Binder1

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Binder1

  1. 1. DJIAExpendituresSpending CalPERS Retirement Benefit – Growth in Fees DJIA Implicitly Forecast byand Benefits GF CalPERS Cost(Before Offsets) Implicitlyin GFProjections State Costs for CalPERS Growth Forecast byCalPERS’s Growth in in StudentSpending Cost Increase Compensation Costs Retirement Benefit UC From 2000-012039-40 2010-11 Spending Return to2010-11 from 2000-01toRevenues Investment as2000-012010-11 and CSU, toinof Assumption ProjectionFunds and 2011-12 %vs. Actual All Dollars Millions Dollars inin Millions Dollars Billions Millions 35,000 7,000 $11,000 $4,000 28,000,000 25% $14 24% 100,000 28,000,000 Parks and Environmental 3,769 Health 4% 3,769 Recreation -86% Protection -87% 10,000 26,000,000 3,500 90,000 Agency 30,000 6,000 12 CSU 24,000,000 9,000 -14% 20% 80,000 Parks and -40% 22,000,000 3,000 Recreation 8,000 25,000 10UC 5,000 -11% 20,000,000 70,000 17% 2,500 18,000,000 7,000 24,317 UC HHS & CSU 60,000 2% 58% 15% 20,000 8 16,000,000 4,000 6,000 2,000 Total 50,000 14,000,000 Human Retirement 337% * 12% Services 5,000 6 HHS 12,000,000 11% 35% 50% 15,000 Benefits 3,000 1,500 40,000 16,322 11% CDCR 10,000,000 10% 4,000 33% STRS 30,000 4 8% Retiree 8,000,000 1,000 10,000 2,000 3,000 232% 7% UC/CSU Health Retiree 7% 6,000,000 241% 648 20,000 Health 648 2,000 2500 4,000,000 5% PERS/STRS/ 5% 5,000 220 220 379 379 1,000 10,000 220 PERS 145 Retirement 2883% 2499% PERS 145 2,000,000 9,689* 103 Health Benefits 1,000 10,259 145 103 17,432 35,974 85,816 $0 2% $0 - - 2000-01 2001-02 % 2002-03% 2003-04 2004-05 2005-06 2006-07 1500% % 2008-09% 2009-10 2010-11 2007-08 -500% 0% 750% 1000% 1250% 1500% 1750% 2000 2010-112000%Estimate % 2500% 500% 1000% $00 -250% 0 0.3% 0% 250 2000-01 500 2250 2500% 2750 3000% 20 20 01-1 201 20 13 2 20 -14 20 -1 20 8 20 -19 20 - 1 20 -22 20 -2 20 -26 20 - 7 20 - 9 20 -31 20 -3 20 -34 20 -35 20 - 20 -39 20 - 0.1% 1211 -12 12 1 1311 13 1315 14-14 14 15115 15 16 6 16216 17-1725 17 1821 18-1930 19- 1932 20-203 2132 20 22-2240 21-21 23423 22 25-2 - 0 23-24 5 2652 244255 27-2 28-286 25 5 2962 26-2755 30-3 5 3163 - 2752 32 28 33-3 -75 29-306 3473 35-3 30 0 36-368 31-32 0 3783 32733 38-3890 3993 - 33 3 34-3580 3584 36-37 5 37-37 38 8 39-4095 4- 4 Estimate 940 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2010-11 2000-01 Parks -- 0 - - 4- - 9- -1520 -4 -17 -9 -20 5 - 4-4 -28 0 -4 - 42 -9 -9 -4 0% 2000-01 2000-01 2010-11 2009-10 2010-11 2010-11 2008-09 9 4- 9- 9 9- 49 9- 9- 8 3 6 17 4 6 9 - - - - - - 21 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 As of May Revision2009-10 2007-08 2008-09 Estimate Estimate 00 * DJIA as of July 6, 2010 to 2007-08 is discounted at 6% Active Healthcare prior Actual Cost per annum back to 00-01 Salary PERS CalPERS 1999 Projection Retiree Health UC PERS fees Student Retiree Health Student fees CSU STRS ** Direct expenditures only SB 400 Active Health STRS
