dismal 1 percent return on its investments last year due primarily to a languishing equities market and continuing troubles in Europe. Most investors can relate to those problems. But CalPERS' performance was uniquely poor. The system's own consultant recently concluded that CalPERS' results were below 99 percent of the nation's largest public pension funds over the previous five years. <NO1>CalPERS' return over that period was a miserable <NO><NO1>0.10 percent.<NO>

But no one at CalPERS has been held accountable for its mistakes. I would include here CalPERS' major blunder in 1999 when it promised the state Legislature that retirement accounts were so flush that the state could significantly bolster public employee benefits at no real risk of taxpayer funds. They were wrong. In fact, since then, the system's portfolio has earned only 75 percent of what CalPERS had promised. As a result, the state has had to spend $20 billion more on pensions than had been projected. And CalPERS' accounts are still $85 billion short of meeting long-term obligations to retirees.

<NO1><NO><NO1>Now, <NO><NO1>just as three California cities have already sought federal bankruptcy protection and more are lining up, CalPERS is coming to ask for more.

<NO><NO1>But apparently if those in the public are angry about this, they just don't understand.

<NO>Glazier contends that a 1 percent return is understandable and that Cal-PERS will make it up in the long run because, well, it always has. If you look at its performance over the past 20 years, it has exceeded its 7.5 percent return goal. "As a long term investor, we fully expect a range of possible returns every year," Glazier said.

<NO1>"Occasionally returns will be negative, and occasionally returns will be wildly high, like last year'<NO><NO1>s 21.7 percent gain."<NO>True enough. But what he doesn't say is that Cal-PERS hasn't been in this place before. It's only been since 1984 that CalPERS has been allowed to invest more than 25 percent of its fund portfolio in stocks and only since 1992 that the CalPERS board has had full oversight of investments. <NO1>I mean no disrespect to the legions of CalPERS investment masterminds, but during most of the 1990s, you could average better than 7.5 percent by throwing a dart at a stocks page.

<NO>Furthermore, what is it that we private investors are always told? "Past performance is no guarantee of future results." And yet CalPERS is so certain that its past performance will guarantee future results — even amid the biggest economic downturn since the Great Depression — that it is betting money on it. Taxpayer funds of course.

Glazier also downplays the financial impact of this latest shortfall, noting that losses will be spread out over years. Is that supposed to make us feel better, that it will just be added to the long-term debt?

<CS8.7>Finally, more people than just pesky editorial writers are concerned about this. A task force of respected budget experts released a comprehensive analysis last week in Washington that looked at the fiscal crisis facing states. The primary finding of the State Budget Crisis Task Force, headed by former Federal Reserve Chairman Paul Volcker and others? States, including California, are a ticking time bomb of debt, including pension liabilities.

</CS>"Increased contributions (for pension benefits) will be required — or, in some cases, benefit cuts may be needed — in order to stave off a crisis," the report found.

Somehow I don't think you can chalk this up to a big misunderstanding. We need an honest discussion about solutions — not whether a problem exits.

<i>Paul Gullixson is editorial director for The Press Democrat. Email him at paul.gullixson@pressdemocrat.com.</i>