Report to the Board of Directors
State Retiree Director
March 8-10, 2010
The value of the CalPERS retirement fund (Market value) was $204.1 Billion on March 8, 2010. To put everything into perspective, the fund was as high as $260 Billion and as low as $160 Billion within the past two years.
It has already been reported that the two initiatives put forth by the Foundation for Fiscal Responsibility, aka Marsha Fritz and former assembly member Dr. Keith Richman, have both been put on the back burner. We should expect to see some kind of new initiative put forward by the foundation and quite possibly gubernatorial candidate Meg Whitman. Stand by on that one.
The initiative shown below has been submitted to the Attorney General for title and summary.
Number 10-0014
Received
FEB 1 8 2010
PAUL McCAULEY'
INITIATIVE COORDINATOR
ATTORNEY GENERAL'S OFFICE
February 10,2010
Office ofthe Attorney General
Ms. Krystal Paris, Initiative Coordinator
1300 I Street,
Dear Ms. Paris:
I request a Title and Summary for the enclosed proposed statutory initiative, The
McCauley Pension Recovery Act.
Also enclosed is the required proponent's affidavit pursuant to California Elections
Code Section 9608 and residential address.
Would you please direct all correspondence and communications regarding the
initiative to:
pmcca28169@aol.com
I am personally hearing-impaired and much prefer e-mail communications.
Enclosed is a check for $200.
Very truly yours,
INITIATIVE MEASURE TO BE SUBMITTED DIRECTLY TO THE VOTERS
SECTION 1. This measure shall be known and may be cited as "The McCauley Pension Recovery
Act.
SECTION 2. For purposes ofthis part, the following terms have the following meanings:
"Pension Taxable Income" means any income from -----
(A) a qualified trust under section 401(a) ofthe Internal Revenue Code of 1986
that is exempt under section 501(a) from taxation;
(B) a simplified employee pension as defined in section 408(k) ofsuch Code;
(C) an annuity plan described in section 403(a) ofsuch Code;
(D) an annuity contract described in section 403(b) ofsuch Code;
(E) an individual retirement plan described in section 7701 (a)(3 7) ofsuch Code;
(F)
an eligible deferred compensation plan (as defined in section 457 ofsuch
Code);
(G) a governmental plan (as defined in section 414( d) ofsuch Code;
(H) a trust described in section 501 (c )(18) ofsuch Code, or;
(I)
any plan, program, or arrangement described in section 3121 (v)(2)(C) ofsuch
Code, if such income (
i) is part ofa series ofsubstantially equal periodic payments(not less
frequently than annually) made for(
I) the life or life expectancy ofthe recipient (or the j oint lives or
joint life expectancies ofthe recipient and the designated beneficiary
ofthe recipient), or
(II) a period ofnot less than 10 years, or
(ii) is a payment received after termination ofemployment under a plan, a
program, or arrangement (to which such employment relates) maintained
solely for the purpose ofproviding retirement benefits for employees in
excess ofthe limitations imposed by I or more ofsections 40 I (a)(17),
401 (k), 401 (m), 402(g), 403(b), 408(k), or 415 ofsuch Code or any other
limitation on contributions or benefits in such Code on plans to which any
ofsuch sections apply.
Such term includes any retired or retainer pay ofa member or former member
ofa uniform service computed under chapter 71 oftitle 10,
Code.
(J) the cost ofhealth insurance premiums, or a health care plan, paid for the
benefit ofthe taxpayer andlor members ofthe taxpayer's household by
anyone other than the taxpayer.