  2. 2. DJIAExpendituresSpending CalPERS Growth in in StudentSpending Benefits Implicitlyin GFProjections Growth Forecast byOffsets) Retirement Benefit – Growth in Fees GF CalPERS Cost(Before Costs State Costs for CalPERS Increase Compensation and Cost Retirement Benefit UC From 2000-012042-43 2010-11 Projection vs.to2010-11 from 2000-01toAssumption Investment as2000-012010-11 Spending Return2010-11 2011-12 toto Revenues CSU, % of Actual and 2000-01Funds and All Dollars inin Millions Dollars Billions Millions 35,000 7,000 $11,000 $4,000 28,000,000 25% $14 24% Environmental 100,000 28,000,000 Parks and 4% 3,769 Health 3,769 Recreation -86% Protection 10,000 26,000,000 Agency 3,500 90,000 30,000 6,000 12 CSU 24,000,000 9,000 -14% Parks and -40% 20% 80,000 22,000,000 3,000 Recreation * 8,000 25,000 UC 5,000 10 20,000,000 -11% 70,000 17% 2,500 * ∴ 24,317 18,000,000 7,000 * UC60,000 & CSU 2% 58% ∴ HHS 15% 20,000 8 16,000,000 * 4,000 * 6,000 2,000 * Total 50,000 14,000,000 Human Retirement * 337% 12% HHS 11% 5,000 35% Services 6 12,000,000 15,000 Benefits 16,322 3,000 1,500 40,000 11% CDCR 10,000,000 10% 4,000 33% STRS Retiree 8% 30,000 4 8,000,000 1,000 10,000 2,000 232% Health 3,000 Retiree 7% 7% UC/CSU 6,000,000 20,000 241% 648 Health 648 2,000 2500 4,000,000 5% PERS/STRS/ 5% 5,000 220 220 379 379 PERS 1,000 10,000 2883% Retirement 2,000,000 220 PERS 145 103 145 2499% Health Benefits 1,000 10,259 145 103 17,432 35,974 85,816 $0 2% $0 - - 0-2502000-01 % 2001-02 % 2002-03 -500% % 0 0% 500% 250 2000-01 750% 1000% 2250% 2009-10 2010-11 2003-04 1000% 1250% 15002006-07 % 2007-08 % 2008-09 2000%% 2750% 2500% 500% 2004-05 2005-06 % 17501500% 2000 2010-11 2500 3000% $00 20 210 01-1 0.3% Estimate 201 20 -1 2 20 - 20 7 20 -18 20 -2 20 - 20 -24 20 -2 20 -2 20 - 20 1 20 -3 20 -3 20 - 20 8 20 -40 20 -41 20 43 5 0.1% 39- 4089 42- 429 37- 780 388 39 41- 40 4190 4194 42 2 35- 457 36 36 36 37 38 3985 32- 33693 34- 34734 35 36 5 29 30- 060 316 31 3265 32 33 3470 26496 27- 28- 485 28 29 5 29 39 30 23- - 0 244 25- 26 2750 27527 24 2545 25 18- 19299 20- 21- 413 21 22 22 234 23 3 15 16- 620 172 18 19 2030 20320 16 17 1825 13- 12 14- 441 13113 14 15 15 15 232 21-1 -12 Estimate 11 52 73 94 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2010-11 2000-01 Parks -40 -4 -37 -38 - - -9 -35 -9 -4 -33 -31 - - -28 -9 -30 -4 -26 -24 - - -21 5 - 92 -4 -19 -16 -17 - - -14 5 -9 -4 0% 2000-01 2010-11 2009-10 2010-11 2008-09 39 3 32 3 25 2 1 1-31 0 1 9 32 - - - - - - - - - - - - - 10 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 As of May Revision2009-10 2007-08 2008-09 Estimate 0 * Active Healthcare prior to 2007-08 is discounted at 6% per Actual Cost annum back to 00-01 Salary PERS CalPERS 1999 Projection Retiree Health UC PERS fees Student Retiree Health Student fees CSU STRS ∴Salaries are affected by the furlough program that was SB 400 Active Health STRS implemented from February 2009 to June 2010
  3. 3. DJIAExpendituresSpending CalPERS Retirement Benefit – Growth in Fees GF CalPERS Cost(Before Costs Implicitlyin GFProjections State Costs for CalPERS Growth Forecast byOffsets) Growth in in StudentSpending Benefits Increase Compensation and Cost Retirement Benefit UC From 2000-012039-40 2010-11 Spending Return to2010-11 from 2000-01toActual Investment as2000-012010-11 and CSU, tovs. Assumption Projectionand Revenues 2011-12 % of 2010-11 2000-01 Funds and All Dollars inin Millions Dollars Billions Millions 35,000 7,000 $11,000 $4,000 28,000,000 25% $14 24% 100,000 28,000,000 Parks and Environmental 3,769 Health 4% 3,769 Recreation -86% Protection -87% 10,000 26,000,000 3,500 90,000 Agency 30,000 6,000 12 CSU 