In Retrospect: The Early Bird Catches the CalPERS By Marcus Pimental, March 2017

Originally published in the March 2017 Conference Edition of the CSMFO Magazine

Over 400 attendees

were up early Wednesday morning for the first 9:15am Early Bird Session “WHITHER GOEST CALPERS?” As we all recognize, CalPERS has been busy these past few years (completion of their five-year strategic plan, replacing their retired Chief Executive Officer and Chief Actuary, lowering their discount rate, etc.). Accordingly, attendees were eager to hear from and found themselves subsequently challenged by the distinguished and influential CalPERS panel. Led by moderator Mary Bradley (CSMFO Past President and our 203 Distinguished Service Award recipient), attendees were introduced to CalPERS Board representative Richard Costigan, along with newly appointed CalPERS Chief Executive Officer Marcie Frost and newly appointed CalPERS Chief Actuary Scott Terando.

Mr. Costigan brought a strong message and high energy level to awaken and challenge the attendees to get involved with CalPERS committees and board. Although he is faced with big demands from his day job as the Senior Director of State and Government Affairs with Manatt, Phelps & Phillips, LLP, he clearly is passionate about making CalPERS fiscally sustainable in a way that supports the other “E”, employers. Accordingly he challenged us to help him help us “to do the right thing in (our) name.”

He also shared his perspectives on Prop 13 and CalPERS’ 1999 landmark SB 400 that together, changed the fiscal landscape of California. He started with recalling the summer of 1977 when he moved here with his parents. “Why is this important?” he asked. “Because it was after the passage of Prop 13. I didn’t vote for Prop 13, my parents didn’t either. Yet it is the fabric of our society, as is SB 400.” “I didn’t vote on SB 400. I wasn’t around when SB 400 came along,” just like many of us who are here now trying to fix the impacts of SB 400 to pay the benefit our prior officials promised and that can’t be changed.
As he wrapped up, Mr. Costigan reminded us that CalPERS is not done. Their November 2015 action to reduce the discount rate from 7.5% to a 7.0% was “just step one.” He added that from a fiduciary perspective, what really needed to be done was make the discount rate cut immediate with no phase in. But, as he indicated, CalPERS “heard us” and gave time for this to start with a phase in. But insisted that we must all remain engaged as they will next review asset allocation, capital market assumptions and their experience study, followed by reconsidering the discount rate as soon as February 2018 (where we can expect discussions of a 6.0% discount rate).

The attendees were then introduced to the next panelists, Marcie Frost, Chief Executive Officer and Scott Terando, Chief Actuary of CalPERS.

Ms. Frost’s comments and approach were well received by attendees as she shared her perspectives and talked about her naturally inquisitive style and how her goal is to work with local government. She feels both of these are critical to find the best approach to keep CalPERS sustainable. To that, she too encouraged involvement and asked attendees the following six questions: (1) How can CalPERS best serve the membership? She emphasized that the reason CalPERS exists is for one purpose, to serve the member; (2) Do we and our agencies have what we need to be successful? Is there information or data that CalPERS can share with employer’s to make our financial leadership jobs easier; (3) How can CalPERS be a best practice leader? As she reminded us, “when you are the biggest public pension plan, you will get a lot of attention.” So it is critical to embrace best practices to let other’s learn from and implement those practices; (4) What is the best way to be a vigilant resource steward to provide more efficiency and effectiveness in achieving the targeted rate of returns; (5) How can CalPERS, employers and members ensure the long-term sustainability of the fund to meet the promises made for generations to come; and finally (6) How can CalPERS be a “reliable” partner to us and other key stakeholders? They want to be seen as a partner to local agencies and their Finance leaders.

She also reminded and affirmed Mr. Costigan view that more changes are coming and cited the rate example where the board reached “nearly unanimous agreement” in moving the discount rate to 7.0%, and that the lone dissenting voice was actually from a board member who wanted the rate to be lower.
Scott Terando, the new Chief Actuary, closed the session. During his detailed presentation, he reminded attendees that although many economists are pegging the next 10-year expected rate of return near 6%, CalPERS takes a longer view and puts more weight on their 20-year rate of return (which is currently near 7%).

He reviewed the recent changes, including reducing their equities target portfolio asset allocation from 60% to 54% as part of their Asset Liability Management plan. The goals of this plan are (1) provide retirement security; (2) maintain the defined benefit plan structure; and (3) strive for satisfying their fiduciary responsibility. He also shared their biggest risk factors staring with CalPERS plan demographics. “Our plans are maturing with more retirements of the baby boomers” (10,000 turn 65 each year) and that these trends “will continue for the next 10 to 15 years,” along with retirees expected to live 5 to 10 years longer than previously expected.

As Mr. Costigan publically encouraged us, he wants to hear from us and views us both on the same team as fellow allies. To that, he encouraged us to advocate by contacting him (rcostigan@manatt.com or his direct line 916-552-2370) and attending any of the Board and Committee meetings, CalPERS forums and training events.

Following are the specific requirements that any sidewalk vending license or regulation must comply with:

  • It can’t limit a sidewalk vendor to a specific part of the public right-of-way, except when the limitation is directly related to objective health, safety, or welfare concerns.
  • It can’t limit a sidewalk vendor from selling food or merchandise in a park owned or operated by the local agency unless there is an existing concession agreement that grants the concessionaire exclusive right to sell food or merchandise.
  • A local agency may adopt additional requirements regulating the time, place, and manner of sidewalk vending in parks if the requirements are: necessary to ensure the public’s use and enjoyment of natural resources and recreational opportunities; or necessary to prevent an undue concentration of commercial activity that unreasonably interferes with the scenic and natural character of the park.
  • Can’t require a sidewalk vendor to get approval from a nearby business before the vendor can sell food or merchandise.
  • Can’t restrict sidewalk vendors to designated neighborhoods or areas, except when the restriction is directly related to objective health, safety or welfare concerns.
  • It can limit stationary sidewalk vendors in areas zoned exclusively residential where no commercial activity is permitted.
  • Can’t limit roaming sidewalk vendors to sell in any area (commercial or residential).
  • Can’t place a limit on the overall number of sidewalk vendors permitted to operate within the jurisdiction, unless the restriction is directly related to objective health, safety, or welfare concerns.

For some additional history about SB 946, see the League of California Cities bill summary issued in 2018.

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Marcus Pimentel is the Assistant Director of Health at the County of Santa Cruz Health Services Agency. He is also a CSMFO cheerleader and currently serves as the Chair of the CSMFO Communication Committee. Marcus has over 20 years of municipal finance experience in the Monterey Bay area and is an active member of CSFMO, having participated in CSFMO’s early coaching program, served as a longtime Chapter Chair, on various CSMFO committees, and as a former Board Member. Marcus is currently on the 2019 Host Committee and Membership Committee. He is most proud of his family’s immigrant background, humbled and amazed that his wife Laurie still chooses daily to remain by his side, and that his daughters Kaitlynn and Kirsten still tolerate his “Dad” humor.

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