SECTION 3. Section 17041 ofthe Revenue and Taxation Code is amended to read:
17041. (a) There shall be imposed for each taxable year upon the entire taxable
income ofevery resident ofthis state who is not a part-year resident, except the head
ofa household as defined in Section 17042, taxes in the following amounts and at the
following rates upon the amount oftaxable income computed for the taxable year as
ifthe resident were a resident ofthis state for the entire taxable year and for all prior
taxable years for any carryover items, deferred income, suspended losses, or
suspended deductions:
lfthe taxable income is: The tax is:
Not over $3,650 ........................... 1 % ofthe taxable income
Over $3,650 but not
over $8,650 .............................$36.50 plus 2% ofthe excess
over $3,650
Over $8,650 but not
over $13,650 .............................$136.50 plus 4% ofthe excess
over $8,650
Over $13,650 but not
over $18,950 ............................ $336.50 plus 6% ofthe excess
over $13,650
Over $18,950 but not
over $23,950 ............................$654.50 plus 8% ofthe excess
over $18,950
Over $23,950 ..............................$1,054.50 plus.9.3% ofthe excess
over $23,950
(2) (A) For taxable years beginning on or after January 1,2009, and before January 1,
2011, or January 1,2011, or January 1,2013, as applicable, the percentages specified
in the table in paragraph (1) shall be increased by adding 0.25 percent to each
percentage. This subparagraph shall become operative only ifthe Director ofFinance
does not provide notification to the Joint Legislative Budget Committee on or before
April 1, 2009, pursuant to Section 99030 ofthe Government Code. This subparagraph
shall cease to be operative for taxable years beginning on or after January 1,2011,
unless the Director ofFinance makes the notification pursuant to Section 99040 ofthe
Government Code, in which case this subparagraph shall cease to be operative for
taxable years beginning on or after January 1, 2013.
(B) For taxable years beginning on or after January 1,2009, and before January 1,
2011, or January 1,2011, or January 1,2013, as applicable, the percentages specified
in the table in paragraph (1) shall be increased by adding 0.125 percent to each
percentage. This subparagraph shall become operative only ifthe Director of Finance
does not provide notification to the Joint Legislative Budget Committee on or before
April 1, 2009, pursuant to Section 99030 of the Government Code. This subparagraph
shall cease to be operative for taxable years beginning on or after January 1,2011,
unless the Director ofFinance makes the notification pursuant to Section 99040 ofthe
Government Code, in which case this subparagraph shall cease to be operative for
taxable years beginning on or after January 1,2013.
(b) (1) There shall be imposed for each taxable year upon the taxable income ofevery
nonresident or part-year resident, except the head ofa household as defined in Section
17042, a tax as calculated in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by multiplying the
"taxable income of a nonresident or part-year resident," as defined in subdivision (i),
by a rate (expressed as a percentage) equal to the tax computed under subdivision (a)
on the entire taxable income ofthe nonresident or part-year resident as ifthe
nonresident or part-year resident were a resident ofthis state for the taxable year and
as ifthe nonresident or part-year resident were a resident ofthis state for all prior
taxable years for any carryover items, deferred income, suspended losses, or
suspended deductions, divided by the amount ofthat income.
(c) (1 )There shall be imposed for each taxable year upon the entire taxable income of
every resident ofthis state who is not a part-year resident for that taxable year, when
the resident is the head ofa household, as defined in Section 17042, taxes in the
following amounts and at the following rates upon the amount oftaxable income
computed for the taxable year as if the resident were a resident ofthe state for the
entire taxable year and for all prior taxable years for carryover items, deferred
income, suspended losses, or suspended deductions:
If the taxable income is: The tax is:
Not over $7,300 ............................ 1% ofthe taxable income
Over $7,300 but not
over $17,300 ............................. $73 plus 2% ofthe excess
over $7,300
Over $17,300 but not
over $22,300 .............................$273 plus 4% ofthe excess
over $17,300
Over $22,300 but not
over $27,600 .............................$473 plus 6% ofthe excess
over $22,300
Over $27,600 but not
over $32,600 .............................$791 plus 8% ofthe excess
over $27,600
Over $32,600 ...............................$1,191 plus 9.3% ofthe excess
over $32,600
(2) (A) For taxable years beginning on or after January 1,2009, and before January 1,
2011, or January 1,2011, or January 1,2013, as applicable, the percentages specified
in the table in paragraph (1) shall be increased by adding 0.25 percent to each
percentage. This subparagraph shall become operative only ifthe Director ofFinance
does not provide notification to the Joint Legislative Budget Committee on or before
April 1, 2009, pursuant to Section 99030 ofthe Government Code. This subparagraph
shall cease to be operative for taxable years beginning on or after January 1,2011,
unless the Director ofFinance makes the notification pursuant to Section 99040 ofthe
Government Code, in which case this subparagraph shall cease to be operative for
taxable years beginning on or after January 1,2013.
(B) For taxable years beginning on or after January 1,2009, and before January 1,
2011, or January 1,2011, or January 1,2013, as applicable, the percentages specified
in the table in paragraph (1) shall be increased by adding 0.125 percent to each
percentage. This subparagraph shall become operative only ifthe Director ofFinance
does not provide notification to the Joint Legislative Budget Committee on or before
April 1, 2009, pursuant to Section 99030 ofthe Government Code. This subparagraph
shall cease to be operative for taxable years beginning on or after January 1,2011,
unless the Director ofFinance makes the notification pursuant to Section 99040 ofthe
Government Code, in which case this subparagraph shall cease to be operative for
taxable years beginning on or after January 1,2013.
