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.