24,000,000 9,000 -14% 20% 80,000 Parks and -40% 22,000,000 3,000 Recreation 8,000 25,000 10UC 5,000 -11% 20,000,000 70,000 17% 2,500 18,000,000 7,000 24,317 UC HHS & CSU 60,000 2% 58% 15% 20,000 8 16,000,000 4,000 6,000 2,000 Total 50,000 14,000,000 Human Retirement 337% * 12% Services 5,000 6 HHS 12,000,000 11% 35% 50% 15,000 Benefits 3,000 1,500 40,000 16,322 11% CDCR 10,000,000 10% 4,000 33% STRS 30,000 4 8% Retiree 8,000,000 1,000 10,000 2,000 3,000 232% 7% UC/CSU Health Retiree 7% 6,000,000 241% 648 20,000 Health 648 4,000,000 9,689* 2,000 2500 5% 5% PERS/STRS/ 5,000 220 220 379 379 1,000 10,000 PERS Retirement 2883% 2,000,000 220 PERS 145 103 145 2499% Health Benefits 1,000 10,259 145 103 17,432 35,974 85,816 $0 2% $0 - - 2000-01 2001-02 % 2002-03% 2003-04 2004-05 2005-06 2006-07 1500% % 2008-09% 2009-10 2010-11 2007-08 -500% 0% 750% 1000% 1250% 1500% 1750% 2000 2010-112000%Estimate % 2500% 500% 1000% $00 -250% 0 0.3% 0% 250 2000-01 500 2250 2500% 2750 3000% 20 20 01-1 201 20 13 2 20 -14 20 -1 20 8 20 -19 20 - 1 20 -22 20 -2 20 -26 20 - 7 20 - 9 20 -31 20 -3 20 -34 20 -35 20 - 20 -39 20 - 0.1% 1211 -12 12 1 1311 13 1315 14-14 14 15115 15 16 6 16216 17-1725 17 1821 18-1930 19- 1932 20-203 2132 20 22-2240 21-21 23423 22 25-2 - 0 23-24 5 2652 244255 27-2 28-286 25 5 2962 26-2755 30-3 5 3163 - 2752 32 28 33-3 -75 29-306 3473 35-3 30 0 36-368 31-32 0 3783 32733 38-3890 3993 - 33 3 34-3580 3584 36-37 5 37-37 38 8 39-4095 4- 4 Estimate 940 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2010-11 2000-01 Parks -- 0 - - 4- - 9- -1520 -4 -17 -9 -20 5 - 4-4 -28 0 -4 - 42 -9 -9 -4 0% 2000-01 2000-01 2010-11 2009-10 2010-11 2010-11 2008-09 9 4- 9- 9 9- 49 9- 9- 8 3 6 17 4 6 9 - - - - - - 21 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 As of May Revision2009-10 2007-08 2008-09 Estimate Estimate 00 * DJIA as of July 6, 2010 to 2007-08 is discounted at 6% Active Healthcare prior Actual Cost per annum back to 00-01 Salary PERS CalPERS 1999 Projection Retiree Health UC PERS fees Student Retiree Health Student fees CSU STRS ** Direct expenditures only SB 400 Active Health STRS
  4. 4. DJIAExpendituresSpending CalPERS Retirement Benefit – Growth in Fees GF CalPERS Cost(Before Costs Implicitlyin GFProjections State Costs for CalPERS Growth Forecast byOffsets) Growth in in StudentSpending Benefits Increase Compensation and Cost Retirement Benefit UC From 2000-012042-43 2010-11 Projection vs.to2010-11 from 2000-01toAssumption Investment as2000-012010-11 Spending Return2010-11 2011-12 toto Revenues CSU, % of Actual and 2000-01Funds and All Dollars inin Millions Dollars Billions Millions 35,000 7,000 $11,000 $4,000 28,000,000 25% $14 24% 100,000 28,000,000 Parks and Environmental 3,769 Health 4% 3,769 Recreation -86% Protection -87% 10,000 26,000,000 3,500 90,000 Agency 30,000 6,000 12 CSU 24,000,000 9,000 -14% 20% 80,000 Parks and -40% 22,000,000 3,000 * Recreation 8,000 25,000 10UC 5,000 -11% 20,000,000 70,000 17% 2,500 * ∴ 24,317 18,000,000 7,000 * UC HHS & CSU 60,000 2% 58% ∴ 15% 20,000 8 16,000,000 4,000 * 6,000 * 2,000 * Total 50,000 14,000,000 Human Retirement * 337% 12% 5,000 Services 6 HHS 12,000,000 11% 15,000 Benefits 35% 50% 16,322 3,000 1,500 40,000 11% CDCR 10,000,000 10% 4,000 33% STRS 30,000 4 8% Retiree 8,000,000 1,000 10,000 