(d) (1) There shall be imposed for each taxable year upon the taxable income ofevery
nonresident or part-year resident when the nonresident or part-year resident is the
head ofa household, as defined in Section 17042, a tax as calculated in paragraph (2).
(2) The tax imposed under paragraph (1) shall be calculated by
multiplying the "taxable income ofa nonresident or part-year resident," as defined in
subdivision (i), by a rate (expressed as a percentage) equal to the tax computed under
subdivision (c) on the entire taxable income ofthe nonresident or part-year resident as
ifthe nonresident or part-year resident were a resident ofthis state for the taxable
year and as ifthe nonresident or part-year resident were a resident ofthis state for all
prior taxable years for any carryover items, deferred income, suspended losses, or
suspended deductions, divided by the amount ofthat income.
(e) There shall be imposed for each taxable year upon the taxable income ofevery
estate, trust, or common trust fund taxes equal to the amount computed under
subdivision (a) for an individual having the same amount oftaxable income.
(f) The A tax imposed by this part is not a surtax.
(g) (1) Section 1 (g) ofthe Internal Revenue Code, relating to certain unearned
income ofminor children taxed as ifthe parent's income, shall apply, except as
otherwise provided.
(2) Section l(g) (7) (B) (ii) (II) ofthe Internal Revenue Code, relating to income
included on a parent's return, is modified, for purposes ofthis part, by substituting "1
percent" for "15 percent."
(h) For each taxable year beginning on or after January 1, 1988, the Franchise Tax
Board shall recompute the income tax brackets prescribed in subdivisions (a) and
(c). That computation shall be made as follows:
(1) The California Department ofIndustrial Relations shall transmit annually to the
Franchise Tax Board the percentage change in the California Consumer Price Index
for all items from June ofthe prior calendar year to June ofthe current calendar year,
no later than August 1 ofthe current calendar year.
(2) The Franchise Tax Board shall do both ofthe following:
(A) Compute an inflation adjustment factor by adding 100 percent to the percentage
change figure that is furnished pursuant to paragraph (1) and dividing the result by 100.
(B) Multiply the preceding taxable year income tax brackets by the inflation
adjustment factor determined in subparagraph (A) and round offthe resulting
products to the nearest one dollar ($1).
(i) (1) For purposes ofthis part, the term "taxable income ofa nonresident or partyear
resident" includes each often following:
(A) For any part of the taxable year during which the taxpayer was a resident ofthis
state (as defined by Section 17014), all items ofgross income and all deductions,
regardless of source.
(B) For any part ofthe taxable year during which the taxpayer was not a resident of
this state, gross income and deductions derived from sources within this state,
determined in accordance with Article 9 of Chapter 3 (commencing with Section
17301) and Chapter 11 (commencing with Section 17951).
(2) For purposes of computing "taxable income ofa nonresident or part-year resident"
under paragraph (1), the amount of any net operating loss sustained in any taxable
year during any part ofwhich the taxpayer was not a resident ofthis state shall be
limited to the sum oft he following:
(A) The amount of the loss attributable to the part of the taxable year in which the
Taxpayer was a resident.
(B) The amount ofthe loss which, during the part ofthe taxable year the taxpayer is
not a resident, is attributable to
arriving at taxable income ofa nonresident or part-year resident.
,
(3) For purposes ofcomputing "taxable income ofa nonresident or part-year resident"
under paragraph (1), any carryover items, deferred income, suspended losses, or
suspended deductions shall only be includable or allowable to the extent that the
carryover item, deferred income, suspended loss, or suspended deduction was derived
from sources within this state, calculated as ifthe nonresident or part-year resident,
for the portion ofthe year he or she was a nonresident, had been a nonresident for all
prIor years.
CD (1) For each taxable year beginning on and after January 1, 2012, there shall be
imposed on every taxpayer who is a resident and whose pension taxable income for
the year exceeds $40,000 an additional tax according to the following schedule. The
additional tax is in addition to all other taxes provided for in this section.
Over $40,000 but not
over $50,000 ............................. $5,000 plus 20% ofthe pension taxable income over $40,000
Over $50,000 but not
over $75,000.............. .............. $7,000 plus 35% ofthe pension taxable income over $50,000
Over $75,000 but not
over $100,000 .............................$15,750 plus 40% ofthe pension taxable income over $75,000
Over $100,000 but not
over $150,000 .............................$25,750 plus 50% ofthe pension taxable income over $100,000
Over $150,000 ......................... $50,750 plus 60% ofthe pension taxable income over $150,000
CD (2) For taxpayers who are seventy-five years of age or older as ofthe date of
enactment, there shall be allowed a credit of$10,500 against the tax computed in
subdivision CD (1). Under no circumstances shall the additional tax so computed be
less than zero.
m(3) For persons who were nonresidents ofCalifornia on the date ofenactment and
for persons who become nonresidents thereafter, an excise tax on the fair market value
ofexcess vested benefits shall be computed and paid in lieu ofthe additional tax.
Persons whose pension taxable income exceeds $40,000 in any taxable year shall be
liable for the excise tax. The excise tax is calculated at a rate offifty percent (50%) on
the amount by which:
(a)
The fair market value of all vested pension benefits ofall pension trusts in
which the individual has a vested interest, calculated on the individual's life
expectancy, exceeds the fair market value ofan assumed annuity of$40,000
paid out over the annuitant's life expectancy. For taxpayers who are seventyfive
years ofage or older on the date of enactment, there shall be allowed a
$250,000 credit against the excise tax so computed.
(b) The Franchise Tax Board shall have the right to collect the tax provided for
in this subdivision at its source.
(c) The Franchise Tax Board shall use the same actuarial assumptions in
calculating the fair market value ofvested pension benefits provided for in
this subdivision.
(d) This subdivision shall apply only to vested pension benefits obtained through
employment ofany person within the State of
sources within
benefits as well as to persons who are successors in interest to any such vested
pension benefits.
(e) For persons who were nomesidents on the date of enactment, the excise tax
shall be determined as ofthe date ofenactment. For persons who were
residents on the date ofenactment but who became nomesidents at any time
after the date of enactment, the excise tax shall be computed as ofthe date
non-residency begins.
(j)(4) In the event P.L. 104-95 is revoked in its entirety, subparagraph (j)(3)(a) shall
become inoperative as ofthe effective date ofits revocation. Under no circumstances
shall any taxpayer be required to pay both an additional tax and an excise tax on the same
pension taxable income.
(j)(5) No person receiving a benefit ofany kind whatsoever in consideration ofthe loss
oflife ofa police officer or a firefighter in the line ofduty shall be liable for the tax
provided by this measure.
SECTION 4. The provisions ofthis measure are severable. If any provision ofthis measure or the
application ofthe provisions ofthis measure is held invalid, that invalidity shall not
affect other provisions or applications that can be given effect without the invalid
provision or application.
SECTION 5.
This measure is operative for each taxable year beginning on and after January 1,2012
or the earliest date provided by law.
************************************************************************
On
January 29 in Sacramento and February 12 in Los Angeles, CalPERS hosted one-day
discussions where local, state, and national retirement experts examined the
current state of California’s public pension plans and analyzed emerging ideas
for ensuring future retirement security. The day-long discussions addressed how
to provide members with adequate and secure retirement benefits that are also
affordable for employers. The forums helped participants find common ground as
they exchanged ideas during panel discussions, presentations, case studies, and
dialogue.
The
CalPERS California Retirement Dialogue drew more than 500 attendees at the two
forums. Panels at both events addressed:
• How did we get there, and
where are we headed?
• Sustainable pension
principles
• Retirement benefit
changes: Are they needed?
• Formulating formulas:
How shall we design benefits of the future?
The
panelists came from government, union and academic backgrounds. Their
presentations covered different aspects of the pension system, but there was
broad worker agreement that the defined benefit pension is the preferred
retirement plan for public employees. Panelists noted that while the economy
may drive changes in future CalPERS pension formulations, those changes should
be negotiated in collective bargaining sessions rather than being imposed
unilaterally by state law.
Speakers
noted pension formulas and rules are different for various categories of
CalPERS members and a one-size-fits-all approach to retirement benefits is
inappropriate. Labor representatives at the forum said worker groups could
negotiate pension changes in collective bargaining sessions if needed. A
panelist from the Governor’s office claimed CalPERS earning projections are too
high, and more reliance on state contributions to make up the difference will
have an impact on future state budgets.