2,000 3,000 232% 7% UC/CSU Health Retiree 7% 6,000,000 241% 648 20,000 Health 648 2,000 2500 4,000,000 5% PERS/STRS/ 5% 5,000 220 220 379 379 1,000 10,000 PERS Retirement 2883% 2,000,000 220 PERS 145 103 145 2499% Health Benefits 1,000 10,259 145 103 17,432 35,974 85,816 $0 2% $0 - -2000-01 2001-02 % 2002-03% 2003-04 2004-05 2005-06 2006-07 1500% % 2008-09% 2009-10 2010-11 2007-08 -500% % 0% 750% 1000% 1250% 1500% 1750% 2000 2010-112000%Estimate % 2500% 500% 1000% $00 -250 0 0.3% 0% 250 2000-01 500 2250 2500% 2750 3000% 20 210 01-1 201 20 -1 2 20 - 20 7 20 -18 20 -2 20 - 20 -24 20 -2 20 -2 20 - 20 1 20 -3 20 -3 20 - 20 8 20 -40 20 -41 20 43 5 0.1% 39- 4089 42- 429 36 37- 780 388 41- 40 4190 38 3985 39 4194 42 2 34- 35- 457 36 36 37 32- 33693 34734 35 36 5 29 30- 060 316 31 3265 32 33 3470 26496 27- 28- 485 28 29 5 29 39 30 23- - 0 244 25- 26 2750 27527 24 2545 25 18- 19299 20- 21- 413 21 22 22 234 23 3 15 16- 620 172 18 19 2030 20320 16 17 1825 13- 12 14- 441 13113 14 15 15 15 232 21-1 -12 Estimate 11 52 73 94 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2010-11 2000-01 Parks -40 -4 -37 -38 - - -9 -35 -9 -4 -33 -31 - - -28 -9 -30 -4 -26 -24 - - -21 5 - 92 -4 -19 -16 -17 - - -14 5 -9 -4 0% 2000-01 2010-11 2009-10 2010-11 2008-09 39 3 32 3 25 2 1 1-31 0 1 9 32 - - - - - - - - - - - - - 10 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 As of May Revision2009-10 2007-08 2008-09 Estimate 0 * Active Healthcare prior to 2007-08 is discounted at 6% per Actual Cost annum back to 00-01 Salary PERS CalPERS 1999 Projection Retiree Health UC PERS fees Student Retiree Health Student fees CSU STRS ∴Salaries are affected by the furlough program that was SB 400 Active Health STRS implemented from February 2009 to June 2010
  5. 5. DJIAExpendituresSpending CalPERS Retirement Benefit – Growth in Fees GF CalPERS Cost(Before Costs Implicitlyin GFProjections State Costs for CalPERS Growth Forecast byOffsets) Growth in in StudentSpending Benefits Increase Compensation and Cost Retirement Benefit UC From 2000-012039-40 2010-11 Spending Return to2010-11 from 2000-01toActual Investment as2000-012010-11 and CSU, tovs. Assumption Projectionand Revenues 2011-12 % of 2010-11 2000-01 Funds and All Dollars inin Millions Dollars Billions Millions 35,000 7,000 $11,000 $4,000 28,000,000 25% $14 24% 100,000 28,000,000 Parks and Environmental 3,769 Health 4% 3,769 Recreation -86% Protection -87% 10,000 26,000,000 3,500 90,000 Agency 30,000 6,000 12 CSU 24,000,000 9,000 -14% 20% 80,000 Parks and -40% 22,000,000 3,000 Recreation 8,000 25,000 10UC 5,000 -11% 20,000,000 70,000 17% 2,500 18,000,000 7,000 24,317 UC HHS & CSU 60,000 2% 58% 15% 20,000 8 16,000,000 4,000 6,000 2,000 Total 50,000 14,000,000 Human Retirement 337% * 12% Services 5,000 6 HHS 12,000,000 11% 35% 50% 15,000 Benefits 3,000 1,500 40,000 16,322 11% CDCR 10,000,000 10% 4,000 33% STRS 30,000 4 8% Retiree 8,000,000 1,000 10,000 2,000 3,000 232% 7% UC/CSU Health Retiree 7% 6,000,000 241% 648 20,000 Health 648 4,000,000 9,689* 2,000 2500 5% 5% PERS/STRS/ 5,000 220 220 379 379 1,000 10,000 PERS Retirement 2883% 2,000,000 220 PERS 145 103 145 2499% Health Benefits 1,000 10,259 145 103 17,432 35,974 85,816 $0 2% $0 - - 2000-01 2001-02 % 2002-03% 2003-04 2004-05 2005-06 2006-07 1500% % 2008-09% 2009-10 