While
there were disagreements among the panelists, they all agreed there would be
challenges for defined benefit public worker pensions in the future.
The January 29
On a regular basis, every 3 years, CalPERS reviews the asset allocation. This is the amount the actuaries estimate will be the rate of return on the invested dollars in the retirement fund. The current rate of return is 7.75%. If the rate of return is reduced, there could be a corresponding effect on the employer contribution rates determined annually by the CalPERS Board of Administration. The results of this work are expected to be completed by the end of this calendar year.
CalPERS to examine asset allocation, rate
of return
March 2, 2010
CalPERS is planning a top-to-bottom review of how the assets in
the fund are allocated — the percentage invested in stocks, bonds, real estate,
private equity, cash and other investments. This full asset allocation review
is conducted every three years — and setting these targets is the most
important step in determining the success of CalPERS investments.
As part of the review, CalPERS will examine the assumed rate of
return — the rate necessary to pay future pension benefits to CalPERS members.
The assumed rate of return is now set at 7.75 percent, a figure CalPERS has achieved
over the 20-year period ending Dec. 31, 2009.
The question that CalPERS faces, now, though is whether the
historic economic upheaval of the past few years has dramatically altered
long-held assumptions about investing in the world’s financial markets. Are
investors in for a sustained period of meager or below-average market growth?
Or will the traditional business and economic cycles – the ones investors have
grown accustomed to over the past couple of decades – return?
Over the next several months, CalPERS staff and the CalPERS
Board will reach out to a wide-ranging group of experts with varied opinions on
asset allocation and the assumed rate of returns. In July, many will present
their views to the Board at its off-site meeting. In November, the Board will
hold a two-day asset/liability management workshop on the issue, and the
following month will formally approve the recommended asset allocation mix.
The assumed rate of return will be considered in February 2011. View
timeline
This nearly yearlong fact-finding mission, says Joe Dear,
CalPERS Chief Investment Officer, will involve “fearless research, robust
debate and sound judgment.”
“I want to be as thoughtful as we can possibly be when we
consider what the longer term investment environment is going to be like and
how we want to position our portfolio,” Dear told the Board at its February
meeting. “We want to be as open and as transparent as we can be, to challenge
our assumptions, to listen to contrasting views and to apply the lessons we
have learned so we can arrive at a well-considered decision.”
CalPERS is planning a top-to-bottom review of how the assets in
the fund are allocated – the percentage invested in stocks, bonds, real estate,
private equity, cash and other investments. This full asset allocation review
is conducted every three years – and setting these targets is the most
important step in determining the success of CalPERS investments.
As part of the review, CalPERS will examine the assumed rate of return – the
rate necessary to pay future pension benefits to CalPERS members. The assumed
rate of return is now set at 7.75 percent, a figure CalPERS has achieved over
the 20-year period ending Dec. 31, 2009.
The question that CalPERS faces, now, though is whether the historic economic
upheaval of the past few years has dramatically altered long-held assumptions
about investing in the world’s financial markets. Are investors in for a
sustained period of meager or below-average market growth? Or will the
traditional business and economic cycles – the ones investors have grown
accustomed to over the past couple of decades – return?
Over the next several months, CalPERS staff and the CalPERS Board will reach
out to a wide-ranging group of experts with varied opinions on asset allocation
and the assumed rate of returns. In July, many will present their views to the
Board at its off-site meeting. In November, the Board will hold a two-day
asset/liability management workshop on the issue, and the following month will
formally approve the recommended asset allocation mix. The assumed rate
of return will be considered in February 2011. View timeline
This nearly yearlong fact-finding mission, says Joe Dear, CalPERS Chief
Investment Officer, will involve “fearless research, robust debate and sound
judgment.”
“I want to be as thoughtful as we can possibly be when we
consider what the longer term investment environment is going to be like and
how we want to position our portfolio,” Dear told the Board at its February
meeting. “We want to be as open and as transparent as we can be, to challenge
our assumptions, to listen to contrasting views and to apply the lessons we
have learned so we can arrive at a well-considered decision.”
Finally, I would like to remind everyone of the
The museum is formed as a non-profit corporation under IRS Code
501 (c) (3). Contributions are tax
deductible for most contributors however you should check with your tax advisor
to assure compliance with the IRS rules and regulations.
The collection of memorabilia and photographs is astounding and
truly represents the history of CDF/Cal Fire.
They need your help and contributions.
Ray Snodgrass
State Retiree Director