2010-11 2007-08 -500% 0% 750% 1000% 1250% 1500% 1750% 2000 2010-112000%Estimate % 2500% 500% 1000% $00 -250% 0 0.3% 0% 250 2000-01 500 2250 2500% 2750 3000% 20 20 01-1 201 20 13 2 20 -14 20 -1 20 8 20 -19 20 - 1 20 -22 20 -2 20 -26 20 - 7 20 - 9 20 -31 20 -3 20 -34 20 -35 20 - 20 -39 20 - 0.1% 1211 -12 12 1 1311 13 1315 14-14 14 15115 15 16 6 16216 17-1725 17 1821 18-1930 19- 1932 20-203 2132 20 22-2240 21-21 23423 22 25-2 - 0 23-24 5 2652 244255 27-2 28-286 25 5 2962 26-2755 30-3 5 3163 - 2752 32 28 33-3 -75 29-306 3473 35-3 30 0 36-368 31-32 0 3783 32733 38-3890 3993 - 33 3 34-3580 3584 36-37 5 37-37 38 8 39-4095 4- 4 Estimate 940 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2010-11 2000-01 Parks -- 0 - - 4- - 9- -1520 -4 -17 -9 -20 5 - 4-4 -28 0 -4 - 42 -9 -9 -4 0% 2000-01 2000-01 2010-11 2009-10 2010-11 2010-11 2008-09 9 4- 9- 9 9- 49 9- 9- 8 3 6 17 4 6 9 - - - - - - 21 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 As of May Revision2009-10 2007-08 2008-09 Estimate Estimate 00 * DJIA as of July 6, 2010 to 2007-08 is discounted at 6% * Active Healthcare prior Actual Cost Salary PERS CalPERS 1999 Projection Retiree Health per annum back to 00-01 UC PERS fees Student Retiree Health Student fees CSU STRS SB 400 Active Health STRS
  6. 6. The Public Employee Pension Crisis in the U.S. and California Josh Rauh Kellogg School of Management Pension Roundtable, Sacramento, California July 8, 2010
  7. 7. Benefits: Current Plan Members in 50 States 600 $ billion Plans Frozen Today (ABO) Common State Accounting (EAN) Actual Expected Benefits (PVB) 500 400 300 200 100 0 2006 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 Estimates by Robert Novy-Marx and Joshua Rauh © 2010 2
  8. 8. Benefits: CalPERS and CalSTRS 90 $ billion Plans Frozen Today (ABO) Common State Accounting (EAN) 80 Actual Expected Benefits (PVB) 70 60 50 40 30 20 10 0 2006 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 Estimates by Robert Novy-Marx and Joshua Rauh © 2010 3
  9. 9. Liabilities: CalPERS and CalSTRS Our valuations as of June 2009, $ billions Discount Rate Frozen Common Expected (ABO) (EAN) (PVB) Total Liabilities System Chosen* $400.3 $473.0 $587.4 CA Taxable Muni $389.9 $450.4 $537.5 Treasury $639.7 $793.5 $1,080.3 Total Assets = $297.3 * 7.75% for CalPERS, 8.00% for CalSTRS Comparisons to Reported Liabilities (EAN): Total System-Reported 2008 EAN AAL was $446.1 (= $268.3 + $177.7) Total System-Reported AAL grew 7-10% annually during 2006-2007 Estimates by Robert Novy-Marx and Joshua Rauh © 2010 4
  10. 10. Net Liabilities: CalPERS/CalSTRS Our valuations as of June 2009, $ billions Discount Rate Frozen Common Expected (ABO) (EAN) (PVB) Liabilities Net of $297.3B Assets System Chosen* $103.0 $175.7 $290.1 CA Taxable Muni $92.6 $153.1 $240.2 Treasury $342.4 $496.2 $783.0 * 7.75% for CalPERS, 8.00% for CalSTRS Estimates by Robert Novy-Marx and Joshua Rauh © 2010 5
  11. 11. Run-Out Dates Current PVB, Annual PVB, Double Assets and Contributions Employee ABO at Current Contributions Level (*) 8% Returns CalPERS 2027 2041 — CalSTRS 2026 2030 2034 6% Returns CalPERS 2024 2032 2039 CalSTRS 2023 2026 2029 * Assumes workers receive no compensating changes Estimates by Joshua Rauh © 2010 6

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